Goin' Euro

I'm not sure that the Republicans should do too much gloating just yet after the resounding victory in November. President Obama promised that he would drag us to a more European model of society, and so far the evidence suggests that he has been remarkably successful. The Euromodel is marked by permanent high unemployment, slow growth, a pusillanimous foreign policy (especially in the face of ruthless dictators), a lack of initiative and a permanent entitlement class consisting of both government workers being paid above market wages and people that don't work at all. But the most salient symptom of goin' Euro is that you develop a penchant for making economic and foreign policy decisions by committee.

We're there.

Government spending is now 25% of GDP, up from about 18% in the Reagan years (and streaking toward 27%). Unemployment is still above 9%, making this the most anemic recovery in terms of job growth in history. Despite the 900 billion dollar stimulus, private sector employment has barely budged. Almost half of our taxpayers don't pay income taxes at all. Despite Bill Clinton's assertion that "the era of big government is over," what we hear from Washington is the old Carpenters' tune, "We've only just begun."

But unlike the federal government, state governments can't just hand the bill to the next generation or print money. They actually have to balance their budgets. To do that on a permanent basis will require a restructuring of the cozy little relationship between the unions and their Democratic benefactors that has existed for decades. Unlike the private sector, there is no incentive to reduce costs or need to show a profit, so all that needed to occur was to keep feeding the unions and the only brake was a bond default or taxpayer revolt. Well, the taxpayers have revolted and Wisconsin is beginning to look like France and Greece when those governments tried to impose a little fiscal discipline.

The other indicia of going Euro is the drive toward decision by committee. And under Democratic rule, governing by committee is blossoming. Dodd-Frank and Obamacare has established scores of these things--- little cabals of pointy headed Ivy League graduates deciding how much banks may charge for overdrafts, what kind of rules there will be for buying and selling derivatives, what my health insurance must cover, and on and on. We now have new rules for the energy output of microwave ovens and the old toy, the Easy Bake Oven will soon be illegal.

Our foreign policy is even out Euroing the Europeans. You know it's pretty bad when France shows a stiff spine than we do. The fall of Mubaruk elicited tepid and guarded comments from the administration, carefully crafted in bureaucratese. And as Ghaddafi strafes and murders his own people, we implore him to "show restraint," write harshly worded letters through the U.N. and impose sactions. That'll show him. I'm sure Ghaddafi is trembling now. We are faced with the most momentus change since the fall of the Berlin Wall, with an opportunity (albeit with some risks) to advance the cause of liberty, and Mr. Obama is more or less M.I.A. I suppose he's used his quota of tough talk on Governer Walker. Last I checked, Libya was still on the U.N. Human Rights Committee.

So, before Republicans get too big for their britches, the evidence is that we're still being pushed into the European model--permanent high unemployment, slow growth, entitled classes, lots of committtees telling us how to live, and a timid foreign policy. Oh, and GDP came in at 2.8% last quarter, remarkably low for a post-recession recovery. How do I fill out the application for the EU?

Cheeseheads!

It was bad enough that we had to suffer through a Packer win in the Super Bowl. But now, the Cheeseheads are acting like, well, Europeans. Did you expect less from those Socialist Swedes across the boarder from us in Illinois? So far, at least, they've left the Molotov Cocktails at home, unlike their brothers-in-arms in Athens. But just weeks after conservatives got a finger wagging lecture about vitriol and civil discourse, Wisconsin workers stormed their capitol over the outrageous prospect of having to chip in a little for their health care and pension benefits. What oppression!

Private sector workers have been ravaged by this most brutal recession, while the public sector has, for the most part, been relatively insulated. Companies I work with have struggled to make payroll, trimmed certain benefits to keep the doors open, and strained to make their budgets, for if they fail, their lenders will shut them down or force them to be sold. Their public sector counterparts until now faced no such pressure.

In Illinois, of course, we dealt with the collapse of tax revenues by raising taxes, cutting programs for the poor, slashing higher education, and borrowing money. You notice that there were no protests here. Who cares if the elderly do without and young kids get their tuition jacked up at U of I? We have union benefits to protect.

