Friday, March 27, 2009

In response to America becoming a socialist nation

ere (in America it) is not considered sufficient that the law should be just; it must be philanthropic. Nor is it sufficient that the law should guarantee to every citizen the free and inoffensive use of his faculties for physical, intellectual, and moral self-improvement. Instead, it is demanded that the law should directly extend welfare, education, and morality throughout the nation.

This is the seductive lure of socialism. And I repeat again: These two uses of the law are in direct contradiction to each other. We must choose between them. A citizen cannot at the same time be free and not free.

How did politicians ever come to believe this weird idea that the law could be made to produce what it does not contain — the wealth, science, and religion that, in a positive sense, constitute prosperity? Is it due to the influence of our modern writers on public affairs?

(t)hose of the socialist school of thought — base their various theories upon one common hypothesis: They divide mankind into two parts. People in general — with the exception of the writer himself — form the first group. The writer, all alone, forms the second and most important group. Surely this is the weirdest and most conceited notion that ever entered a human brain!

In fact, these (legislators of) public affairs begin by supposing that people have within themselves no means of discernment; no motivation to action. The (legislators) assume that people are inert matter, passive particles, motionless atoms, at best a kind of vegetation indifferent to its own manner of existence. They assume that people are susceptible to being shaped — by the will and hand of another person — into an infinite variety of forms, more or less symmetrical, artistic, and perfected. Moreover, not one of these (leaders) on governmental affairs hesitates to imagine that he himself — under the title of organizer, discoverer, legislator, or founder — is this will and hand, this universal motivating force, this creative power whose sublime mission is to mold these scattered materials — persons — into a society.

These socialist(s) look upon people in the same manner that the gardener views his trees. Just as the gardener capriciously shapes the trees into pyramids, parasols, cubes, vases, fans, and other forms, just so does the socialist whimsically shape human beings into groups, series, centers, sub-centers, honeycombs, labor-corps, and other variations. And just as the gardener needs axes, pruning hooks, saws, and shears to shape his trees, just so does the socialist need the force that he can find only in law to shape human beings. For this purpose, he devises tariff laws, tax laws, relief laws, and school laws.

But what a difference there is between the gardener and his trees, between the inventor and his machine, between the chemist and his elements, between the farmer and his seeds! And in all sincerity, the socialist thinks that there is the same difference between him and mankind!

It is no wonder that the governors of the (twenty-first) century look upon society as an artificial creation of the legislator's genius. To intellectuals and writers, the relationship between persons and the legislator appears to be the same as the relationship between the clay and the potter.

Moreover, even where they have consented to recognize a principle of action in the heart of man — and a principle of discernment in man's intellect — they have considered these gifts from God to be fatal gifts. They have thought that persons, under the impulse of these two gifts, would fatally tend to ruin themselves. They assume that if the legislators left persons free to follow their own inclinations, they would arrive at atheism instead of religion, ignorance instead of knowledge, poverty instead of production and exchange.

According to these (elites), it is indeed fortunate that Heaven has bestowed upon certain men — governors and legislators — the exact opposite inclinations, not only for their own sake but also for the sake of the rest of the world! While mankind tends toward evil, the legislators yearn for good; while mankind advances toward darkness, the legislators aspire for enlightenment; while mankind is drawn toward vice, the legislators are attracted toward virtue. Since they have decided that this is the true state of affairs, they then demand the use of force in order to substitute their own inclinations for those of the human race.

Rousseau (said): “He who would dare to undertake the political creation of a people ought to believe that he can, in a manner of speaking, transform human nature; transform each individual — who, by himself, is a solitary and perfect whole — into a mere part of a greater whole from which the individual will henceforth receive his life and being. Thus the person who would undertake the political creation of a people should believe in his ability to alter man's constitution; to strengthen it; to substitute for the physical and independent existence received from nature, an existence which is partial and moral. [7] In short, the would-be creator of political man must remove man's own forces and endow him with others that are naturally alien to him.”

Please remember sometimes that which you so arbitrarily dispose of, are men! They are your equals! They are intelligent and free human beings like yourselves! As you have, they too have received from God the faculty to observe, to plan ahead, to think, and to judge for themselves! Ah, you miserable creatures! You who think that you are so great! You who judge humanity to be so small! You who wish to reform everything! Why don't you reform yourselves? That task would be sufficient enough.

