Going Postal

In 1965-66 while bobbing around the North Atlantic and Mediterranean aboard the USS Casa Grande, LSD-13, mail service was, as you would expect, a little slow. Four decades later things have not improved, even without the handicap of being in the middle of some ocean. Turning a first class letter over to the gentle ministrations of both the USPS and Canada Post is a bit like tossing the letter in the ocean and hoping the tides will eventually get it to its destination. It can take ten days to get a letter from Seattle to Whistler, about the same amount of time you would require to walk it up there yourself. You can imagine what kind of problems this creates when you are trying to pay a bill to a US company.

Postage rates go up every year while the service gets worse. In 1975 the cost of a first class stamp was $.10. By 1981 it had doubled to $.20 and then between 1985 and 2008 had doubled again to $.44. Despite these increases and the USPS monopoly position, this government owned corporation manages to lose money nearly every year and require a government “bailout”. This year the USPS expects to lose $2.9 billion and anticipates even bigger losses next year. They are proposing cutting delivery to five days to save money.

The USPS is the 8th largest corporate entity in the US with over 900,000 employees. Make that government union employees, meaning no Democrat in his right mind would ever vote to privatize this turkey. And, despite running this hopelessly inefficient and money losing operation, the USPS awarded its executives $197 million in bonuses last year. After demonizing every bank and corporate executive in recent weeks about pay and bonuses you’d think someone in the media might have brought this up. Not likely. And, I doubt the class warrior foot soldiers at ACORN will be sending any busloads of protesters out to the homes of USPS execs to chant and wave signs or threaten them with hanging.

The problem with the USPS is the same as with any monopoly: the lack of competition and the absence of any real motive for profit or efficiency. Even where the USPS competes with private companies like UPS or FedX they get their asses kicked and that’s even with the various restrictions the USPS places on them. You can read more at:
http://www.blogger.com/www.i2i.org/articles/4-2001.PDF.

The whole post office thing bubbled to the surface of the fevered swamp of my brain as I listened to President Obama explain today how the government was going to take over and fix the auto industry. In other words, turn it into another post office. You may have noticed that the stock market responded to this news by dropping 254 points today.

The first step in this program was the firing of GM CEO Rick Wagoner. Does GM have a Board of Directors? Of course. But, the nameless wizards appointed by Obama to “oversee” the automobile business have decided that ol’ Rick must go or the administration will shut off the bail out money. If the board had a lick of sense or courage they should have said, “Screw you” and immediately filed for Chapter 11.

Silly me. I thought we had settled this debate about free enterprise and government micromanaged economies long ago.

Have we forgotten about the collapse of the former USSR? Or, the perfect comparison of the success of West Germany over East Germany? Or North Korea vs. South Korea? So, with these real world examples fresh in our mind we now think that the Obama Team with the combined business experience of the average high school senior can effectively run the auto industry? Absurd.

I have suggested in previous posts that I believe that the unions and various government mandates imposed on the auto companies (CAFÉ mileage standards) have contributed significantly to the difficulties at the Big Three. Can you imagine what the politicians will do to these firms when they have complete license to meddle in the day-to-day business decisions? You should be able to easily picture these anti-business, environmentally besotted types demanding that the auto boys produce cars that meet the “green” standards but that no one wants to buy. Do you believe that the Democrats who have the unions in their pockets are going to play hardball with them? Get real. Like the post office, the auto companies will need a bailout every year.

Obama had all the CEOs of the nation’s largest banks over to the White House for lunch this past week. I’ll bet they got a spanking from BHO and left with a silent vow to send the TARP money back as soon as humanly possible. That is, if they can. Mr. Geitner plans to subject them to a “stress test” that may require them to take more TARP funds whether they want it or not, keeping them under the thumb of the politicians and bureaucrats.

The Obama team is moving swiftly to take over as much of private industry as possible before the honeymoon ends: First the auto companies, then the banks, health insurers and perhaps the oil companies. When all major American industries are run by the government and managed with the cheerful efficiency of the US Postal Service the “Change We Can Believe In” will have truly arrived. Welcome to East Berlin.

