immigration

So pretty much out of nowhere immigration has become the hot topic in Washington.  Before Arizona passed its own version of immigration control, no one in Washington was really talking about the issue.  My own cynical opinion is that the Democrats saw immigration as a way to steer the debate away from their unpopular policy debacles (stimulus, auto bailouts, health care, and what is slowly becoming a handout for big banks - financial reform).  With the so-called "jobless economic recovery" and voters pissed as hell at government in general, the Democrats looked poised to suffer monumental losses in November.  In this environment I'd probably want to change the subject as well.  Whether changing the issue to immigration is a smart political move is yet to be seen.

Very few issues are as divisive as immigration.  This has almost always been the case throughout the history of American politics.  Historically, many Americans born here have always felt an aversion to allowing more people to enter "their" country.  This was true in the nineteenth century - Irish, Italian, Asian and Eastern European immigrants were treated extremely harshly by traditional Protestant white majorities that dominated the country at the time.  Not much has changed today other than the fact that many of the people's whose ancestors once belonged to these oppressed groups now wish to limit immigration, themselves, while the majority of the anti-immigration sentiment is now focused on Mexicans.  This idea that we shouldn't allow anymore immigrants into the country when we have so many other problems of our own is what I like to refer to as the "Labor Union View of Population." 

I don't mean to say that labor unions around the U.S. espouse a policy view that we should close our borders.  In fact the opposite is true.  Many influential unions see a large amnesty as a tremendous opportunity to expand their ranks.  Currently many illegal immigrants compete directly with union labor in a variety of industries such as farming, construction and other day-laborer jobs.  Part of the reason some of these workers do not join unions themselves is because of their undocumented status.  Amnesty could change all of that.  But I regress.  The reason I term the anti-immigration view the "Labor Union View" is because in my opinion most Americans who hold anti-immigrant views do so for the same basic reason why a worker joins a labor union: to restrict the size and diversity of the labor pool.  Labor unions operate by restricting the supply of workers an employer has to choose from.  By imposing rules that only union members can be eligible for a job, the price of such labor rises.  Many anti-immigration components feel the same way.  By limiting the amount of immigrants into the country, the total supply of labor will decrease, thereby increasing the price of labor.  Remember the old South Park adage, "THEY TIRK ERRR JEEERBBBSSS?!?" (see clip below)



Now first of all I do not want to make you think that this is the only reason why some anti-immigration view holders do not support a comprehensive immigration reform bill.  I think there is a lot of merit to the argument that the control of our own borders is an urgent national security issue.  Unfortunately we live in an age where thousands of people around the world wish to do innocent, American civilians harm simply because of the way we live our lives.  We have an obligation as a people to stand up to these people that challenge our free and open society.  This means that we must do everything in our power to prevent attacks within our border against our fellow citizens.  However, in my opinion this national security issue is often used by as a smokescreen by politicians whose ultimate goal is to simply close the border. I also believe the argument that we should not reward those people who break our laws by granting them amnesty is deserving of merit.

There is also no doubt that some prejudice is involved as well.  These prejudicial views combined with the idea the immigrants will come in here and take away good well-paying, all-american jobs leads to a political culture that simply demonizes any type of comprehensive immigration reform.  This view point is simply wrong on the policy and wrong on the facts.  Immigration can be a tremendous source of growth in our economy, but only if it is coupled with other pro-growth initiatives along the way.  We must move away from the idea of "Zero-Sum" economics that dominates the immigration debate.  Just because an immigrant comes here and takes a low paying manual labor job does NOT mean that there is one less job for an native born American.  When an employer hires an immigrant for less money than he would have to pay native american to do the same work, the companies overall efficiency has increased.  These savings are eventually reinvested either in the business itself, or passed on to shareholders who can use the money to fund other productive ventures elsewhere in the economy.  This creates real job growth, not the artificial spikes in demand that are the dominant effect of short-term government "stimulus."

 So what would effective reform look like?  First, the emphasis of any policy must incentivize well-educated, hard-working immigrants to come to America.  These are keystone innovators of any society, and technology driven economy like the United States needs these types of thinkers in greater numbers in order to prosper.  The most important proposal I could make in this category would be to be institute a rule that any foreign graduate from a U.S. university with a science or engineering background should be offered a permanent green card and the opportunity to work towards citizenship.  By increasing the number of innovators we can harness the economic growth associated with these individuals over the course of their lives.  I don't think many people could make a strong argument why such a policy is against U.S. interests.

Secondly, I believe that some type of amnesty is necessary.  As I have written many times before, inherent economic realities often provide very strong incentives to break laws that limit the individual's ability to economically prosper.  Take for instance the market for illegal drugs.  The penalties associated with the traffic of these substances is very harsh, in fact much harsher than any anti-immigration laws, but every year millions of Americans take risks anyway to sell and purchase the drugs.  Regardless of the basis for such demand, the economic incentives provided by its mere existence almost forces many poor Americans into entering drug trade.  When the rewards of success are so high, even the chance of criminal punishment does not substantially decrease the average expected value of engaging in such an enterprise.  This is also the case regarding illegal immigration.  The incentives provided by the good working conditions and economic opportunities available in the U.S. make it economically rational to break U.S. immigration laws even taking into account the chance of apprehension.  Therefore illegal immigration will continue regardless of any attempt to truly secure the border because the incentive to break the law is too high.

