Now the TSA gets off its ass

After the travel gestapo working for Homeland Security totally flubbed the warning they received about would-be terrorist Umar Abdullmutallab they have finally gotten off their fat asses and done something. Once again, it is the wrong thing.

As you will remember they imposed these new absurd travel regulations stripping people of the right to pee during the last hour of a flight. Well, that information was made public through some blogs. So what do the Travel Nazis do? They go after the blogs with subpoenas.

The writer Christopher Elliot, found a TSA agent at his front door with a subpoena saying: "You are hereby commanded by the administrator, Transportation Security Administration, United States Department of Homeland Security to produce and permit inspection of the records described below...."

While the TSA didn't have time to investigate someone reported by his own family as a terrorist, who flew without luggage and who appeared on a list of suspected terrorists, they do have time to harass bloggers. Why? The bloggers printed the new TSA "guidelines" on "How to Harass Innocent People Why Ignoring Real Threats." Okay, maybe the TSA called it SD 1544-09-06. They are demanding the bloggers reveal the source of their information. It is a pathetic commentary on the Homeland Security State of Napolitano and Obama, when instead of fixing what went wrong, they concentrate on unimportant issues while harassing bloggers.

The TSA sent two of their thugs to visit travel blogger Steve Frischling as well. They confiscated his lap top computer. Frischling said that they threatened to "interfer" with his contract to write a blog for an airline if he refused to cooperate with them. They wanted him to name names. Is Joe McCarthey running TSA? The New York Times is reporting that the TSA refuses to say how many American bloggers are being harassed under this new fishing expedition. What they want is to silence anyone exposing TSA stupidity—which would be a full time job.

So, all you morons who thought Obama would be different than Bush, you are right. He's worse. I could be wrong, but I don't remember TSA thugs harassing bloggers under Bush. That seems to be an Obama innovation. Certainly this contempt for the First Amendment is not unique it was used before—by men like Stalin, Mao, Mussolini and Hitler.

Huffington Post says:

The agents threatened to get Frischling -- a blogger for KLM airlines -- fired from his job, confiscate all his electronic devices -- phones, computers, and iPods -- and declare him a security risk -- which would get him on the No Fly list -- unless he cooperated.

Frischling -- who has worked for Life, Time, Newsweek, New York Times, and was embedded with troops in Iraq -- didn't know what to do. He couldn't reach a lawyer.

The civil subpoena threatened a fine and up to a year in jail for failure to comply.

The TSA has been under fire lately for failure to stop the Christmas Bomber from boarding the NW flight. Frischling told the Huffington Post that he didn't know who sent him the memo and that it is not in any of his computers. The memo was hardly secret. It was sent to approximately 10,000 airlines, airports, and security firms around the world, including locations in Riyadh, Islamabad, and Lagos.

So the TSA sends out a directive to thousands of places, which is seen by tens of thousands of people, and then starts harassing two people for knowing what is in the directive. This is par for the bungling, authoritarian perfomance of Napolitano. She really does want to be another Janet Reno. Now all she needs is to kill some women and children by buring down their "compound" and send in armed thugs to terrorize a small child. Janet Reno Lives. Be Afriad. Be Very Afraid.

Image: Janet Reno showing the world some of her "tools of persuasion." She promised to later show reporters the "rack," "iron maiden" and other tools she finds usesful as first security reichfürher.

Flubbed terrorists known to government.

The Nigerian who tried to light explosive strapped to his leg was known to the U.S. government. Umar Abdulmutallab's name was added to a list of known or suspsected terrorists by the government a month ago. However, when the man's name was run through the database, before he could board his flight, it came up with a green light. There was no warning of any kind. There wasn't even a suggestion that he be put under additional scrutiny. Instead of focusing on people the government KNOWS to be risks the bureaucrats prefer to go after everyone.

There are new restrictions on hand luggage put into place—yet the explosives the man carried were strapped to his leg and never in hand luggage. There is the new regulation confining passengers to their seats yet the man was in his seat when he tried to light the explosive. Abdulmutallab would have been in compliance with all the new restrictions imposed by the government had they been put in place before he boarded the plane. In other words, NONE of the new regulations would have had any impact on the incident. These regulations do not prevent incidents such as the one that happened, that is clear. The incident is merely an excuse for the additional regulations not a justification.

Take the new rule on one piece of carry-on luggage only as an example. Abdulmutallab had only one piece of carry-on luggage. In fact, it was the only luggage he had. Apparently no one found a man flying thousands of miles, with just one piece of hand luggage unusual. His ticket showed him being on his trip for almost two weeks—yet he had no luggage and no one found that unusual. He was on a list of suspected terrorists which exists to allegedly warn airport security about yet the U.S. government gave the man the green light so security staff were not even warned to give the man a bit of additional scrutiny.

Instead of focusing on ways in which the existing failed the bureaucrats like Napolitano look for ways to complicate the lives of innocent people. One month ago our government listed Abdulmutallab as a potential terrorist and yet they approved him to fly without even a hint that he might be a problem. The failure was not the result of too little regulation, as Napolitano is always inclined to think, it was the failure of government. Having the travel gestapo spend more time hassling flyers is no help. All it does is tie up security staff with millions of innocent people.

Since the government knew that Abdulmutallab was a potential risk the most sensible thing to do was to ask security staff to check him out thoroughly. When the man checked-in, was on a list of potential terrorists AND had no checked luggage that should have sent alarm bells ringing. But no one, other than the bureaucrats, knew he was on the list. Security at the airport was never told.

Notice that the failure in security belongs heavily to the bureaucrats in Washington for failing to sound the alarm bell for extra scrutinty. It partially belongs to security staff for not wondering about the absence of luggage. Instead of addressing precisely where security failed, Napolitano pretends the problem was not enough state control and ups the level of regulations stripping Americans of freedom. This is why I don't think there is a war on terrorism, there is a war on freedom however. Everytime some would-be terrorists does something the U.S. government, instead of actually focusing on the individuals with a known tie to terrorism, clamp down on the traveling public.

Photo: Janet Napolitano illustrating how to slowly grab liberty by the throat.

Some people find the oddest things troubling.

The irrationality of the anti-gay crowd amazes me. Sometimes, however, they are so bizarre and strange that they only bring about smiles and laughter. I've seen stand-up comics who aren't as funny as some of the Christianists, and the latter aren't even trying.

Most people have seen the rainbow flag, which symbolizes gay pride—except in parts of Europe where the flag, with the word "peace" on it, is an an anti-war symbol. Someone in Neptune, New Jersey, at a residents association meeting, wants the city council to look into banning the rainbow flag on houses. Their complaint reads:

"Ref: Display of sexual orientation flags," the question begins. "More and more, we are noticing flags being displayed on (Shark River Hills) properties declaring the occupants' sexual orientation or proclivity — not just the multicolored "gay' striped flags, but also banners indicating fetishes and or other "lifestyle' choices.

"While this type of display may be acceptable in certain gay enclaves, there is simply no justification for it in a family oriented neighborhood like (Shark River Hills.) Your comments?"

Alas, this person's imagination is running away with them. I've lived in major cities and medium size cities, in various countries as well, yet never heard of, or seen, a flag for "fetishes and or other 'lifestyle' choices." Ooops, there is the Christian flag which I've seen used by various conservative churches. But other than that, I can honestly say I've never heard of such a thing. I suggest the only flat that has this person upset is the rainbow flag. If they can't get gays removed from "family oriented neighborhoods" (hey, Hans Hermann Hoppe would vote for that!) then at least they can get the flags out.

Meanwhile a politician from the conservative, religious-oriented Law and Justice Party in Poland is complaining that the local zoo purchased an elephant which appears to be gay. The politicians whines: "We didn't pay 37 million zlotys ($11 million) for the largest elephant house in Europe to have a gay elephant live there." It could be worse. The compound could be flying a rainbow flag or some of the other "fetish" flags that allegedly exist.

Meanwhile the police in Brooklyn, New York are up in a dither because a local pizzaria has a weekly gay night which includes male go-go dancers. (That isn't what I usually get when I order a pizza with sausage.) Captain Kennenty Corey, of the 76th Precinct promised: "We're going to determine the legality of it. If they're outside of it, then we're going to take action." I feel safer already. Police didn't even know about the weekly party until the New York Times ran an article mentioning it. Obviously they were flooded with complaints. The gay party is held on a night when the pizzeria, in the past, was usually closed. And the sign outside clearly says "Gay Party" to warn off the faint-of-heart.