Actually, what is the political struggle that we witness? It is the instinctive struggle of all people toward liberty. And what is this liberty, whose very name makes the heart beat faster and shakes the world? Is it not the union of all liberties — liberty of conscience, of education, of association, of the press, of travel, of labor, of trade? In short, is not liberty the freedom of every person to make full use of his faculties, so long as he does not harm other persons while doing so? Is not liberty the destruction of all despotism — including, of course, legal despotism? Finally, is not liberty the restricting of the law only to its rational sphere of organizing the right of the individual to lawful self-defense; of punishing injustice?

The strange phenomenon of our times — one which will probably astound our descendants — is the doctrine based on this triple hypothesis: the total inertness of mankind, the omnipotence of the law, and the infallibility of the legislator. These three ideas form the sacred symbol of those who proclaim themselves totally democratic.

The advocates of this doctrine also profess to be social. So far as they are democratic, they place unlimited faith in mankind. But so far as they are social, they regard mankind as little better than mud. Let us examine this contrast in greater detail.

What is the attitude of the democrat when political rights are under discussion? How does he regard the people when a legislator is to be chosen? Ah, then it is claimed that the people have an instinctive wisdom; they are gifted with the finest perception; their will is always right; the general will cannot err; voting cannot be too universal.

When it is time to vote, apparently the voter is not to be asked for any guarantee of his wisdom. His will and capacity to choose wisely are taken for granted. Can the people be mistaken? Are we not living in an age of enlightenment? Have they not won their rights by great effort and sacrifice? Have they not given ample proof of their intelligence and wisdom? Are they not adults? Are they not capable of judging for themselves? Do they not know what is best for themselves? Is there a class or a man who would be so bold as to set himself above the people, and judge and act for them? No, no, the people are and should be free. They desire to manage their own affairs, and they shall do so.

But when the legislator is finally elected — ah! then indeed does the tone of his speech undergo a radical change. The people are returned to passiveness, inertness, and unconsciousness; the legislator enters into omnipotence. Now it is for him to initiate, to direct, to propel, and to organize. Mankind has only to submit; the hour of despotism has struck. We now observe this fatal idea: The people who, during the election, were so wise, so moral, and so perfect, now have no tendencies whatever; or if they have any, they are tendencies that lead downward into degradation.

The claims of these organizers of humanity raise another question which I have often asked them and which, so far as I know, they have never answered: If the natural tendencies of mankind are so bad that it is not safe to permit people to be free, how is it that the tendencies of these organizers are always good? Do not the legislators and their appointed agents also belong to the human race? Or do they believe that they themselves are made of a finer clay than the rest of mankind? The organizers maintain that society, when left undirected, rushes headlong to its inevitable destruction because the instincts of the people are so perverse. The legislators claim to stop this suicidal course and to give it a saner direction. Apparently, then, the legislators and the organizers have received from Heaven an intelligence and virtue that place them beyond and above mankind; if so, let them show their titles to this superiority.

They would be the shepherds over us, their sheep. Certainly such an arrangement presupposes that they are naturally superior to the rest of us. And certainly we are fully justified in demanding from the legislators and organizers proof of this natural superiority.

Please understand that I do not dispute their right to invent social combinations, to advertise them, to advocate them, and to try them upon themselves, at their own expense and risk. But I do dispute their right to impose these plans upon us by law — by force — and to compel us to pay for them with our taxes.

I do not insist that the supporters of these various social schools of thought renounce their various ideas. I insist only that they renounce this one idea that they have in common: They need only to give up the idea of forcing us to acquiesce to their groups and series, their socialized projects, their free-credit banks, their concept of morality, and their commercial regulations. I ask only that we be permitted to decide upon these plans for ourselves; that we not be forced to accept them, directly or indirectly, if we find them to be contrary to our best interests or repugnant to our consciences.

But these organizers desire access to the tax funds and to the power of the law in order to carry out their plans. In addition to being oppressive and unjust, this desire also implies the fatal supposition that the organizer is infallible and mankind is incompetent.

