Monday, September 29, 2008

How Texas Reps Voted on the Bailout

In Total

Against - 23
For - 9


Green, Al
Green, Gene
Johnson, Sam



Johnson, E. B.

Republicans in Italics, Democrats otherwise

Great Speech Against the Bailout

Click here

Here here, Mr. Flake.

Sunday, September 28, 2008

Another Depression? Not Yet

The belief that we are headed for another depression is being tossed around, so I wanted to help clear up some questions about the current state and direction of the economy. Let me put a few fears aside, but then bring up a few that you may not be aware.

How do Depressions Happen?

First, Depressions don’t just happen. They are not a random and inevitable byproduct of a free market. In fact, the opposite is true. As I have written before, the free market is simply a system where individuals, not government, make personal financial decisions that are often extremely complex, based on what makes the best sense to them. When the government interferes, they are telling individuals that they are wrong and that a few people are smart enough to make decisions for society as a whole. Because each human life is so complex, a small group of government planners will make so many errors that the more they try to fix the economy the more havoc they will cause.

A Quick History Lesson

In 1929, the stock market plunged in widespread panic. This was not unique, as it has happened many times before and afterwards throughout the years. In 1987, the stock market dropped even more precipitously than in 1929 and the economy kept on humming for several more years. In fact, the market recovered so dramatically that the Dow Jones Industrial Average actually recorded a gain for the year.

What actually happened was a collision of new socialist ideas and the hubris of Presidents Herbert Hoover and Franklin Roosevelt. In 2001, we saw the stock market drop and the economy slow after the attacks on September 11th. Within days, the Federal Reserve lowered interest rates to help the economy get back on its feet. After the crash in 1929, the Federal Reserve decided to stop following the rules of the Gold Standard and increased interest rates. The Fed poured cold water on an already cooling economy.

Herbert Hoover knew what always followed a financial panic in America: companies would slash their worker’s wages so that they could stay in business. Hoover, in his infinite wisdom, decided that this was bad and convinced thousands of companies not to lower wages exchanging union promises to not strike. Lo and behold, hundreds of companies started to go out of business because they couldn’t afford the promises. The mistakes by President Hoover continued as he and his cabinet tried to “fix” the economy.

As the economic malaise dragged on the American people soured on Capitalism. Roosevelt easily won election in 1932. Unfortunately, instead of seeing Hoover as fool hardy, he saw Hoover’s error as not going nearly far enough. Roosevelt’s government attempted one fruitless attempt after another. Not until Pearl Harbor did President Roosevelt’s experiments end and the country’s focus moved to the war. Afterwards, President Truman was not nearly as interested in market interference as Roosevelt, and America’s economy quickly rebounded.

Are Our Leaders Repeating History?

Ben Bernanke, the current President of the Federal Reserve had this to say to the famously free market Milton Friedman on his 90th birthday on the role of the Federal Reserve in starting the Great Depression:

“You're right, we did it. We're very sorry. But thanks to you, we won't do it again.”

Is he right that they will not do it again? I believe so. I am not a fan of the Federal Reserve or much of what they do, but I do think that they will likely avoid the horrible mistakes that occurred during the Great Depression. Mr. Bernanke is renowned as an expert on the Great Depression and his admissions on the numerous mistakes that the government made encourages me to believe that we will not make the same mistakes.

As a number of other economic writers have recently noted in various articles, there is also no brewing intellectual movement endorsing the socialist ideas rampant amongst the intelligentsia during the late 1920’s. This too gives me comfort that history will not repeat itself.

However, what happened in a few short years after the onset of the Depression that gives me concern today was that millions of Americans, who had more faith in the free market than understanding, lose the faith in tough economic times. Unfortunately, in our own time, we have seen a significant bump in support for solutions that ignore free choices and responsibility by individuals.

Many of our leaders exhibited the same vices of Hoover and Roosevelt when it came to the recent $700 billion bailout, but not all. While President Bush admitted that the bailout went against his free market instincts, few in the Democratic Party, nor their candidate Senator Obama, took pause at such a gargantuan interference. Their concern was not whether the government should interfere in the market, only the distribution of the benefits.

It is not repeating old mistakes that concern me so much, as it is committing new ones. There are many people in power with a friendly disposition towards market interference. Unemployment is heading upwards and inflation continues to be a problem. Will recent decisions make these situations worse? Will Americans lose just enough faith in the free market to vote people into power whose first instinct is to interfere in the market and expose us to the risk of a much deeper recession? Will our leaders, guided by fear, succumb to ill-conceived economic ideas? I hope not.

Another Depression? Not yet.

Friday, September 19, 2008

Houston Needs Price Gouging

In the wee hours of Saturday, September 13th, Hurricane Ike came ashore in Galveston County, Texas, where I live. With my family safely housed with relatives on the far northwest side of Houston, I traveled Saturday afternoon to view the damage to my home situated several miles from the coast. I faced little traffic on the highways, few downed power lines, and had little problem getting to where I was going. Now, six days later delivery trucks don’t seem to be able to make it here. Houston’s mayor is still pleading companies to make deliveries of gas, food, and ice, as we sit in long lines for necessities and common comforts. How do we fix this problem? Legalize price gouging.

What was noticeable for a number of days after the storm was gasoline hoarding. Queues for gasoline extended multiple blocks and required several hours of patience. The overwhelming majority of customers not only completely filled the tanks within their vehicles, but they also filled one or more gasoline canisters. No one wanted to wait through another line, so the incentive from price controls was to purchase as much as possible to avoid the need to come back. Because of this incentive, the few gas stations that were open inevitably ran out of fuel, feeding a vicious cycle of panic and hoarding.