Wasting tax funds on this clown...

This is what passes as sex education under Christianist control. This clown (literally} is paid to try to teach "abstinence" to high school students. And your tax money pays the bills.

We are all sex offenders now -- Happy Halloween.

One can almost bet that a politician is, right this moment, concocting some new stupid piece of legislation. And he will crow if he manages to pass the new absurdity into law -- and the more absurd it is, the more likely it is that it will pass.

Consider that we are now about to enter Halloween. It is not a holiday I have ever particularly enjoyed, not even as a child. And my general response has been to ignore it. I don’t wear a costume and I don't say “trick or treat” or hand out candy treats. Maybe I’m a spoil-sport but I don’t care for the day. So I’d usually turn off the lights and curl up in front of the television and watch a good movie, or maybe a not-so-good movie.

Now I can’t. The morons who get elected to office seem intent on making it dangerous to ignore Halloween, perhaps even deadly. Let me explain how this happening.

Politicians like to solve “problems” especially where there really is no problem after all. And Halloween gives them such an opportunity. In all the years of Halloween the scare stories are more scary than the real stories. In actuality one child has been abducted while going out trick or treating. That was 35 years ago. Only one case.

But the politicians in their campaign to rile up the public about sex offenders (a label that is given out easily and for some very non-serious issues -- such as streaking, urinating at the side of the road, or sex between two teenagers) are intentionally fanning the flames of fear for their own personal profit.

In South Carolina anyone deemed a sex offender is forbidden to give out candy on Halloween and is required to turn out the porch light -- to pretend they aren’t home. In New York an “offender” is forbidden to hand out candy, answer the door, possess candy or wear a costume on Halloween.

In Missouri a judge judiciously put a halt to some of the bizarre regulations on sex offenders, such as forbidding them to engage in any Halloween activity with their own children. But they are still required to turn off the lights and pretend they aren’t home.

And that pisses me off. I’ve been turning out my porch light and pretending I’m not home for years. And I’m no sex offender, registered or otherwise. So now my problem is what do I do this year? If I turn out the lights, and don’t answer the door, is that the same thing as advertising “sex offender here!!!!”?

One can’t ignore the damn holiday without possibly getting accused of being an offender. For years I’ve safely ignored the holiday. Now, what will the neighbors think? Will they assume that the light is off because a sex offender lives here? Or will they just think an old grump who doesn’t care for being annoyed on Halloween is here? I don’t mind the old grump reputation -- I’ve earned it. But damn, that sex offender thing upsets me. The only offending thing about my sex life is that there is damn so little of it. And that doesn’t seem to bother other people much -- just me.

Ever since the witchhunt hysterias of the days of McMartin and dozens of other such fake child molestation cases I have judiciously and cautiously avoided even the appearance of any involvement with someone underage. I don’t hang around where kids hang around -- actually that would be annoying to me. I don’t think I’ve ever been alone with a kid in years. I avoid even speaking to kids I don’t know. Being male in a dangerous thing and some asshole is quite likely to make up accusations, and just the accusations alone can ruin your life. So I’ve done my best to stay away from even the appearance of something like this.

And one way I did that was just avoiding Halloween. (Quite honestly, I’ve always ignored the holiday but this was another reason for doing so, just not my original, primary reason.) Now ignoring Halloween is a sign that one is a sex offender, thanks to these laws.

The other thing I know is that with the hysteria that the politicians have been feeding it is not safe to be a sex offender. Several people assumed to be offenders have been attacked, some have been killed. A podiatrist in the UK faced continual harassment because stupid individuals confused podiatrist with pedophile. Individuals who moved into homes previously occupied by registered sex offenders found their address was still listed on-line and they were harassed and attacked by vigilantes out to protect kiddies.

So the mere whisper, or suspicion of being some sort of sex offender, is enough to cause you physical harm and all sorts of grief. Now ignoring Halloween is a sign of being a sex offender. All of this to address the “problem” of offenders attacking children on Halloween -- something that only happened once almost four decades ago. The odds that anyone is being protected by these relatively new laws is extremely small -- probably non-existent. But come Halloween, numerous states will be sending their cops out to make sure offenders have turned off their porch lights.

The majority of offenses that qualify one as a sex offender have nothing to do with children anyway. So a man, who got drunk, fondled a woman against her will, and is a sex offender, is now considered a threat to children for eternity. Come Halloween the police will be making sure he isn’t wearing a costume, doesn’t own any candy and has his porch light off -- good time to be a criminal since the cops will be occupied.

Sure, that sort of misallocation of police resources is upsetting. But what really has me pissed off is that I may have to hand out candy this year lest it be assumed that my disdain for the practice proves I’m something I’m not. Of course, this sort of bizarre absurdity can only be created when politicians get involved. In one of the Tremors sci-fi films the character Burt told two government agents: “Why don’t you guys go do what you do best. Take something simple and complicate it.” Well, that is what the politicians have done with Halloween. If I turn out my light, to have the evening to myself, I could be assumed to be a sex offender thanks to the politicians. But handing kiddies candy in the dark of night is supposedly a sign of a child molester -- hence the reason for the ban. Handing out candy is suspicious and not handing out candy is suspicious, perhaps we have reached the final outcome of this hysterical earlier than I thought -- we are all sex offenders now.

Time vs. the Times.

Time magazine has an interesting account of the small role that the “prosperity gospel” played in the housing debacle. The “prosperity gospel” tends to be associated with fundamentalist churches, typically of the Pentecostal variety, often predominantly black churches.

The basic premise of this theology is that God doesn’t just want to “save sinners” but bless them as well. Often these advocates of divine healing see wealth as another form of health -- it is financial health. And if God wants believers to prosper in all things then he is going to bless them financially.

The Time article quotes various experts on Pentecostalism all saying that these doctrines encouraged poor believers to go out and get the house that God wanted them to have regardless of their credit rating. So they did. The article said that “native-born faith built partially on American economic optimism entered into a toxic symbiosis with a pathological market.” One professor of religion said the doctrine made believers vulnerable to “greedy brokers.”

While I think they touch on a small aspect of the crisis, the way theology impacted actions and encouraged poor people to apply for loans they couldn’t afford, it is clear they know nothing about economics or politics.

Consider the “greedy brokers” for an instant. I would think that a truly greedy broker wouldn’t lend money to people who can’t pay back the loan. And what makes the market pathological?

While this article is happy to look at a very tiny role that religion played in the problem it implies the entire debacle was caused by “pathological markets” and “greedy brokers”. That view is wrong and another journal of record shows how it is wrong -- the New York Times.

The Times has run an article which more clearly shows how altruism, in contrast to greed, played a major role in the crisis. And it showed how markets weren’t allowed to operate and that the crisis was politically created by “caring” politicians.

The Times article mentions the CEO of Fannie Mae, Daniel Mudd, as someone who “wanted to work for an altruistic business”. He was happy to work with Fannie Mae which is “a government-sponsored company” that “helped Americans get cheaper home loans”. This was government “helping” people not markets acting in a greedy manner.

And remember those “greedy” individuals helping lend money to people? The article also reveals why this was happening -- and it wasn’t greed, it was politics. “Congress was demanding that Mr. Mudd help steer more loans to low-income borrowers.” In fact, Mudd’s own managers told warned he was “making too many loans that would never be repaid.” But Mudd was an “altruist” wanting to “help” people.

Congress was whining that the markets, left to their natural inclinations, wouldn’t make loans to people who can’t afford them. This, no doubt, is pretty much true. So Congress used this “government-sponsored company” to ignore “greed” and act “altruistically” by “helping” poor people borrow money. Between 2005 and 2008 “Fannie purchased or guaranteed at least $270 billion in loans to risky borrowers -- more than three times as much as in all its earlier years combined...” Mudd admits he that he feared “Congress would feel like we weren’t fulfilling our mission” and that is why he followed the policies that are causing so much misery.

Just a few years ago it was “greedy” not to loan money to high risk individuals. Now, when the shit hits the fan, the same moaners claim that loaning the money was inspired by greed. So not loaning the money is greedy and loaning the money is greedy. What they can’t accept is that it was altruistic impulses that helped cause this problem. In 2000, Fannie Mae announced “it would buy $2 trillion in loans from low-income, minority and risky borrowers by 2010.” Fannie Mae wasn’t being greedy at all -- it was being generous. It was following orders from politicians in Washington to loan out money to the poor.