Which countries contain the most peaceful, the most moral, and the happiest people? Those people are found in the countries where the law least interferes with private affairs; where government is least felt; where the individual has the greatest scope, and free opinion the greatest influence; where administrative powers are fewest and simplest; where taxes are lightest and most nearly equal, and popular discontent the least excited and the least justifiable; where individuals and groups most actively assume their responsibilities, and, consequently, where the morals of admittedly imperfect human beings are constantly improving; where trade, assemblies, and associations are the least restricted; where labor, capital, and populations suffer the fewest forced displacements; where mankind most nearly follows its own natural inclinations; where the inventions of men are most nearly in harmony with the laws of God; in short, the happiest, most moral, and most peaceful people are those who most nearly follow this principle: Although mankind is not perfect, still, all hope rests upon the free and voluntary actions of persons within the limits of right; law or force is to be used for nothing except the administration of universal justice.

This must be said: There are too many "great" men in the world — legislators, organizers, do-gooders, leaders of the people, fathers of nations, and so on, and so on. Too many persons place themselves above mankind; they make a career of organizing it, patronizing it, and ruling it.

Now someone will say: "You yourself are doing this very thing." True. But it must be admitted that I act in an entirely different sense; if I have joined the ranks of the reformers, it is solely for the purpose of persuading them to leave people alone.

My attitude toward all other persons is well illustrated by this story from a celebrated traveler: He arrived one day in the midst of a tribe of savages, where a child had just been born. A crowd of soothsayers, magicians, and quacks — armed with rings, hooks, and cords — surrounded it. One said: "This child will never smell the perfume of a peace-pipe unless I stretch his nostrils." Another said: "He will never be able to hear unless I draw his ear-lobes down to his shoulders." A third said: "He will never see the sunshine unless I slant his eyes." Another said: "He will never stand upright unless I bend his legs." A fifth said: "He will never learn to think unless I flatten his skull."

"Stop," cried the traveler. "What God does is well done. Do not claim to know more than He. God has given organs to this frail creature; let them develop and grow strong by exercise, use, experience, and liberty."

God has given to men all that is necessary for them to accomplish their destinies. He has provided a social form as well as a human form. And these social organs of persons are so constituted that they will develop themselves harmoniously in the clean air of liberty. Away, then, with quacks and organizers! Away with the whims of governmental administrators, their socialized projects, their centralization, their tariffs, their government schools, their free credit, their bank monopolies, their regulations, their restrictions, their equalization by taxation, and their pious moralizations!

And now that the legislators and do-gooders have so futilely inflicted so many systems upon society, may they finally end where they should have begun: May they reject all systems, and try liberty; for liberty is an acknowledgment of faith in God and His works.

The preceding piece was excerpted and edited by Dean Kalahar (with changes in parenthesis) from The Law by Frédéric Bastiat, First published in 1850 as a reaction to French government policies. The original text is from The Foundation for Economic Education, Inc. Irvington-on-Hudson, New York 10533

Spend and tax

A picture is worth a thousand words


Green hypocrisy

The green movement can't decide if they want deserts or wind power. Someone needs to tell them that choices have costs and that they do not live in the Garden of Eden.

John Fund in the Wall Street Journal says placing wind power in the Mohave Desert is being stopped by environmentalists who are afraid of hurting the desert turtle.

There are "130 pending applications for solar power projects on federal land administered by the Bureau of Land Management . . . environmentalists are blocking such plants by demanding time-consuming environmental-impact studies. . . applications are still being clogged up in a bureaucratic pipeline and no new permits have been issued to date."

Thursday, March 26, 2009

The U.S. can't borrow cash without buyers

From Noel Sheppard, Associate Editor,

Wall Street got rocked Wednesday by a “debt bomb” economists have worried about for decades.Hours after the United Kingdom failed to attract enough buyers for itsauction of $2.5 billion of 40-year bonds, the United States Treasury had similar difficulties with its sale of $34 billion worth of five-year notes and was forced to raise their interest rate to a much higher yield than had been anticipated.Such problematic debt offerings came on the heels of Germany having two failed auctions of its bonds already this year.

Will Going green really create jobs?

Some economic evidence of the green job creation hype.

The following is from a new study just released.