In this situation, I believe that the prudent and cost-effective strategy would be for the government to attempt to facilitate the actions of economically rational actors in a way that still protects vital national interests such as preventing terrorists from coming into the country.  It makes no sense for government to attempt to completely eliminate a segment of a natural market (in this case outlawing a section of the natural labor market), as it is impossible.  As long as the underlying economic rational remains (which in this case will remain as long as the U.S. economy is prosperous) , people are going to pursue their economic best interests regardless of the penalties that are put into place.  Even the strict criminal penalties instituted in Arizona do not provide enough incentive to overcome the rational economic decision making that immigrants have made in my opinion.  As long as the worse the U.S. government can do is to send them back home, there is little incentive not to try to enter the country.

Therefore I believe the best immigration policy the U.S. can establish would be one that liberalizes the rules for permanent residency.  However, in a country with as many government "social safety net" programs as the U.S., allowing this sort of unfettered immigration could easily lead to abuses.  Obviously I am for the reduction, if not the complete elimination, of many of these wasteful programs that incentivize people to be unproductive.  However, I am in the minority so many of these programs are unfortunately here to stay.  Therefore I would propose that in exchange from dramatically liberalizing and increasing the immigration quotas, the new immigrants would be required to waive any right to participate in a list of certain government programs.  This would include medicaid, the new health care entitlement, and other types of welfare subsidies.  In exchange for giving up access to these handouts, we should end the cap on the number of new immigrants we allow into the country.  If someone does not have a criminal history and wishes to enter the U.S. to work, then we should allow it provided that he or she agrees to give up his ability to simply live off the state.  It is a fair compromise, but I doubt anyone in Congress, especially the Democrats who are simply trying to liberalize immigration so that there will be more wards of the state, would even consider this proposal. 

In conclusion, my basic premise is that illegal immigration is mainly caused by rational economic decision making of these immigrants.  When something is a rational economic decision even in circumstance where the government is attempting to completely ban it (undocumented immigration, drugs, prohibition) then it is nothing more than a tremendous waste of government resources to enforce such a policy.  If there is one thing I firmly believe it is that if a market for some good or service naturally exists (in the case of immigration it is a strong market for labor in the U.S.), then government prohibition of such a market does nothing but push it underground where the rule of law no longer applies.  This gives economic power to those who openly disobey the law and should not be the policy of our government.  Instead we should recognize that we cannot unilaterally eliminate a natural market in our free society, so instead we should attempt to structure the market in such a way that maximizes the benefits to everyone involved.  In the case of immigration I would argue that the best way to do this would be to encourage people who want to work hard to come here and do just that, while still instituting important checks regarding their background.  Are some people that have broke the law in the past or potential terrorists going to slip through the cracks in this type of liberalized system?  Most definitely yes.  However, I believe that is part of the price you must pay in a free and open society.  The economic benefits of liberalization outweigh these risks by an order of magnitude, and I believe that terrorists will get around even the most stringent rules if they really wanted to.  Remember that we have thousands of miles of open border with Canada.  Instead, by eliminating the possibility that immigrants are coming here for a handout, these immigrants could be a tremendous source of growth for years to come.  That would be good for all Americans.

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.

uncensored

the look on chris demarco's face says it all

TIGER YOU ARE THE MAN!!!!

book club

So from time to time I actually do read an occasional book. Although I would have to say over half of what I read is non-fiction, I do enjoy a good novel from time to time. Unfortunately, it has been over a year (since Christmas 2008) that I have read a book cover to cover. So I have decided that I am going to read a book.

As I said, I enjoy non-fiction books. The subject matter that these books come in are in two basic categories: economics/philosophy and golf. However, I really want to read a fictional novel that seems to be a least somewhat related to these two categories. As you may have guessed, this combination does not tend to lead to many dramatic tales of heroism, especially since the political philosophies I enjoy reading about are more libertarian in nature. Nobody seems to want to make their protagonist a golf pro or a champion of laissez faire economics. However, after reading an article in Fortune about Wisconsin Republican Congressman Paul Ryan (btw great article link here), one of his favorite authors caught my eye: Ayn Rand.

Now I have heard of Rand numerous times before, and I knew that her books had been very influential on people like Ronald Reagan, Alan Greenspan, Jack Kemp and Newt Gingrich; however, I have never personally read any of her work.  Obviously, anything that is read by conservative leaders like those mentioned above has never been anywhere near a public high school reading list (where most of the novels I have read have come from).  So I am going to check it out.  And I encourage you to do the same.  Listed below is a link to Rand's masterpiece Atlas Shrugged on Amazon.  From what I have heard, Rand is an excellent writer who champions the idea of free markets and individualism, while still keeping the reader actually engaged in a riveting story.  We shall see.  I am buying the book today, and I will review it on this site when I am finished, although I have no idea when that will be.  Until then, here's to a reading experiemnt.  Hopefully I won't get lazy and try to find a movie version...

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.