And at the time, when this started, various critics warned of a crisis that could result from such reckless lending. Congressmen like Barney Frank dismissed the warnings and announced that the government-sponsored program was sound and should keep doing what it was doing. Of course Congressman Frank now blames the problem on markets and not on his own interventionist policies. The Times reports that “Capitol Hill bore down on Mr. Mudd as well. ...regulators sharply increased Fannie’s affordable-housing goals. Democratic lawmakers demanded that the company buy more loans that had been made to low-income and minority homebuyers.”

Democratic Senator Jack Reed told Mudd at a 2006 Congressional hearing: “In fact, Fannie and Freddie can do more, a lot more.” One Fannie executive said “our mandate was to stay relevant and to serve low-income borrowers. So that’s what we did.” But who issued this mandate? Congress, that’s who. This was politics at work not the market.

With the government’s Fannie-monster guaranteeing loans to borrowers lenders did precisely what the politicians wanted and started lending money to high risk borrowers. Between 2001 and 2004 the money these lenders lent to high risk clients increased from $160 billion to $540 billion.

The Times makes it quite clear that it wasn’t the free market that caused this crisis but government meddling especially meddling inspired by Democratic members of Congress. They wrote:

Had Fannie been a private entity, its comeuppance might have happened a year ago. But the White House, Wall Street and Capitol Hill were more concerned about the trillions of dollars in other loans that were poisoning financial institutions and banks.

Lawmakers, particularly Democrats, leaned on Fannie and Freddie to buy and hold those troubled debts, hoping that removing them from the system would help the economy recover. The companies, eager to regain market share and buy what they thought were undervalued loans, rushed to comply.

The White House also pitched in. James B. Lockhart, the chief regulator of Fannie and Freddie, adjusted the companies’ lending standards so they could purchase as much as $40 billion in new subprime loans. Some in Congress praised the move.

“I’m not worried about Fannie and Freddie’s health, I’m worried that they won’t do enough to help out the economy,” the chairman of the House Financial Services Committee, Barney Frank, Democrat of Massachusetts, said at the time. “That’s why I’ve supported them all these years — so that they can help at a time like this.”

While I support Barney Frank’s position on civil liberties the man is a moron when it comes to economics. Mr. Frank pushed the very policies that caused poor people to get screwed over in this crisis. And he doesn’t even have the character to admit his own role. Instead he scapegoats free markets while knowing full well that he and his fellow politicians were distorting the market.

Statist liberals (as opposed to classical liberals) helped create this crisis with their lack of understanding of basic economics. They won't admit it. And to appear concerned they voted for a massive bail out of various corporate interests. It doesn't matter how much Barney Frank and the Left want to help the poor. Motives are not important. Their stupid policies screwed the poor in the crisis and to appear "concerned" they rushed to pass legislation that will screw the poor even more. With friends like this the poor don't need enemies.

Raping the taxpayer for fun and profit.

I fully expect the Bush bail out to become policy. It is bad policy but bad policy and Congress go together like salt and pepper.

The politicians have raised their token resistance. Minor changes will be made. Pressure will be put on the holdouts and they will change their votes assuring voters that they held out for the “best” they could hope for.

The “crisis” is one that mainly impacts specific sectors of the economy not the whole economy. And it isn’t as disastrous as the panic mongers want you to believe. More importantly the bail out is not a solution. It doesn’t address the real cause to the problem. People blame the greed on Wall Street but who are they kidding.

Exactly how did greedy Wall Street create the problem? They loaned money to people who were not credit worthy. Those people bought property that was inflated in value. When the value of the property fell and the people couldn’t pay they walked out. Why did greedy bankers lend money to people who were so risky? Because Congress forced them to.

What the Democrats aren’t telling anyone is that they pushed for the very measures that pushed banks to lend to high-risk customers. The banks were threatened with all sorts of legal action if they didn’t help implement Democratic policy -- which was to “increase” housing affordability. Then we had the Federal Reserve pursuing a policy of credit expansion to bring down interest rates to encourage the spending spree to continue. And it did -- right up until the collapse

Greedy Wall Street is certainly involved but greedy politicians were the true creators of the problem. Some like, Congressman Barney Frank, went so far as to poo-poo anyone who said there were problems with the government monsters Freddie Mac and Fannie Mae.

And now greedy Wall Street is certainly lining up for the bail out. Once it becomes apparent that stupid politicians will enact insane policies of distributing billions of dollars for no good reason, there will be no shortage of worthy recipients with cap in hand waiting to be showered with their share. One could argue the fools are the ones who don’t show up -- they will be net losers in the deal, funding the rest of the greedy mob.

And that is what we have -- a greedy lynch mob ready to string up the American taxpayer. This is how politics works. By the time the election rolls around I wouldn’t be surprised if the average voter isn’t repeating the slogans from Washington and commenting about how the bailout is saving America.

Politics is rape except it is done so deceptively that by the time the rape is over the victim is convinced it was her idea and, in addition, she is immensely better off because of it.

Dr. Frankenstein's Bubble: Made in Washington

Question: How bad is the economy going to get?

Answer: Much worse than it has to be.

Why: The nostrums being proposed by the Secretary of the Treasurer are destructive and noxious. Let’s face it, the Bush Administration is totally incompetent and can turn any cold into a fatal disease. I really wasn’t paying that much attention to what Secretary Paulson was saying so I didn’t realize precisely how stupid he was in regards to economics. The man is a blithering moron. Take this series of questions and answers with Paulson as an example:

Jon Healey: Many of the people we speak with don't like this because they see the results of the government's work being sustaining housing values that should have been allowed to come down.

Henry Paulson: Again, I've given my answer to that. I think what we're doing is avoiding a market failure that would have forced housing values down in a way that was not in the investors' interest, and in a way that the market wasn't intended to work.

Tim Cavanaugh: How can you force values down? Why aren't values finding their natural level?

Henry Paulson: The way values would go down is, as I've said, you'd have market failure...

Henry Paulson: ...What this will do will make a difference in that we won't have housing prices driven down in ways that distort the market because the industry wasn't able to come up with procedures to deal with an unprecedented situation.

Tim Cavanaugh: Is it distortion in the market when the market was already distorted up to a degree that maybe wasn't unprecedented, but was certainly unusual in American history?

Henry Paulson: So you'd like to see it distorted down too...
Peter Hong: Could you be a little clearer on what you mean by "market failure"?

Henry Paulson: As I've said, chaos...when I say market failure I say that we have an unprecedented situation, and the private sector has to find a way to deal with that. Otherwise you're going to see them drowning in people who can't make resets, whom they would ordinarily want to keep in a home.

Peter Hong: You used the phrase "distort down." Is it distortion or is it a correction?

Henry Paulson: What I want is markets to work. And I would define a market failure as the system not being able to cope with the wave, so that foreclosures took place that would not have taken place if there were smaller volume...

Peter Hong: But are house prices too high?

Henry Paulson: I'm not going to—foreclosures are bad for neighborhoods. You have needless foreclosures that are driving down prices, created by a situation that is unprecedented and that would under normal circumstances not have taken place.

Good God, didn’t this man take a basics Econ 101 course sometime in his life or is he intentionally ignoring market fundamentals for other reasons? First, lets get rid of the absurd idea that this crisis is one of “market failure”. Markets are doing precisely what they are supposed to do -- when a good is overpriced markets correct that price and bring it down.

So why is housing overpriced in America? Government policies pushed by short-sighted politicians (are there any other kind?) intentionally distorted markets to increase the demand for housing. The whole purpose of the government created monsters, Fannie Mae and Freddie Mac, was to make it easier for people who can’t afford a home to buy one. Easy-money policies from the Federal Reserve, cheap lending from government-backed institutions, increased the demand for housing faster than the supply thus pushing up prices. This gave the home owner the illusion of increasing wealth and they went on a spending spree increasing their debt believing the increased equity in their home would cover it. A good time was being had by all.

And there were lots of people willing to build homes in order to sell them to these people. In fact, there were lots more people building those homes then there should have been.