Fred’s Tossin’ and Turnin’

Next month marks the 65th anniversary of the publishing of Friedrich Hayek’s classic The Road to Serfdom. He wrote it as World War II drew to a close to warn Europeans of the dangers of socialism. At the time, the leading intellectuals in England and elsewhere strongly favored pushing their societies toward the warm fuzzy embrace of socialist utopia. Hayek pointed out that for socialism to function, the government must become more and more coercive. (Think of the IRS and the heavy fines meted out by government agencies to bring citizens to heel.)

Eventually, Hayek observed, this power over the individual falls into the hands of a despot with disastrous results. His prime example of this phenomenon was Germany. They had embraced the National Socialist Party, granting it absolute control over German society. When Hitler took over, the NSP morphed into the Nazi Party and Germany became a military dictatorship. (“Nazi” by the way, is Bavarian slang, which roughly translates into “dummy” or “dunce”.)

Hayek rightly made no distinction between the terms “fascist” or “communist” as is so common today in intellectual discourse from the left and right. For the average citizen the realities of living under either one is identical with the loss of individual freedoms such as speech, assembly, property and the likelihood of getting a fair trial when you piss off some bureaucrat.

It would be hard to deny that the current Obama Administration and Democrat controlled Congress is pushing us rapidly into the direction of socialism. Indeed, “Newsweek” magazine on its Feb. 26th cover proudly proclaimed “We’re All Socialists Now”. They accept that the era of bigger government is coming and that we should embrace it. Ol’ Friedrich is turning in his grave.

Hayek was an economist first and often did intellectual warfare with John M. Keynes during the Great Depression. Keynes believed in an activist and expansive government and favored fiscal stimulus (big government spending). Hayek believed in free markets, limited government, stable monetary policy, low taxes and appropriate regulation. (Ebenstein, National Review, 2/23/09). The politicians of the day followed Keynes’ prescriptions and the depression lasted from 1929 until after WWII. In short, it did not work out well.

Hayek was a “monetarist” meaning he favored actions by the Federal Reserve to create stability in the money supply and interest rates to direct the economy independent of political influence. “Fiscal policy” is the responsibility of Congress.

In past blogs I have asserted that the current mess precipitated by the housing bubble was caused by “easy money” for far too long and the interference by Congress in the housing market with the Community Reinvestment Act. To understand how this worked out let’s look at what the Fed under Greenspan (Fed. Chairman ’87-2006) did and see the results on the economy of his ministrations.

Between 1998 and 2000 Greenspan gradually ratcheted up interest rates to 6.5% causing a recession in 2001. (Note: This is the Federal Funds Rate as opposed to the Prime Rate, which is generally 3% higher.) He began lowering rates until they hit 4% just before 9/11. Immediately after 9/11 he dropped them to 1% and kept them there until 2004. Hayek argued that, “…if interest rates are too low they will attract resources to areas of the economy not otherwise attractive to investment.” Like real estate? Housing prices were skyrocketing and the mania was in high gear. Sensing trouble, Greenspan then jacked up rates to 5.25% by 2006. Adjustable rate mortgages started kicking in and that pinprick caused the bubble to burst. Many economists now call this whole mess “The Greenspan Bubble”.

From this it should be clear that the Democrat strategy to blame the economic crisis on Bush, while effective, is totally bogus. The politically independent Fed gets the lion’s share of the blame for this debacle, with honorable mention to House Democrats who pushed to get unqualified buyers into houses and then resisted all efforts to rein in Fanny and Freddie.

The 2006 elections brought in a Democrat controlled Congress and the 2008 Presidential election gave us the thinly qualified Obama. Rewriting history and elevating FDR to sainthood have resurrected Keynesian theory.

Money in incomprehensible numbers is getting tossed out the door in frantic spending to try to stem the tide of recession. At the same time the Fed cut the interest rates to essentially zero. And, yesterday while House Democrats were looking for the addresses of the AIG employees who got bonuses so they could string them up on the nearest light pole, the Fed quietly created $1.5 trillion dollars out of thin air. They’re gonna print it, folks! Did I hear someone say “smoke screen”?

