As the rapidly dwindling fans of Keith Olbermann know, the MSNBC host likes to tar his enemies with the moniker “worst person in the world.” Rather than heaping this often humorless praise on deserving foes, Olbermann most often targets fairly harmless lesserknowns and obvious blowhards like Bill O’Reilly. In the gracious spirit of Olbermann’s mildly likeable shtick, Shout Bits hereby nominates a new worst person in the world: Paul Krugman.
Krugman is a Nobel Laureate, a professor at Princeton, a New York Times columnist, and an advocate for Keynesian spending and trade protectionism – in other words a socialist’s tweed clad dream. Krugman is among the hard left critics of Pres. Obama for not spending enough on stimulus and various social justice programs. A man for all seasons, Krugman advocates for higher taxes during good times to always grow the government. As Krugman’s tax and spend creeping socialism drains away US jobs, he advocates a new world order that would cripple trade and plunge the world back into a new Great Depression. His academic achievements are perhaps second only to Keynes in their assault on free markets and individual liberties. Finally, his nasal bleating voice is a crime in itself.
Still, Krugman is nothing more than a mouthpiece for the extreme left. He possesses only words as his tools to take down the US capitalist system. How can a person whose only ally is the First Amendment be ‘the worst person in the world?’ To paraphrase Stalin, how many armies does Krugman have? Krugman was powerless, until this week when Donald Kohn announced his retirement from the Fed.
Left wing ideologues quickly rallied behind Krugman to replace Kohn as Fed Vice Chairman, much as they did when Ben Bernanke’s renewal was in jeopardy. Suddenly, Krugman may get his army. Anyone concerned about the US’s national debt, inflation, or free trade should work to quash this idea before it grows legs.
As Shout Bits argued last week, Obama is exacerbating an already dangerous problem with his extreme wasteful spending binge. The only way Obama can hope to pay for his libertine excesses is through surprise inflation – which will transfer wealth from savers to borrowers like the US Treasury. Unfortunately, the Fed has long stood in the way of inflationary policies. Ever since the monetary policies of the Nixon, Ford and Carter administrations nearly ruined the nation, the Fed’s first priority has been to restrain money supply growth and contain inflation.
The “spread the wealth” President would no doubt like some room to operate and inflation is a stealthy way to steal from the responsible and give to the debtors. Enter Krugman, who’s every policy is inflationary. Krugman supports deficit spending (inflationary), loose monetary policies (inflationary), and in good times, tax increases (long term inflationary by growing government faster than the economy) – consanguinity indeed for a President who wants to reshape the economy.
With the retirement of Kohn, Obama may now appoint three of the seven Fed members. While Krugman may be an extreme example of leftist fiscal and monetary policies, there are many lefties with PhDs in economics. Freedom loving Americans should demand deficit hawks on the Fed, not the socialists with whom Obama normally rubs shoulders. Monetary policy is at the heart of US economic strength, and there is good cause to worry that Obama does not know the lessons of Carter era inflation.
The US Government’s balance sheet is looking a bit unsound lately – $12.4 trillion in public debt. Correcting for the Enron-like accounting that hides the Government’s Social Security and Medicare liabilities, the figure is estimated at $59 trillion. While “can’t” is not in the traditional American vernacular, repaying $59 trillion in debt, or even servicing it, is nearly impossible. How will the Government get out of this mess?
One way would be for the Government to mend its wasteful ways. Congress could eliminate pork, stop creating new programs, cut wasteful programs that are not essential or do not work, and focus on cutting the Federal Budget as a percent of GDP. As long as Congress runs a surplus, the economy would slowly grow out of its debt problems. Of course that would take decades of prudent fiscal management and is therefore unlikely. Few have ever realized such a monumental goal as responsible governance.
Another way would be for the Government to liberalize economic policies. If the cost of manufacturing in the US were allowed to reflect the true market, the US would again become the world’s manufacturing powerhouse. US labor is the most productive in the world, and the US’s system of property rights and its superior infrastructure are unmatched. Of course hindrances such as militant unions, abusive trial lawyers, excessive regulation, and anti-immigrant isolationism are so entrenched in US Politics that reigniting US industry is a long shot.
Should Congress fail to restrain its spending or liberalize its regulatory stranglehold on industry, what then? Governments have faced this dilemma since the early Roman Empire, and the answer has always been the same: inflation. Time and again, failed governments have used surprise inflation to melt away obligations they cannot pay. Also called ‘printing money,’ inflation reduces the real value of the principal on any debt.
Perhaps the most egregious example of surprise inflation was the Gold Confiscation Order of 1933. Pres. Roosevelt, in what seems outlandishly un-American today, outlawed the ownership of most gold. FDR forced gold savers (whom he called hoarders) to cash in their gold for paper certificates. Almost immediately thereafter, FDR declared the value of gold had risen from the confiscation rate of $20.67 per ounce to $35 per ounce. The value of every cash savings declined by a third overnight, and the US Treasury essentially stole it from those foolish enough to save.
Now, without a gold standard to manipulate, the Fed inflates currency by buying government bonds in the open market. During the recent recession, the Fed inflated the money supply by buying back bonds with new dollars. While this tactic is generally accepted as appropriate to combat a deflationary spiral, it is also the cause of runaway inflation. If the US cannot find lenders for its excessive deficit spending, it will be forced to issue worthless dollars in exchange for its obligations.