But why the distortion in building? Consider yourself an investor wanting to get a return on your money. If you purchase stocks, and the stocks went up, you paid capital gains tax on the increased value. If you invested in gold, silver, coins, or almost anything, and you received a profit on your investment you paid a capital gains tax on that profit --- with one major exception. You guessed it: housing!

Go back to 1997 and the so-called Taxpayer Relief Act of 1997 passed by the Congress. Here is a description of the law:

The relief act's primary provision for home sellers is the capital gains tax exclusion -- when you sell your home, if you qualify, you can keep, tax free, capital gains of up to $500,000 if you are married filing jointly or $250,000 for single taxpayers, or married taxpayers who file separately.
Your capital gain on the sale of your home is the selling price minus your cost basis. The cost basis is your purchase price, plus qualified purchase costs, improvements and selling costs, minus any accumulated depreciation, say for a home-based business. A professional can help you more specifically calculate your gain if you are not sure what qualifies and what doesn't.

Now a libertarian might say that tax relief is not a bad thing. But there is tax relief that can create problems. When you have a tax on all capital gains but one specific kind then tax relief linked to one investment alone it will distort investment patterns. The tax policy, in essence, lowers the return on all investment save the favored one. Thus more capital flows into the favored investment than into the others. The natural market is distorted. Some areas lack the investment they ought to have under natural returns and the favored area receives more investment than it would if on an equal playing field.

When one sector of the economy has too much investment the rate of return in that sector will eventually fall. Over investment drives down profits in that sector while pushing up profits in the underinvested sectors. Housing was over built and with each new house the pressure was increasing. The bubble had to burst. What Secretary Paulson is doing is trying to artificially pump up the bubble -- the very sort of policy which caused the problem in the first place. Somebody needs to point out that you don’t cure drunkenness with more alcohol and you don’t cure an economic bubble by re-inflating it.

Vernon Smith won the Nobel prize in economics and almost a year ago he wrote about the housing bubble and the cause.

Thank you President Bill Clinton for your 1997 action, applauded by the banks, the realtors and all citizens in search of half-millionaire status from an investment they could understand and self deceptively believe to be low risk; thank you for fueling the mother of all housing bubbles; thank you for enabling so many of us who bought second or third homes, and homes before construction began, which we then sold to someone else who dreamed of riches from owning homes long enough to sell to another fool.

Once again, try as we might and in spite of our political rhetoric, we have failed to help the poor in applauding government action intended to help ourselves.
The consumption binge is now over, and there is more than enough blame and souring loans to spread around. Congress, if its members can stop squabbling, wants desperately to sanctify it all with actions sure to launch at some future date the grandmother of all housing and mortgage-market bubbles. This august body has long forgotten that it set the stage for housing bubbles by creating those implicitly taxpayer-backed agencies, Fannie Mae and Freddie Mac, as housing lenders of last resort.

Smith notes that it would have been beneficial to allow “capital gains on all assets to go tax free, provided that the capital was reinvested....” But proposals to do that raise the shrill cries of the Statist Left who believe the benefits the rich. They preferred target “relief” and they picked housing to encourage more people to invest into this one sector of the economy. They told us this was helping the poor.

So where are the poor today? They bought houses that had inflated prices, prices inflated by the politicians and their “created in DC” bubble. They bought the houses that they couldn’t afford because the same politicians made it easier for them to do so through the lending distortions they put into effect. So they gave easy money to people to buy property that was overvalued. When the value of the property corrected itself, as was bound to happen, the same homeowners found that they were paying far more than the property was worth. Each month their were going shelling out money as if a property was worth X amount, when in reality it was worth far less. Basically the “caring” Left in Congress conned a lot of people into buying an investment that was bad for them.

Of course those people borrowed the money and most those loans ended up in the hands of the government-sponsored agencies Fannie Mae and Freddy Mac. Make no mistake these are entirely creatures put together by the Dr. Frankenstein’s in Washington. Now the conned home owners are defaulting, destroying their credit ratings, going bankrupt and being harmed in innumerable ways. So the morons who created this crisis, the politicians, are rushing to bail out the big moneyed institutions that leant the money. Damn the little guy tricked into making a bad investment by government policy, but bail out the corporate interests.

Once again we have another politically-created disaster where the most vulnerable people in society are being harmed. The harm was imposed on them by policies which the politicians, particularly the Democrats in DC, claimed were being implemented to “help” them. One basic principle to remember is that “help” from Washington almost always does more harm to the recipient being helped than it does good. Help from DC is like a rapist claiming he’s helping his victim learn new techniques for sexual pleasure. The victim ends up bloodied and beaten and it is only the rapists who gets his jollies.

After the poor home buyers were conned into buying overvalued property by the snake-oil salesmen from Washington they found themselves in a horrible position. When they start going under, and the institutions that hold their loans start hurting, the politicians rush in to rescue the institutions. And who is going to pay for that? The taxpayers. And that means higher taxes to cover the billions in bailouts. Washington tricked people into making bad investments. And when those people go broke and can’t pay off their loans Washington comes in and taxes the same people to save the asses of the corporate elite.

Once again it is clear that government intervention into the market does not help the poor. Quite the contrary. It is the poor who tend to pay the highest price for the intervention and receive the least benefits. Even under the best of the times the “benefits” are dubious and or a short-term nature with long-term consequences which make them worse off.

Keep an eye on Washington because this will be a perfect example of how alleged liberals in the Democratic Party will push through policies that help major donors to their parties while shafting the poor. It will also illustrate how government interference in the free market does not help the poor but harms them. And notice how this crisis has been evolving for sometime now but the political classes did nothing. As long as people were losing their homes the politicians were relatively silent. Once the defaults started hurting the billionaires that fund both parties the politicians jumped to life and demanded bail outs for the big boys. That is the nature of politics but I’ve written about that before.

In defense of short selling.

Politicians are having a field day with the economic meltdown that they worked so hard to create. Typical of the political classes they create a crisis then argue that the cause was that they don't have enough power. They then propose "solutions" guaranteed to make matters worse in the long run thus creating another crisis which sets the power-grabbing process into motion once again.

In the current situation the politicians are refusing to look at how they created bad incentives to overbuy housing. Instead they want to find scapegoats. And they seem to think that "short sellers" in the financial markets are responsible for the problems there -- as opposed to too many houses being held by people who are defaulting on their payments because the "caring" politicians insisted on creating programs to sell homes to people who can't afford them. Short-sellers are the scapegoat. Selling short don't drive down the value of the stock. They are betting that the stock is overvalued. And if enough people are short-selling that is the canary in the mine and ought to serve as a warning. The politicians think it best that there be no warning that a collapse of a company is coming. They want stock holders caught unaware -- how sweet of them. The above video is a short presentation on short selling.

Arson, Fannie, Freddy and Uncle Sam

Some time ago I lived in a state that created a entity that was going to provide fire insurance to those who needed it but were ineligible to receive it from private insurers. It was sold as a warm and cuddly thing to do motivated by only the best of motives and opposed only by those who are cold-hearted and cruel.

No one seemed to ask why it was that the buildings in questions could not obtain private insurance. The major reason was that many of these buildings were fire traps. They were badly maintained and were likely fire hazards.

After the program was initiated the papers reported a rash of fires in buildings covered by the state subsidized insurance scheme. Some of these were just what you would expect from high risk buildings. But quite a few appeared to be of “suspicious origins”.

Buildings in such bad condition could be purchased at relatively low prices. They could be insured, at taxpayer expense, at relatively decent prices. And the owner could make an instant profit if his building had an accident. Coincidentally, of course, that is what happened.

Some of my older readers might remember the Savings & Loans debacle. The nation’s S&L’s offered consumers high interest rates to get their deposits. And to pay off those high rates they made some very risky investments. Safe investments tend to have low returns and dangerous investments have much higher rates of return.

Very quickly many S&Ls got into financial trouble. They sought high profits, had large debts to their customers, and went bust. The Left called that an example of the effect of greedy capitalism.

What they neglected was that S&L crisis was similar to fire insurance problem. S&Ls had insurance which the government provided them. The government told the S&Ls that all the profits from their investments belonged to them. As for the risk the government said they would cover the costs. Each account was covered by the government up to a certain amount -- an amount high enough to cover most accounts.

In the fire scam the government told building owners that the pay-out from a fire would belong to them entirely. But the costs of having a risky business would be covered by the taxpayers.