A group of studies, rapidly gaining popularity, promise that a massive program of government mandates, subsidies, and forced technological interventions will reward the nation with an economy brimming with green jobs. Not only will these jobs allegedly improve the environment, but they will pay well, be very interesting, and foster unionization. These claims are built on 7 myths about economics, forecasting, and technology. Our team of researchers from universities across the nation surveyed this green jobs literature, analyzed its assumptions, and found that the special interest groups promoting the idea of green jobs have embedded dubious assumptions and techniques within their analyses. We found that the prescribed undertaking would lead to restructuring and possibly impoverishing our society. Therefore, our citizens deserve careful analysis and informed public debate about these assumptions and resulting recommendations before our nation can move forward towards a more eco-friendly nation. To do so, we need to expose these myths so that we can see the facts more clearly

Morriss, Andrew P., Bogart, William T., Dorchak, Andrew and Meiners, Roger E.,7 Myths About Green Jobs(March 11, 2009). U Illinois Law & Economics Research Paper No. LE09-007. Available at SSRN:

Outlawing failure

John Tamny on Treasury Secretary Geithner,

"Indeed, the failure of companies big and small means that capitalism is working. It is only when governments feel the need to act that we actually experience what he deems crises. Geithner’s inability to comprehend these basic truths foretells an austere future where he will seek to outlaw failure, and in doing so, he’ll blunt the essential market lessons that tell us how to achieve."

A Greek history lesson

Victor Davis Hanson on current American socio-political behavior.

"In the last three months, we’ve been reduced to something like the ancient Athenian mob — with opportunistic politicians sometimes inciting, sometimes catering to an already-angry public.The Greek comic playwright Aristophanes once described how screaming politicians — posing as men of the people — would sway Athenian citizens by offering them all sort of perks and goodies that the government had no idea of how to pay for.The historian Thucydides offers even more frightening accounts of bloodthirsty voters after they were aroused by demagogues (“leaders or drivers of the people”). One day, in bloodthirsty rage, voters demanded the death of the rebellious men of the subject island city of Mytilene; yet on the very next, in sudden remorse, they rescinded that blanket death sentence. Lately we’ve allowed our government to forget its calmer republican roots. We’ve gone Athenian whole hog."

Wednesday, March 25, 2009

Government failure in the derivitive market

Private property must be protected and tracked under a legal system of contracts. In this regard, the government failed in its primary responsibility, which is to protect people and their property.

In the link below, DeSoto clearly explains the problem with derivatives and the need for all traded paper to be recorded to ensure document/property transparency.

Tuesday, March 24, 2009

Solutions to credit crises were outlined six months ago!

What is taking so long? Chalk one up for the inefficiency of government.

Here is part of a piece I wrote on October 1st, 2008, 6 months ago! The government is just beginning to, possibly, follow some of these ideas.

A free market economic plan to deal with the credit crisis

  • Securities and Exchange Commission (SEC) opens a free and open trading market in mortgage backed securities (MBS) in one of the major exchanges.

  • SEC suspends mark to market accounting practices on MBS

  • No capital gains tax levied on profits from trading MBS

  • The Treasury Department will be allowed to purchase and sell MBS on the open market with the intent of securing appreciating assets for the treasury; and will be authorized for a maximum pre-determined dollar amount deemed appropriate by congress with oversight protections and General Accounting Office (GAO) review powers

  • $5000 Tax deduction for all homeowners who have not defaulted on either their primary and/or secondary mortgages currently held for at least 5 years

  • Increase in FDIC insurance limits to $250,000 per account

  • Repeal the Community Reinvestment Act and offer legal protections for banks that adhere to clearly defined credit and lending parameters, including those that lead to “redlining.”

  • Form a Commission to lay the groundwork, including timetable, for the privatization of Fannie Mae and Freddie Mac

  • Full disclosure to shareholders of all contracts and “buy out/golden parachute” clauses of top executives in financial institutions prior to approval by the board of directors of any financial company.

Monday, March 23, 2009

Geitner's plan and the naysayers

Regarding the Geitner plan to get the "toxic" assets off the books:

The naysayers and Professor Krugman (see his comments below) seem to forget about the power of self interest, profit and a free market. Nobody will buy "toxic" assets, subsidized or not, unless they believe the profitability is greater than the risk. Nobody is just going to give them away so a market must be created to find out their worth.

The value for these assets will be greater than their current zero dollars suggest, thus there will be a market for them- where their ultimate price will be set through the mechanisms of supply and demand. Ultimately, competition to profit from purchasing the assets based on self interest will set a true current value.