If gasoline prices had been allowed to float up to, say, $8, some people, including tightwads like me, would have chosen not to buy as much gasoline in hopes that the price would come down over the next few days. If the average customer was buying only 10 gallons of gasoline instead of 25, the stations would have been able to service more people because the incentives would be to self-ration and not as much to hoard.

The unseen benefits that $8 gasoline would have brought are alternative purchasing options. With enormous profit margins to be made, tanker trucks from the four corners of America would have set off to sell gasoline on the roadside, in parking lots, or door to door, quickly ending the shortage. Instead of getting on the phone and begging for supplies, the mayor could have concentrated on traditional city functions like restoring water, clearing roads and removing debris.

Now, the greatest shortage is electricity. While few incentives could encourage the power companies to work faster, nor for safety reasons should they, there are alternatives that price gouging could provide. The tens of thousands of people who own generators, but have now had their electricity restored, have likely tucked them back into the corner of the garage. If the price was allowed to double or triple, they would be placed in a much more helpful position of being able to pocket some cash now and buy another generator when the prices return to normal in the coming months. As it is, few individuals have an economic incentive to part with their generators and give them over to the hundreds of thousands facing weeks without electricity. Because price gouging is illegal, thousands of people are burning up precious gasoline hoping to hit the Home Depot lottery by being there when the next shipment of five generators arrives tomorrow.

The emotional pull for an egalitarian distribution of food seems to be even stronger than that for gasoline, but the same problems persisted in local supermarkets after the storm. As I picked up a few items at a recently opened store near my home, I witnessed food hoarding going on as well. A woman added nearly a dozen packages of hot dogs to her cart already half-full with bags of frozen chicken breasts, and other packaged meats. She then turned to advise the other two women she was with to grab some. Each added half a dozen packages to their carts. I don’t know their situation back home, but since the shelves were mostly bare already, it probably meant that other people arriving later would have to go without. If the store had hiked the prices of certain items even a few dollars, food types in short supply could have been enjoyed by more people not just the lucky few who discovered that the store had recently restocked.

It is hard to label a system that bans price gouging egalitarian when the winners are those who get lucky or simply have a high tolerance for waiting in line. We need to legalize price gouging. As I wait for my roof to be fixed and tree limbs to be hauled off, I am eating no hot dogs. Can someone tell FEMA to send more hot dogs?

Monday, September 15, 2008

Ike - Only Some Damage

I am finally back home in air-conditioned comfort. We are still under a water boil advisory, so ice for our drinks. I have a big bath tub size area of shingles that blew off the roof, but only a couple water spots inside the house. A tree in the front yard lost several large limbs and looks a little sparse. Two sections of the fence blew down. Other than that, not too bad.

Friday, September 12, 2008

Hurricane Ike

For those of you who have read my bio you may be aware that I live in League City, TX, where Ike is supposed to cross over in the wee hours tonight. Thankfully, my house is at 25 ft. above sea level, so I'm not terribly concerned about catostrophic damage from the storm surge. Although, I suspect that we will have no power or water for a few days.

Cross your fingers.

Tuesday, September 9, 2008

Signs of Victory

I've been a little excited over the last few weeks as McCain seems to have surged past Obama and has momentum heading towards the debates. I've tried to keep that excitement subdued because many things can happen between now and then, but some anecdotal events have given me reason to start thinking victory.

I saw this article headline today and took it as a sign that Obama is in far more trouble than I had previously hoped:

"What's the difference between Palin and Muslim fundamentalists? Lipstick" - Juan Cole - Salon Magazine

A selected quote:

"Palin's stance is even stricter than that of the Parliament of the Islamic Republic of Iran"

I'm pretty sure that implying that a Vice Presidential candidate is more radical than the leaders of an authoritarian dictatorship, is only a hairs breadth away from the classic internet rhetorical crutch - "She's worse than Hitler". It's one thing for some wild-eyed crazy to stoop to this level of discourse in the comment section, but for a magazine that takes itself seriously, to print this sort of hyperbole is laughable.

Mr. Cole, you are a joke.

Tuesday, September 2, 2008

Time to Eliminate the Federal Gas Tax

The Federal Gas Tax must go. It is part of the rent-seeking bog that has mired our Congress in excessive spending, and provides the murkiest pool of funds for pork barrel projects. It serves virtually no national interest and it wastes the time of lawmakers and federal officials.

I am not proposing a tax cut. I would fully expect most every state to increase their gas taxes to make up for the lost funds from federal transportation outlays. The point is for individual states to make decisions on transportation spending, and remove the bulk of funds that Congress hands out with a wink and a nod to friends, donors, and the well connected.

Many have attacked earmarks with good cause, but there are still those that defend them. The defenses go something like this:

“I was sent to Congress to fight for my state/district and make sure we get our fair share of federal funds”


“The citizens in my state/district would rather have their elected officials work for them instead of relying on some bureaucrat”

Should individual states get their fair share of gas tax revenue? Yes, by never sending the money to Washington in the first place.

Who should decide how gas tax revenue in Delaware be spent? The people of Delaware. If Oklahoma wants to build freeways, then let them use their own money. If Oregon wants no freeways and only light rail, then let them use their own money. Funding should not be based on the seniority of a state’s congressional delegation. It should be decided with the reasonable judgment of those who are most familiar with state transportation needs: The State governments.

The bumbling bureaucrats and the arcane funding formulas give incentives for every state and city to maximize their funding by kowtowing to the rules and not strictly looking out for the interests of their local citizens. If these defenders of pork are right, state governments would be vastly superior at appropriating gas tax funds than the federal government. When a state government is using their own money there will be far fewer “Bridges to Nowhere”. It is only when they are trying to game the system that idiotic projects of that ilk are enacted.

Federal Gas Tax dollars are a cesspool of corruption. They waste time and misappropriate transportation dollars around the country. The Federal Gas Tax must go!