When government does this it distorts how people act. It tells them to take risks they wouldn’t take if it was their own money on the line. It encourages people to do things which have a high probability of turning out badly. When the state subsidizes the cost of risks while leaving the benefits private it increases the likelihood that risks will be taken and expands the potential for disaster.

The Fannie Mae and Freddy Mac situation is another prime example of this. These companies were allowed to keep all the profits from risky mortgages they covered. But when the risks turned out to be real, and the losses were apparent, the government bails them out. Private profits and public risks are a very dangerous combination.

Imagine how this principle would operate with gamers in a casino. Each individual walks in with a stack of chips provided by the politicians. If the gamer is lucky and wins a jackpot they get to keep all the funds. If they lose they didn’t put anything up. The number of gamblers would increase dramatically.

Of course, many advocates of Big Government promote this sort of policy in area after area. They want to nationalize risks and privatize benefits. But sometimes they do the reverse, that is they privatize risk and nationalize benefits. This too distorts behavior.

One example of this is when an entrepreneur works hard to create a profitable enterprise. The risks of venture belong to him or those who invested in his vision. However, should such an endeavour succeed the politicians demand that the benefits of that venture be given to the state for its use. That means, for the use of politicians who use it to buy votes or reward special interest groups that help them get elected. The risk is private, the benefits public.

Of course, the more this happens the less individuals are willing to take risks. This is easily shown if you assume a situation where 100% of the benefits are nationalized but 100% of the risk is privatized. Who would take a risk, with their own capital, to create a business where they would reap none of the benefits? No one!

We live in a world where politicians have created two sets of policies which deal with risks and benefits. One set of policies rewards bad decisions and the other punishes good decisions. Incentives matter but politicians don’t care. And they don’t care because their incentives are not to let markets work -- but to flex power by manipulating markets for their own benefits or those of their backers.

We’re from the government and here to screw up your life.

The City of Milwaukee is about to steal a man’s home. No, this isn’t because they want to build a highway. Nor is it about transferring the property to some private developer. They are taking the man’s home because he failed to pay a parking ticket!

Peter Tubic, 62, is the victim of government theft and his home, valued at about a quarter of million dollars, is going to be sold by the city in order to pay the parking ticket.

Tubic, who is on social security disability because of mental and physical problems, was ticketed for having an unlicensed car. The car, however, was sitting in his driveway at the time. It was parked on private property and not on a public road. The fine was $50. Then the city tacked on additional penalties to the fine amounting to $2,600.

At the time the home belonged to Mr. Tubic parents. Tubic was caring for them at the time. His father had dementia and his mother was dying of cancer. And in spite of his own disabilities he was their live-in caretaker. The vehicle had a broken radiator. In order to license the vehicle the renew the license the car had to have the radiator fixed and Tubic couldn’t afford that. The vehicle was fined for violating city zoning laws.

Tubic says a bureaucrat came by the house and ordered him to fix the vehicle and he intended to do that. But a couple of days later his father died and he was overwhelmed by the death and the tasks he faced.

By the way, the ticket is only four years old. You try to figure out the interest on a $50 fine to reach $2,600 in just four years. If the interest were 100% per year the fine would be just $800. The City of Milwaukee apparently charges interest that is well in excess of most Mafia loan sharks. And apparently they enforce their “deals” with the same sort of brutality. Instead of busting a kneecap the City, however, steals a man’s home. All Tubic’s taxes (payments politicians demand in order to let you use your own property) were paid in full. The only issue was the fine for violating zoning laws by having a van without license plates parked in his driveway.

Of course the compassionate city says that Tubic is allowed to rent his own home from the city until they sell it from underneath him. But then he’ll have to negotiate rent from the new owners.

According to Social Security, Mr Tubic has psychological disabilities that restrict his “ability to understand, remember and carry out detailed instructions”. He also suffers from degenerative diseases of the knees and spine, has a chronic respiratory disease and diabetes.

The City of Milwaukee has a court date set for September 11th, a day favored by terrorists of all sorts apparently. The plan, at this time, is for them to confiscate the house. All this because of a $50 fine for a “zoning violation”. You can contact Mayor Tom Barrett at (414) 286-2200 or at mayor@milwaukee.gov.

Mayor sends cops after two small children.

In the past I bestowed a “Moron of the Week” award. I confess I have been negligent of late in doing so. Certainly it wasn’t due to a shortage of worthy recipients -- after all this election season so the airwaves are filled with potentials. I’ve just neglected it.

But Gregg Manning, the Mayor of Clayton, California, is such a worthy recipient that the award is hereby bestowed on him. Mayor Manning is not just worthy, he is a prime example of precisely what it means to be a moron. In short, he is the moron by which all other morons must be judged. First, here is a video clip that explains the situation. Please remember he is only on film -- don’t shoot the screen. It will only damage your computer and will not effect Manning at all. Watch, then read the rest, then do something about it.




What sort of bureaucratic mentality is rampant in Clayton? We note that this arrogant old clown seems incredibly condescending. He seems proud that the regulatory crazy politicians in his administration have made lemonade stands for children illegal. I note the Clayton is a very white, very rich town and has little crime. But are these rules a make-work program for cops? Let’s pass stupid laws in order to give the cops someone to go after.

Two girls were selling some spare vegetables from the family garden. Horror! Call out the SWAT team. Mayor Greg “You must obey me” Manning claims this had to be stopped due to traffic problems. The neighbors, who actually live on the street, say there have been no traffic problems at all. Could it be that Manning invented that?

But wait, Manning also invokes the ludicrous “precautionary principle”. That is where we destroy something not because of what it is, or does, but because of what we imagine it might be. So he says that the stand has to be closed down because the two small girls might expand into other product lines -- like chickens. As he said: “They may start out with a little card-table and selling a couple of things, but then who is to say what else they have....” Wow. Is that the best this interfering Nanny can come up with? Here he has retreated from his claim that the stand was causing problems. Instead he is arguing the children must be stopped because he imagines they might do something else. They have to be regulated, not due to problems they are causing, but entirely on the basis of the Mayor’s imagination.

And get that snotty little attack on the parents of the children involved. Because they are defending their children they are “self-centered” unlike arrogant pricks who get elected to office. He said: “I wish everyone would follow the rules and not be just self-centered.” Maybe the rules are crap, Mayor Manning. Maybe the individuals who imposed them, such as yourself, are petty little bureaucrats trying to micromanage other peoples lives.

In reality Manning is far more “self-centered” than the family or the children involved. He is so self-centered that he thinks that he knows how to define the common good for everyone! And in his utopian model that means selling vegetables are a crime and children with lemonade stands are legitimate targets for police intervention.

I don’t know what is best for everyone. Therefore, I have no desire to run other people’s lives. Manning believes he knows what is best and can’t wait to run other people’s lives. Which is the self-centered view? Liberty is based on humility, on the acceptance that I don’t know enough to micromanage the lives of others. Statism is based on the principle that some elite individuals know more than others, are endowed with special traits that make them capable to run the lives of other people. It is an entirely self-centered view of politics. Manning’s entire premise isbased on his natural superiority to rule others and his right to enforce it by armed force if required. (And do remember that this rule was enforced by armed police officers who paid the children a visit.)

So what should be done about this? How about letting this moron know that his actions are not appreciated. In fact, let all the Clayton bureaucrats know this. Here is information on how to contact these clowns. And, while it is going to be difficult, given the utter stupidity of these people, try to be polite.

Greg Manning, Mayor
(925)-673-7316
gmmann@hotmail.com

Julie Pierce, Vice Mayor
(925)-673-7320
Julie_Pierce@comcast.net

David Shuey, Councilmember
(925) 673-7317
shuey@rankinlaw.com

Hank Stratford, Councilmember
(925) 673-7318
hank_stratford@yahoo.com

William Walcutt, Councilmember
(925) 673-7321
wrwalcutt@aol.com

Dumb and dumber: DEA outdoes NHS in stupidity

Yesterday I commented about “National Health Service logic”. The point was simple. While the NHS faced a reduction in customers receiving dental care it bragged that it was spending more money. They seemed to think that a reduction in services is compensated by spending more money for them.

This is typical bureaucratic logic. Rarely do they ever bother to look at actual output or real value created. Their entire emphasis seems to be on input --- how much they spend and how many bureaucrats they employ. In the real world the idea is to maximize output for the least amount of input. The difference is the value that is created.