In the end, the assets will be removed from the books of the financial institutions, unless they purchase "toxic" assets or decide not to sell their own. Speculation based on self interest or "greed" as Mr. Krugman would probably call it is how markets work. People will purchase almost anything, if they believe the value will increase above the purchase price and there will be a free market operating in order to sell what they once purchased at some time in the future. The closer the plan is to the principles of free market capitalism, the greater the chance it will work.

Paul Krugman said,

And so the plan is to use taxpayer funds to drive the prices of bad assets up to “fair” levels. Mr. Paulson proposed having the government buy the assets directly. Mr. Geithner instead proposes a complicated scheme in which the government lends money to private investors, who then use the money to buy the stuff. The idea, says Mr. Obama’s top economic adviser, is to use “the expertise of the market” to set the value of toxic assets.

But the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt. So this isn’t really about letting markets work. It’s just an indirect, disguised way to subsidize purchases of bad assets.

The Constitution and the dollar

How do we fix the economic situation? It is not so hard after all.

Louis R. Woodhill writing in, Sorry, but Capitalism Did Not Fail, said,

"Capitalism and the free market can only do their job if the government supplies constant, reliable units of measure. This is why Article I, Section 8 of the Constitution of the United States says: “The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures”. The Framers seemed to understand that the dollar is a unit of measure, just like the foot, the pound, and the second."

Maybe it's time for Americans to be "grown-ups?"

Kathleen Parker eloquently discussing the pulse of the nation.

"Despite civic rage and political blame -- even death threats aimed at business executives -- there is a carnival air of unseriousness and grotesquery loose upon the land. Life has become one grand, comic burlesque, a vaudevillian game show where plumbers are journalists, war heroes twitter, and the president hits the late-night circuit in the midst of crisis."

Taxing AIG bonus money at 90%?

Great quote from John Campbell(R-CA) regarding taxing AIG executives at 90%.

"You may or may not realize it, but embezzlement income is taxable today, but at normal rates. So if you steal money, you will not have a tax higher than normal. You may be forced to give the money back because you stole it, but it will not be taxed away from you. This bill makes a bonus from Bank of America a more egregious offense under the tax laws than bank robbery."

Friday, March 20, 2009

AIG bonuses and the Constitution.

Link and enjoy.

Capitalism is under attack.

The following should offer refreshing peace of mind to all those who understand that capitalism saves lives

Excerpts from Do not let the ‘cure’ destroy capitalism
By Gary Becker and Kevin Murphy

March 19 2009

Capitalism has been wounded by the global recession, which unfortunately will get worse before it gets better. As governments continue to determine how many restrictions to place on markets, especially financial markets, the destruction of wealth from the recession should be placed in the context of the enormous creation of wealth and improved well-being during the past three decades. Financial and other reforms must not risk destroying the source of these gains in prosperity.

Consider the following extraordinary statistics about the performance of the world economy since 1980. World real gross domestic product grew by about 145 per cent from 1980 to 2007, or by an average of roughly 3.4 per cent a year. The so-called capitalist greed that motivated business people and ambitious workers helped hundreds of millions to climb out of grinding poverty. The role of capitalism in creating wealth is seen in the sharp rise in Chinese and Indian incomes after they introduced market-based reforms (China in the late 1970s and India in 1991). Global health, as measured by life expectancy at different ages, has also risen rapidly, especially in lower-income countries.

When did bonuses become a bad thing?

If Washington can go after Wall Street firms, why not Bonuses on Main Street? Should we go after Wal-mart for giving out bonuses? Where does the drive toward socialism end?

Chris Burritt of Bloomberg tells the story. " Wal-Mart Stores Inc., the world’s largest retailer, plans to award $2 billion in extra compensation to about 1 million U.S. hourly workers this year after sales jumped in the recession.

The amount of the bonuses, profit sharing, discounts and 401(k) and stock-plan contributions being given to employees compares with the $1.8 billion Wal-Mart distributed last year. Payments to employees include $933.6 million in bonuses today"

Cap and trade tax hits low income earners.