In the most blatant display of hypocrisy I’ve ever witnessed, politicians called for the heads of AIG executives for receiving bonuses that were agreed to in the very “stimulus” legislation they had just passed!! Of course, they had an excuse: none of them had actually read the damn thing. Latest news on this is that Geitner, Obama’s Treasury Secretary, now admits that he insisted the “Dodd Amendment” authorizing the bonuses be added to the stimulus bill. Dodd had only the day before denied he knew anything about the amendment carrying his name. Today they passed a bill to tax these 71 individuals to get the bonuses back. It’s probably unconstitutional. How can anyone have any confidence in these clowns?

But, I digress. Feel better though having gotten that out of my system.

OK, what does all this mean? It seems the latest move by the Fed coupled with the massive spending by the Obama Team will likely jolt the economy into a mild recovery. Most likely we will dip back into recession when the cap and trade taxes, individual tax hikes and card check kick in. In any case, almost everyone expects that the next ice burg in our path will be unprecedented inflation. In a year or two the US dollar might look a lot like the Zimbabwe currency.

Fred, climb out of the grave. We need ya, man.

Let’s Have the Debate

Journalist Peter Foster reports in the “National Post” today that he is heading off to New York City to attend the 2009 International Conference on Climate Change. Dubbed the largest ever gathering of climate change skeptics, the title of the event is: “Global Warming: Was it Ever Really a Crisis?” Dozens of presenters from the scientific community will offer papers disputing the conventional wisdom that global warming exists and that, in any event, is not a threat to humanity. Presumably, (and hopefully) they will discuss the economic folly of promoting drastic measures in the midst of a worldwide recession.

I suspect that this conference will not get even a passing reference in the mainstream media. That would prove embarrassing to the media and Obama Administration as they push forward with their plans to impose a $650 billion cap and trade regime (carbon tax) on the American people. Even Obama and his fellow socialists admit that energy costs will skyrocket, while they are less forthright in admitting that this war on CO2 amounts to a huge tax increase on everyone. No one in support of this scheme wants to confess that poorer citizens will be hardest hit. That famous 13 bucks a week in tax breaks (falling to $7.10 in 2010) for lower income Americans will quickly evaporate as the cost of everything goes up…. except the stock market, of course. That will be going down and so will the job market as industries flee the country. You really have to wonder if these guys have a clue. Or maybe, (and God I hate to say this) it’s intentional. Can it be possible that they hate business so much that they would intentionally destroy the American economy? When ideology trumps reason and science you have to wonder.

Meanwhile, on the other side of the pond in Merry Old England where they are still seething over the dissing of PM Gordon Brown by the White House, another conference is taking place. This one at the University of the West of England in Bristol brings together psychologists, sociologists and eco-gurus and will explore the Mental Disorder of “climate change denial”.
Yes indeed, the 650 certified meteorologists and climate scientists on the US Senate compilation of climate cataclysm skeptics and the 32,000 scientists who signed the Oregon Petition saying they dispute that humans are causing climate change are certifiably nuts. Hold on while I see if I can find a straight jacket on eBay.

Foster dubs this group climate true believers adherents of a “global state religion” or “eco-shariah” and anyone disagreeing with accepted dogma in need of serious psychological treatment. Like the medieval Christianity, Islamic fundamentalists or communist dissenters, non-believers need to be tortured (re-educated?) until they accept the true faith. Perhaps a little electro-shock therapy would do the trick?

This sort of thinking lends a lot of credence to the late Michael Crichton’s contention that modern society has embraced environmentalism as a secular religion. Only a true believer refuses to look at scientific evidence with an open mind.

One thing remains clear, no one in the Obama Administration wants to have a debate about the validity of global warming. (Al Gore doesn’t want to debate anyone on the science either.) And, they certainly don’t want to have a vote on this massive tax increase. They can avoid that messy confrontation by simply imposing cap and trade through the regulatory auspices of the EPA and/or regulations under the ESP (Endangered Species Act. Remember those “endangered” polar bears?) Having a debate would expose millions of people to the scientific evidence and raise the question of whether this is about saving the planet or simply a massive tax and power grab.

Can you say taxation without representation?