Government employees think that the size of the bureaucracy is what is important. Of course, more employees and a higher budget might be a sign of something good, provided that the output is much higher and the created value is greater than before. But, as we saw in the dental service of the NHS the output had declined. Still the spokesman for the NHS thought a higher budget was a good sign.

Another bureaucratic agency, one far more destructive than the NHS, has published comments about their 35th anniversary. The Drug Enforcement Administration recently wrote: “At its outset, the DEA had 1,470 Special Agents, a budget of less than $75 million, and a presence in 31 countries. Today, the DEA has 5,235 Special Agents, a budget of more than $2.4 billion and 87 foreign offices in 63 countries.”

With such massive increases in spending exactly what value has been created?

If we grant the premise that the DEA ought to reduce drug flows there is a problem. They aren’t managing that. Last year John Walters, head of the Office of National Drug Control Policy, admitted: "A perennial goal of US anti-drug policy has been to disrupt supplies enough to constrain availability... this effort, however, has consistently failed to achieve lasting increases in drug prices or reductions in drug purity levels. Rather, cocaine prices have been in general decline since 1982. And according to new estimates, which the White House drug czar's office quietly provided to a US senator in January, this decline continued apace in 2006."

Some basic economics will tell you that a long term decline in the price of cocaine indicates that the supply of cocaine is increasing relative to demand. Cocaine is easier and cheaper to find today than it was when the DEA was born.

But, hey folks, they’re spending a lot more money and have a lot more staff. And they brag about that increase in spending and staffing as if that alone justifies their existence. Of course, even if they somehow managed to succeed that would not be sufficient to justify their existence.

Government forbids mother from saving infant's life.

Kataraina Pewhairangi is a young mother, just 18-years-old. And her 9-month old baby, Teyah-Mere, is dying. The child has Biliary Atresia. This is a very rare disorder and it requires surgery in some cases or a liver transplant. The liver produces bile but the bile is retained resulting in cirrhosis of the liver. Without a transplant the baby will die.

You can imagine Kataraina’s relief when she was told that she is a perfect match for her daughter. She is physically capable of donating part of her own liver and can personally save the life of her baby. And she wants to do just that. But she can’t.

Standing in her way are the rules of the socialized health system in New Zealand. The government has an “ethics committee” which makes up rules as to what is “ethical” or not. That which they deem “ethical” is permitted and that which they find unethical is banned. And they have decided that no one under the age of 21 is allowed to participate in a live donation even if it is necessary to save the life of the donor’s own child.

Pewhairangi finds the rule “stupid”. I personally find it unethical. About one in six Kiwis, in need of a liver transplant, die before they receive it. I see no reason that this infant should have to take that chance. Ask yourself what impact this would have on Pewhairangi herself. If she knows she can save her baby’s life and is forbidden to do it, and the baby dies, can you imagine the grief and trauma that will have?

This mother is angry and vowing to fight. “I will stop at nothing. I will go as far as I need to,” she promised. I believe her.

She points out the absurdity of government “ethics” rules here. “I could join the army and go overseas and die for my country” she says, “but I can’t save my daughter’s life.” Welcome to the world of government regulation.

Meanwhile, the infant is in hospital again. She has to receive treament because her condition is worsening. The national health system is happy to continue spending this money but is ignoring a solution to the problem that is literally right under their nose. Grandmother, Lilian Purukamu, says that two other infants from the whanau--the extended family, or Maori grouping to which these women belong-- have already died from the same disease while waiting for liver transplants. She says that she too it outraged and will campaign to change the rules.

But the situation gets worse. The Northern Regional Ethics Committee, which comes up with these rules, may not be allowed to change their own rules even if they see it as necessary. The New Zealand Herald says: “This is because the committee deals with new procedures or studies and not on-going issues.” And, at this time, no one is sure who has the authority to change the rule. An attempt to change the donor age to 20 previously failed and the staff at this “Ethics Committee” say they won’t comment on the issue.

“We’re from government. And we’re here to help you.” Of course, we all know, that the solution to any health-care problem is more government bureaucrats being given the power of life or death over others.

UPDATE: The bad publicity over this regulation forced the hands of David Cunliffe, minister of health for New Zealand. Under the parliamentary system ministers have almost dictatorial powers and can intervene with wide lattitude. Cunliffe called the local health department and got the transplant approved. He claims that the age restriction of 21 only applied to the first six transplants, which certainly would be an odd regulation. He also claims that it is now 16 years of age instead but said health officials have discretion on an individual basis which sounds as if they can override this anytime they wish.

When asked why there was so much confusion within the government as to what the policy actually is he responded: "Let's just say that that matter has been clarified." Now he says "There is no rule... there was only a guideline set for the initial trial." And he insists he not "overturn any of the guidelins." It seems to me that Mr. Cunliffe has only made things more confusing. He says there is no rule setting any age limit yet he also said the age limit was 16. You can't have it both ways. And then when asked to explain this confusion he says that there is no confusion and things have been clarified -- sure, clear as mud.

And local Kiwi papers now report that this doesn't actually clear Pewhairangi to donate part of her live for her baby. It only allows her to begin the bureaucratic process of obtaining permission to save her baby's life. The New Zealand Herald says: "There are extensive criteria that must be met before a person can be a live donor. This includes psychological and medical assessment." So things are still tentative.

When nonsense makes sense.

Sometimes insanity makes sense. At least it does in the Bizarro world of politics. Let me tell you a story.

A few years back I was renting some commercial street on the main street in one of our major cities. The space I was renting was about one third of the ground floor. Above me were two floors of tenants.

One day one of the tenants from above came down rather irate. He was planning to file complaints with the city against the building owner, who was a small businessman who had offices next door to my own. This tenant wanted me to add my name to the complaint that would be filed. I was curious as to what it was that had this guy so upset. The conversation went like this.

Me: “So what’s the problem?”

Him: “We have 32 cracked windows in our flat.”

Me: “Thirty-two windows! Exactly how many rooms does your flat have?”

Him: “It’s an eight bedroom.”

Me: “But how much rent do you pay for that?”

Him: “Five hundred a month.”

Me: “Maybe that’s the reason he doesn’t have much money for maintenance.”

What was going on was that you witnessing the effects of rent control. The local city government had said that landlords couldn’t raise rents and thus it froze rents at levels that were years out of date. Of course property taxes and expenses didn’t freeze just the rental income. In the case of this tenant the travesty was that he was allowed to get away with his game. To cut to the chase I threw the guy out and told him I had no intention of signing his complaint.

What I didn’t realize is that while the ground floor had three businesses on it the same space on the third floor was occupied by one massive apartment. Rent control meant that this tenant was allowed to keep this huge apartment at a fraction of the market rate. But it get worse. While the landlord couldn’t make money on the apartment the tenant was.

With eight bedrooms this tenant was bringing in “roommates” who shared his flat. He, however, was able to rent out each room for what he paying for the entire flat. He didn’t have to work since he was able to reap profits from the landlord’s property in ways which the landlord couldn’t. As the tenant saw things it was fine that he profited from the roommates but the landlord, who was receiving only a tiny fraction of the actual rental income had to pay for the new windows.

Having lived under rent control for sometime I quickly realized that this was a con game played by tenants. Even small apartments could be sublet at a profit by the tenant. One tenant in the city once bragged to me how he had a two bedroom apartment. Because rent control reduces the supply of apartments while pushing up demand there is a massive shortage of housing. That means even single rooms in the city could be let out at premium if you were allowed to do so. And he, as the tenant, was allowed to do so. So his entire rent was paid by the roommate’s rental of one room in the flat.

There is very little support for rent control among economists. Most agree that rent control destroys the housing market. It prevents maintenance and by reducing the return on housing it discourages expanding the housing market to meet demand. At the same time the lower rents mean more tenants are attracted to the dwindling supply of housing.

One “beneficiary” of rent control was Cathy Kim of Berkeley, California. Berkeley is a university town and the far Left city council pushed through strict controls on landlords. Kim says that as result when she heard of a studio apartment available she had to take it sight unseen. In addition she started paying rent four months before she needed it otherwise she’d miss out and wouldn’t find a place to live. She notes that while housing supplies in most cities were expanding in Berkeley they contracted under these controls. “Between 1980 and 1990, Berkeley lost 4,613 of the 27,821 rental units tallied by the 1980 US Census (source: Berkeley's current Draft General Plan).”