Tax Foundation
March 16, 2009
Who Pays for Climate Policy? New Estimates of the Household Burden and Economic Impact of a U.S. Cap-and-Trade System

by Andrew Chamberlain


Many U.S. lawmakers view cap and trade as a politically superior non-tax approach to climate policy. However, cap and trade imposes identical economic burdens on households to a similarly designed carbon tax. Using the newly-released 2002 input-output accounts we present new estimates of the distributional impact of a typical cap-and-trade system by income, age, U.S. region and family type. In total, households would face an annual burden of roughly $144.8 billion per year with costs disproportionately borne by low-income households, those under age 25 and over 75 years, those in Southern states, and single parents with dependent children. Using RIMS II multipliers we estimate the broader economic impact of cap and trade. Depending on how the system is structured, cap and trade could reduce U.S. employment by 965,000 jobs, household earnings by $37.8 billion, and economic output by $136 billion per year or roughly $1,145 per household. Lawmakers weighing the costs and benefits of climate policy should be aware that cap and trade would impose a significant and regressive annual burden on U.S. households, and would not represent a "tax free" way to reduce greenhouse gas emissions.

Politicians as intellectuals?

"The single greatest instance of intellectual foolishness today is the continuing pretense that politicians are serious people worthy of serious consideration. They are scoundrels, each and every one, regardless of party (although some of them, it is true, are more scoundrelly than others). For any scholar to pretend that these people are disinterested servants of the public welfare -- to pretend that the words politicians utter or send out in press releases are meant to promote any goal other than politicians' own glorification and pursuit of power -- is for that scholar to be duped to a degree that should be more embarrassing than would be the discovery that that scholar believes the earth to be flat or that Big Foot was in league with Lee Harvey Oswald to murder JFK." - Don Boudreaux Cafe Hayek

Pat Buchanan on systemic failure

Excerpts from Systemic failure by Pat Buchanan

In short, this generation of political and financial elites has proven itself unfit to govern a great nation. What we have is a system failure that is rooted in a societal failure. Behind our disaster lie the greed, stupidity and incompetence of the leadership of a generation.

"Avarice, ambition," warned John Adams, "would break the strongest cords of our Constitution as a whale goes through a net. Our Constitution is made only for a moral and religious people. It is wholly inadequate to the government of any other."

In this deepening crisis, what is being tested is not simply the resilience of capitalism, but the character of a people.

Thursday, March 19, 2009

The credit crisis for visual learners

The crisis of credit visualized.

This is a very helpful lesson. They needed, however, to add the fact that the government was also part of the problem by passing the community reinvestment act, ignoring Fannie Mae and Freddie Mac, and not enforcing the rule of law with the SEC.

John Tamny speaking about the political economy

The success of capitalism means that many are allowed to do things that have nothing to do with productivity. And from government and academic elites that frequently seek to undermine the very system that enabled their cushy jobs, to foundations created by capitalist profits that often dismiss same, the commercial success wrought by the pursuit of profit has created an unproductive elite that lives off the very business profits that it regularly casts a skeptical eye on. . .

Washington [is] the place for lesser minds. . .

The irony of a government that fostered our financial destruction overseeing its resuscitation has seemingly never troubled Bernanke, so now the very regulations that failed so impressively when it came to rooting out previous financial mistakes will be expanded. What’s rarely asked is how the very people who achieve stature through something called “pay grades” could ever successfully regulate those who make millions by gaming those same regulations and regulators.

Once this is considered, it has to be remembered that a bigger regulatory state simply insures that there will be more big failures, and more Bernie Madoffs to contend with. Regulations, rather than a deterrent when it comes to nefarious activity, actually encourage it for the existence of rules that sharper minds in the private sector will always work around. Regulations merely tell those eager to cheat or take excessive risks what they’ll have to comply with while cheating and taking excessive risks.

Better it would be if Bernanke et al were to acknowledge how tragically unequal they are to the task of outsmarting private sector minds. If so, if the regulatory state shows an appealing modesty with regard to its shortcomings, it can be assured that private individuals, with money on the line, will do for themselves what Washington has never been able to do.