For inflation to work, governments must surprise or deceive their creditors. If a creditor expects inflation, as in the case of Zimbabwe, he will either not lend at all or structure payment in the form of harder currencies like the Dollar or the Euro. Paper money is a matter of trust alone, and to inflate one’s way out of debt requires violating that trust.
Inflation also harms those who save. Most assets do not go up in value as fast as inflation, so savings are reduced or wiped out by inflation. Inflation does benefit those who borrow, because the real value of their obligations is reduced. In effect, when a government inflates its way out of debt, it steals real wealth from those who save and gives it to those who borrow.
Unless the US changes its unsustainable ways very soon, the second half of this century will be grim indeed. The many benefits of the Dollar’s world dominance will evaporate. A generation’s savings will be wiped out by runaway inflation. International investment in the US’s economy will greatly slow. Foreign trade will be cramped by an unreliable Dollar. In short, the US may become a shadow of its former greatness when the Government is forced to inflate away its debts. That is something to think about the next time a politician wants to spend a few billion more dollars on some superfluous new program.
This week five corporations, including BP and ConocoPhillips, dropped out of the US Climate Action Partnership (a.k.a. USCAP, with an emphasis on the ‘CAP’) an industry lobbyist group that sought to mollify the most aggressive instincts of ‘green’ and government organizations while at the same time advance the environmentalist agenda. USCAP’s membership is chock full of corporations that will not benefit from cap and trade laws, yet they lobbied for them. One might assume that five brave corporations saw that global warming is more political than science based, and they made a principled stand by dropping out of USCAP. The real reason is more pedestrian, and a little sad. Why these companies joined and subsequently left USCAP goes a long way to explain the psyche of corporations.
USCAP is based on the strategy of ‘being at the table so as not to be on the menu.’ Big corporations are easy targets for opportunistic politicians – consider Pres. Obama’s relentless bashing of Wall Street ‘fat cats,’ or the Senate’s grandstanding over cigarette companies’ unhealthy products, or Sen. Hatch’s obsession with punishing Microsoft. Obviously BP has no interest in fossil fuel taxes, and Phillip Morris doesn’t really favor punitive cigarette taxes, but they, and countless other corporations play USCAP’s game because it is better than the alternative – the complete routing and destruction of shareholder value that Microsoft suffered as punishment for standing up to the Government.
Big Corporations ’sit at the table’ with their enemies for another reason: to stifle competition. The Byzantine red tape that Washington imposes on the free market is easily navigated by multi-billion dollar corporations, but not so by their smaller competitors. The costs of complying with regulations that clog every aspect of the business world disproportionately fall on the shoulders of small businesses and entrepreneurs. For example, Mattel lobbied for a new law that, while imposing some product testing expenses on themselves, effectively outlawed independent toy manufacturers. Mattel even managed to make selling used toys at garage sales practically impossible. The law created and entrenched an oligopoly of big toy manufacturers; not bad for a day’s work in Washington.
Similarly, back when a socialized health care bill seemed inevitable, Wal-Mart came out and supported Obamacare. Why would Wal-Mart, the nation’s largest employer, want the burden of insuring all of its employees? Wal-Mart knew that it had the economies of scale to pay the very least for its insurance, and it owns its own Pharmacies to boot. Of all the employers hit by Obamcare’s mandates, Wal-Mart is best equipped to cope. Wal-Mart didn’t care about people so much as it wanted to suppress its competitors.
Likewise, USCAP’s mission is not to benefit its members by reducing their costs, but to harm smaller competitors more by raising their relative costs. From the formation of AT&T over a century ago, , to blue laws, to the Chamber of Commerce’s statist tolerance of government, regulation always evolves into an incumbent protection racket. The only losers are entrepreneurs and consumers.
Why the USCAP defections? USCAP is falling apart because the Obama agenda is falling apart. Cap and trade is dead with little hope for revival. USCAP’s mission of mitigating cap and trade’s damage to its well-heeled members no longer matters, so its members are dropping off. There was no change of moral compass here, just political calculus.
Similarly, with the implosion of Obamacare, PhRMA recently dumped its CEO, Rep. Billy Tauzin. PhRMA had the same mission as USCAP, but with regard to Obamacare – craft a bill that harms its members less than their competitors. Why continue to pay a Washington big-wig when the issue is comatose and ready for the morgue? Tauzin’s connections and moral flexibility are no longer needed.
Why are companies, especially the larger ones, so spineless on issues that are critical to very existence of the US? Why are corporations so greedy, feckless, and sometimes even evil? Simply because it suits their short term interests. Leftists want to believe that corporations should be good corporate citizens, but it is not in their nature. Corporations will always pursue politics as a way to benefit shareholder value.
Despite the evil corporations sometimes do, there remains no better engine for the betterment of people. The NYSE’s $16.3 trillion market capitalization proves that the corporate structure is the best way to generate wealth and improve everyone’s quality of life. In other words, the corporation is a wonderful source of good, but corporations are sometimes evil. Political opportunists in Washington set up corporate excesses as a straw man to hobble the corporate system and dole out their expensive favors.
Nobody should count on Corporate America to consistently support the cause of capitalism and freedom. The Supreme Court rightly ruled that corporations have the right to political speech, but that does not mean that informed voters should always listen, because corporations are at best a weak ally in the cause of liberty.
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