I confess that as an avid reader I used to scour the bookstores in Berkeley for my library. I would make frequent trips there and spend the day going from shop to shop to buy these books. Recently I decided to relive these memories and found the city to be a dump. I spent an hour on the main street, which was dirty and run down, and found one book worth purchasing before deciding I wasted my time. The city was removed from list of places to shop.

If economists know that rent control is disastrous, and if the impact of rent control is to reduce the supply of housing and lead to a decay in housing stock, then why in the world does it exist?

Because it makes sense! True it doesn’t make economic sense. It doesn’t make sense even in accomplishing it’s purported goal of expanding the supply of “affordable housing”. But it makes political sense. In the past I’ve often discussed the perverse incentives of politics. And if you think about it you will see that the political process can only make bad economic choices.

Politicians as politicians can only do two things. They can restrict projects through regulations, taxes and red tape. Or they can promote a venture through subsidies, contracts, or the like.

The regulations, red tape and taxes reduce the supply of needed services that are actually being provided. After all you can’t tax a business that doesn’t exist. So when a business does exist government makes that business less efficient and more costly. In addition these regulations, rules and taxes reduce the supply of new businesses coming into existence. Often they die before they start because of them.

To counteract this destructive tendency these selfsame politicians then try to encourage businesses. If this is done by reducing the regulatory and taxation burdens it will help. That is the only way government can really help stimulate business -- get out of the way. But politicians frown on anything that reduces their power or influence. So they prefer the use of subsidies, grants, or government contracts.

But what sort of business exists solely because of these subsidies or contracts? A business has to take a string of resources; such as the resources put into the product or service, labor, land, etc., and combine them together. If the product or service that results has more value than the cost of the input they profit because they are creating wealth. If the business consumes more than it produces then it is destroying wealth and thus losing money.

Political intervention in the marketplace means that government reduces the wealth of the society. It makes us worse off by making profitable entities less profitable. And it makes us worse off by propping up entities that consumer wealth instead of producing it.

But couldn’t government actually subsidize enterprises that make economic sense? They could but why? Such enterprises would exist without the subsidies. And susidizing them only takes wealth from poorer consumers and gives the wealth to producers who are likely to be wealthier. Similarly government could speed up the decline of unprofitable enterprises but such businesses would go under without the state’s help. Instead the state has a tendency to push marginal business, that have a chance of surviving, under when unnecessary.

Government intervention doesn’t make sense. Political control tends to destroy enterprises that make economic sense while pushing programs and businesses that don’t make sense. So why do they do it?

Because it sometimes make political sense to do that which doesn’t make economic sense. Let’s go back to our example of rent control. The simple reason it exists is that the number of voters who are tenants exceeds the number of voters who are landlords. These sorts of measures are particular likely to pass by the vote the public. When the masses can decide the tendency is to redistribute rights and wealth from minorities to majorities.

Of course the political system also does the opposite. It redistributes rights and wealth from majorities to minorities. This tends to take place under the legislative system. So we witness Big Energy and Agribusiness pushing for subsidies for disasters like ethanol. In the legislative process it is the minorities that tend to get the support.

So doesn’t it all wash out in the end? Not at all. Let me illustrate it with a domestic quarrel between a husband and a wife. She is angry and breaks his fishing rod. He retaliates by destroying her vase. She gets more angry and slashes the tires on his car. He responds by cutting up the new couch she bought. By making things more even all they managed to do was make themselves worse off.

Since the political process can basically only destroy efficiency where it exists and prop up inefficiency where it exists these measures don’t balance out. They accumulate.

The whole process is like a group of ten people sitting in a circle with the local political walking from participant to participant. From each individual he collects one dollar. When he gets to the last person he hands them five dollars and then starts the process over again. He does this ten times until each person has received one five dollar bonus. This sort of redistribution makes everyone poorer. But they are so happy when they receive their bonus that the tend to see the politician as their friend.

The reality is that government can’t make business more efficient. It can only increase inefficiency and destroy wealth. Only by acting within the proper confines of government: that of protecting life, liberty and property, does it help anyone. Beyond that the State manages to increase the number of losers while making everyone believe they better off. Such are the perverse incentives of politics.

Note on reading: I highly recommend a short book that discusses the role of incentives under both profit management and bureaucratic management. That must-read book is Bureaucracy by Ludwig von Mises. Copies can he purchased from Laissez Faire Books, 1-800-326-0996.

And they're from the government and here to help you.

Mary Jo Pletz was facing some difficult times. Her infant daughter had just been diagnosed with a brain tumor. She needed to stay home and care for the child and there were so many doctor’s appointments. Yet the family needed the income she could earn from working to pay for all of this. Pletz thought outside the box and came up with a solution.

She began selling items on eBay. She also discovered that there are lots of people who have items they want to sell but who, for various reasons, aren’t anxious to go on-line themselves and those people were happy to let her sell their items on their behalf and keep some of the profit. Pletz did very well it and had sold well over 10,000 items. Her customers were happy too. With around 11,000 ratings left Pletz her approval rating was 99.9 percent positive. Out of the thousands of customers she had only 14 were unhappy.

What a great testimony to the workings of a free market. She was filling a need. She benefited from doing so. The clients who had her sell their goods were happy. The eBay customers who purchased the good were happy. This is win-win-win all around. So who was unhappy? The state of Pennsylvania of course.

Pletz discovered that the government was unhappy when she answered her door one day to find some suited thug operating a state protection racket. He made her an offer she couldn’t refuse. He informed her that the Godfathers down in Harrisburg had heard about her little venture. They weren’t happy.

It seems Pletz had gone into business without kissing their ring first and offering them a sufficient bribe in order to leave her alone. She was told that she could be fined for selling on eBay because she didn’t have an auctioneer’s license. And the fine could be $1,000 for every item she sold. Quick math told the woman that she could be held up for $10 million. One shouldn’t upset the Family.

She closed up shop and took a part-time job as a dental assistant. She also had to hire an attorney to try and protect her from the workings of the Mob. But she also fears that if convicted she can be forbidden from working as a dental assistant -- that too is a licensed profession. And while she has a license it can be stripped from people who are convicted of a crime, even if its a candy-ass, ridiculous crime invented by morons who ought to be dangling from the nearest lightpost ala Mussolini.

Of course the reason the Mob in Harrisburg wants the licensing is “to protect the consumer”. Never mind her 99.9 approval rating in customer service. Notice that protecting consumers never is mentioned when it comes to government agencies like state schools, the DMV or any other department. Surely on-line sellers can’t even do 1% of the damage done to decent people by government officials.

And this is a perfect case to prove the point. According to the Philadelphia Inquirer they are 400 retail drop-off stores in Pennsylvania for internet sales. And 14,000 residents of the state earn most their income from internet auctions. But Pletz is the one they picked to make an example in order to scare the others in paying protection money.

Barry Fallon, 61, had a similar experience to that of Pletz. He had an ISold It franchise store. He was doing well and providing a service customers were willing to pay for -- willing enough that he was also providing jobs to three employees. The state went after him and basically shut him down.

Of course the Mob has protection rackets that favor certain groups. And in this case the group protected were the old fashioned kind of auctioneers. One of them told Fallon that he’d front for him for a fee of $1 per item sold. Then his buddies in the Mob would leave Fallon alone. Fallon explained: “It’s like the buggy-whip manufacturers deciding whether these newfangled automobile manufacturers can do it without a buggy-whip license.”

State Rep. Michael Sturla (D) is the chairman of the House Professional Licensure Committee. He says he wishes the state “will walk away from that one [Pletz] and prosecute somebody else.” Apparently the public is too sympathetic to Pletz, she doesn’t look like the rapacious capitalist that the regulators like to concoct for PR purposes. Sturla isn’t quite willing to let go of controlling every aspect of human existence though he is willing to ease up a bit -- especially when it generates negative publicity like this case. He wants to create an electronic auctioneer’s license and require each recipient to be bonded for $5,000 to “protect consumers”. Apparently this politician thinks that restricting competition is good for consumers. He hasn’t taken Econ 101 apparently.

Sen. Rob Wonderling (R) has introduced legislation to exempt eBay sellers from the licensing requirement entirely. Of course he’s not proposing getting the Mob out of the protection racket. He just prefers they not expand it into this new realm.