Wisdom and guidance from the father of the Constitution

Dean Kalahar
March 11, 2009

"James Madison, the father of our republic, warned of the dangers of human nature tied to unchecked factions. He designed our constitution to be a check against the ill conceived ideas of any impassioned group. In the Federalist #51, Madison said, “A rage for paper money, for an abolition of debts, for an equal division of property, or for any other improper or wicked project, will be less apt to pervade the whole body of the Union than a particular member of it; in the same proportion as such a malady is more likely to taint a particular county or district, than an entire State."

Madison understood the nature of man and the proposition of "wicked" ideas such as over-speculation, foregoing the costs of choices, and laying claim to another man’s property; but he never envisioned these "maladies" would be able to infiltrate and “taint” the political fabric at the national level. Let’s take a closer look at the current architecture in Washington that would make Madison recoil in horror.

"A rage for paper money" by printing, borrowing, loaning and spending 4.6 trillion dollars and promoting over-speculation based on lax market oversight on Wall Street and legislative mandates to buy houses on Main Street.

"[a]n abolition of debts" by bailing out the banking, insurance, and auto industries, as well as renegotiating private mortgage contracts.

"[a]n equal division of property" by a legislative agenda based on redistributing income on a massive scale with universal healthcare, subsidies, and tax credits to non-taxpayers, paid for by tax increases to those who create the wealth of the nation.

Madison’s belief that no one political entity could ever “pervade the whole body of the Union” has been thoroughly discredited by the current behavior of the legislative and executive branches of government. If the people of the body politic do not rise up and provide a counter balancing faction to the “malady” that is Washington, we will get everything we have not asked for and do not deserve. Fortunately, the Constitution offers not only the method of our destruction but the means of our salvation. American’s owe Madison, and every other citizen who has fought and died to protect this great nation, personal actions to stop the “improper” use of power and reaffirm the guiding principles of our founding fathers that have served us well for the last 233 years.

AIG, bonuses, and the Constitution

Dean Kalahar
March 18, 2009

Are you feeling angst over the AIG bonus payout, and do you believe the Congress should do something about it? If so, some Constitutional wisdom is in order to clear your head.

First, the role of government is to protect the people and their property. This fundamentally includes judicial enforcement of contracts. The bonuses in question with AIG were stipulated in contractual agreements. Whether you feel the bonuses were outrageous or not, the government’s role is to enforce contracts and protect property rights. In doing so, the free market functions more efficiently, a fact that has been largely ignored, yet, is sorely needed in these tough recessionary times.

Some in Congress are looking for ways to get back the bonus monies through legislation. Maybe they should read the Constitution which states in Article 1, Section 9 and 10 respectively, “No Bill of Attainder or ex post facto Law shall be passed.” And the states are prohibited to “pass any Bill of Atainder, ex post facto Law, or Law impairing the Obligation of Contracts,”

In regard to these provisions, what did James Madison say in Federalist #44 to clarify the founder’s beliefs, "Bills of attainder, ex post facto laws, and laws impairing the obligations of contracts, are contrary to the first principles of the social compact, and to every principle of sound legislation. . . The sober people of America are weary of the fluctuating policy which has directed the public councils.~They have seen with regret and indignation that sudden changes and legislative interferences, in cases affecting personal rights, become jobs in the hands of enterprising and influential speculators, and snares to the more-industrious and less-informed part of the community."

In addition, the court later ruled that, "The Bill of Attainder Clause was intended not as a narrow, technical prohibition, but rather as an implementation of the separation of powers, a general safeguard against legislative exercise of the judicial function or more simply - trial by legislature."~ U.S. v. Brown, 381 U.S. 437, 440 (1965)

If this is not enough to replace angst with constitutional principles, another question needs to be asked. Are the bonuses really “outrageous in size?”

Mark Perry points out that out of the nearly $200 billion in taxpayer funds that were pumped into AIG, the $165 million in bonuses represent .0825% (about 1/12 of 1%) of the bailout amount. In other words, $1 in bonus money is being paid out for every $1,272 of bailout money received by AIG.

It seems that concerning the economy, everything Congress touches turns into a disaster. To which, in an act of utter contempt for the American people, Congress asks for even broader powers to fix the problems they created. Remember, these are the same people who swear to you that they know how to fix the recession better than the principles of free market capitalism.

The solution for Congress and the President to the AIG bonus question is to simply let it go, and stop trying to manage a 15 trillion dollar economy of 330 million people. If they feel the need to do anything, they can all agree to do nothing. God help us all.