On it’s behalf the State claims that they are “complaint driven” implying that someone actually complained that Pletz did something wrong. Of course, they won’t reveal who complained or about what. So you just have to take their word for it.

To quote Ronald Reagan: government isn’t the solution. It’s the problem.

Rogue choir boy threatens to bring down civilized society!

Dear Reader, I confess. I have been negligent. Far too much time has passed since I last hurled my verbal javelin at the brain-dead bureaucrats who infest government schools. I have had a good excuse -- with the presidential battle heating up there were other fish to fry, fish that stunk even more than the typical pencil-pushing imbeciles that run the schools.

Of course, it was only a matter of time before some bumbling Bozo in the school system would redirect my attention toward the menace that is state education. And, as usual, it was some poor student who had to suffer due to the duncical policies of the education establishment.

Christopher Berger is an 18-year-old high school student at Grayslake Central High School. Now often you will hear the phrase, “he’s no choir boy” when talking about teens. Not in Berger’s case. He really is a choir boy. This kid is so together that he really doesn’t need high school -- it probably stands in his way of getting an education. When he’s not in choir he’s an athlete at the school -- in three sports. He is a member of Future Business Leaders of America and spends some of his spare time training to be a fire fighter. In other words this is the sort of dream kid that government schools love to pretend they turn out.

In fact, they did turn him out, literally -- they threw him out. Worse yet, they sent the cops after the boy. If you look at the photo you will get an idea of the serious crime committed by this choir boy. In his hand he is holding something called a Multitool. Anything resembling a Swiss Army knife is a multitool. They are those weird devices that have tiny screw drivers, miniature scissors, itsy-bitsy pliers and the like, all crammed into one device. I’ve always assumed them to be more gadgety than useful. Apparently the dolts running Berger’s school see them as weapons of mass destruction.

Berger’s grandmother bought one for the boy’s father. The father decided to give it to the son. And the son accidentally left it in his jacket pocket at Christmas and forgot to remove it when he returned to school. He didn’t give much thought to it. The problem started when he accidentally left his jacket in the school cafeteria. School officials saw the jacket and searched it -- these guys are so vigilant they could work at the airport. And they discovered the multitool. Well, things went on high alert from that point on.

No doubt Homeland Security was put on full alert. President Bush immediately ordered plans for the invasion of Iran to be resurrected since this new threat was discovered. In some Pakistani cave Osama bin Laden shuddered with horror as his new plot to topple the Great Satan had been foiled. Yes, the world was saved at the very last minute. For this dangerous device contained, and I hope you are sitting down, a 2 inch knife.

When the jacket was traced to Berger he was promptly thrown out of school for two days. But these defenders of Western civilization weren’t satisfied. Office Ken Arnold (no doubt a direct descendent of Benedict) gave the poor kid a police citation which will require the boy to defend himself in court. What was our dangerous choir boy charged with? According to the Chicago Sun-Times “Officer Ken Arnold states that [Berger] endangered the life of other students by leaving a knife unsupervised.” Obviously Officer Ken’s mother beat him with a stupid stick -- often.

What is worse is that the clowns in the local police department are saying this happens all the time. They brag that students are frequently charged with endangering the lives of others for owning pocket knives.

If accidentally leaving an unsupervised multitool with a 2 inch blade is endangering the lives of others then the police better crack down on the local steak house! Have you seen the steak knives that they routinely just hand out to people? My god, the humanity!

Officer Ken was obviously being lenient. No mention was made of the tiny flashlight which is included with the tool. Do you have any idea how many people could be blinded by that? What if some Al Qaeda deep cover operative at the school grabbed this flashlight and rushed down to O’Hare airport. Before Homeland Security could figure out how to tie their shoes, this villain, who no doubt is a gay Mexican illegal immigrant, could have used that flashlight to blind pilots of departing aircraft In minutes dozens of planes could be crashing into buildings. Thank Jesus for Officer Ken.

Here is what gets me -- Officer Ken seems to be permanently stationed at the school. Ken “stupid stick” Arnold is the Student Resource Office at the school. It’s bad enough that these kids have to be around “educators” but no kid is safe in the same room with a cop. The idea of having one permanently stationed in a school ought to send shivers down the spine of every parent.

It’s bad enough one of them could be living down the road, without you knowing it, but allowing them near impressionable children is just going too far. I think we need an on-line registry so we can keep track of them. I do appreciate the uniforms and specially colored cars so we can spot this menace quickly. But some of them try to disguise themselves as decent citizens. That can’t be tolerated. Some even have pages at MySpace!

If you don’t think that America is in the grips of irrational panics and run by blithering fools then you aren’t paying attention.

Dildo police strike again: What is wrong with the American South?

The dildo police have struck again. I am convinced that someone must be doctoring the water in the Bible Belt. Nothing else could possibly explain the utter silliness of this region of the country. Well, almost nothing else.

In Jackson, Mississippi police arrested three individuals at two adult bookstores for selling “sex toys”. They even conducted an “undercover” operation. Under whose covers?

To protect the residents of Mississippi from rampaging dildos and dangerous vibrators the police arrested clerk James Henderson. The owner of store, Harry Rosenthal, was informed of the raid and when he went to the shop to find out what was going on police slapped the cuffs on this dangerous criminal as well. Elsewhere Misty Jordan was arrested at another adult shop.

A witness who works in the same building as the store says police arrived shortly after the shop had a delivery of inventory. The police “just started taking boxes” said the witness, Charles Hobby. He said that some of the boxes were nothing more than lotions or massage oils.

The Theocratic impulse in the American South is a strong one. Don’t you regret winning that damn civil war now? Better off to have let them go. Of course that would mean we’d be building the wall in a slightly different location but it would have helped keep the God-botherers from infesting the rest of the country with their silliness.

About the only place this sort of nonsense takes place is in Jesusland, USA. In Lubbock, Texas police arrested a clerk for selling dildos. This is the same town were the police arrested the Chippendale dancers because the chief of police says he saw a “pelvic thrust”.

We even have a Theopublican legislator who has distributed literature claiming that evolution is a Jewish plot to undermine Christianity arguing, on video, as to why the state should protect people from dildos -- albeit not from dildos who get elected to office on the Republican ticket in Texas. (Follow that last link to see the video where this moron defends the dildo law. It's hilarious.)

In South Carolina another Theopublican (those are Republicans who are theocrats), Ralph Davenport, introduced legislation which would make it a felony to sell any device that helps induce sexual pleasure. Under his legislation a dildo would be considered “obscene” and anyone selling this piece of vinyl or plastic could go to prison for five years and pay the extortionist in the State a $10,000 penalty.

Now as far as I know these absurd laws exist only in the South including Alabama and Georgia. In Texas a dildo can be sold but has to be called by another name. If you say it is a “safe sex demonstration device” you are within the law. If you say, “Hey, how much is that dildo in the window?” and the clerk tells you then the clerk is off to prison.

The last bastion of slavery in the Western world was the American South. The South enshrined segregation as a way of life well into the latter part of the 1900s. The anti-Catholic, anti-Jewish, anti-Black Ku Klux Klan thrived in the South. While lynchings took place in many states they were mostly concentrated in the South, particularly the deep South. The states that supported the bigoted campaign of George Wallace for President were all in the South. The flight to Christian schools was primarily in the South and mainly to avoid segregation, not because of secularism. The last states in the US to want to incarcerate people for gay sex were all Southern except for two Mormon dominated states. And the states that arrest and prosecute people for dildos are once again in the South.

Now I know that the racist Right loves to discuss “Southern culture”. Sorry, I don’t call that culture. I’m sure some Southerners will take offense at what I’ve written. Good! Maybe they will start taking offense at the stupidity of what their fellow citizens are doing to one another. If they aren’t offended by the last two hundred years of Southern history then they deserve to be offended by this essay.

Instead of building that damn wall around the Rio Grande and points west we ought to put it up along the Mason-Dixon Line. It’s not too late. The US Congress can still grant the South independence and allow them to fall into the static quagmire of a culture steeped in superstition and statism. Of course I suspect that at this point in time they won’t leave. As they see it they are intent on conquering the North. I don’t think they will and come the next national elections the Theopublicans will be in for a shock. But still the idea that we have this sort of nonsense going on in this century is scary.