This is not a simple management/worker dispute. This is conflict of interest problem. In the private sector, the tension is between ownership and labor. Every dollar not spent on labor can either be a dollar reinvested in the business or returned to the shareholders. It's a classic tug-of-war. It is management's goal to constantly reduce costs to remain competitive, and labor is merely an input cost. Unfortunately for workers, labor does not get a say in who owns the enterprise.

The public sector presents a much different picture. In the public sector, both both sides are on the same side of this devil's bargain. Labor bargains for ever fatter bundles of pay and benefits and full employment, and in exchange, they promise their bosses their votes. There is no pressure to reduce costs. Their managers, the politicians, are more than happy to cave in to labor's demands. Unlike private sector bargaining where management and the shareholders feel the pain of a bad bargain, in the public sector, politicians don't get stuck with the bill. The taxpayers do.

That symbiotically parasitic relationship worked for decades. But now, the states and the federal government are broke and we are pushing back. The tea party protests of last summer were just the beginning. Workers in the private sector will not stand for a society where their home equity has vanished, their 401(k)'s have been decimated, and higher and higher taxes are being demanded of them so their public sector brethren can retire at age 55 with little or no out- of -pocket costs for their benefits. That is just slavery.

The petulant children that now occupy the Wisconsin capitol and their silly Democratic benefactors that fled the state need a healthy dose of reality. All in, these workers are generally paid above market wages and benefits for the skill level that they bring. Almost every company I have worked with over the past 3 years has had to do more with less.

Unions served a useful function in many industries. In coal and transportation, they ensured vital safety standards. They have provided a measure of protection against capricious treatment. But in the public sector, they have bankrupted us. They have manipulated a wealth transfer of monumental proportion and feathered their own nests by promising to deliver the vote to politicians.

Game's up. It's time to get you acquainted with reality. Elections do indeed have consequences.

Happy Birthday, Gipper!

My wife and I attended a 100th birthday party for Ronald Reagan last weekend. Our neighbor's living room was appropriately decorated with a life size cutout of the Gipper, the coffee tables had bowls of jellybeans on them, the big screen TV played Reagan's greatest hits, such as the "tear down this wall" speech, the "evil empire" speech and the comfort he gave to a mourning nation after the Challenger accident when he poetically spoke about the astronauts that "slipped the surly bonds of earth to touch the face of God."

We debated about his greatest accomplishments. Was it the steady pressure put on the Soviet Union and the leadership with reluctant European partners that caused the U.S.S.R. to buckle? Was it the political air cover given to Paul Volker, breaking the insidious back of inflation? Was it lowering confiscatory tax rates setting off a multiyear economic boom and twenty year bull market? Was it putting the brakes on suffocating government growth and regulation? It was all of those things and more.

But what made Reagan truly great was his humility and his desire to push power away from himself and Washington to individuals and the states. He understood that government that governs best governs least and governs locally. It wasn't simply his communication skills that made him so popular; it was that what he communicated was in synch with the American psyche.

So it was almost obscene that liberal pundits recently referred to President Obama's State of the Union speech as "Reaganesque." Please. Obama is the anti-Reagan.

He has effectively undone welfare reform with extended unemployment benefits.

He has slashed funding for missile defense that Reagan refused to conced to Gorbachev and handed the Russians veto power over its deployment.

In contrast the the "Shining City on a Hill" narrative of Reagan, Obama has spent much of his first two years trotting around the world apologizing for the U.S.

He engineered a government takeover of 1/6 of the U.S. economy, while Reagan championed the private sector.

He has attacked state sovereignty by suing Arizona over immigration and Texas over environmental regulation. Reagan fought to devolve power to the states.

Reagan took a stand against public sector unions by firing the air traffic controllers. The Obama administration has coddled, fed and growth them.

Reagan had close, personal relationships with the leaders of our Western partners, especially with Great Britain's Margaret Thatcher. Obama has no such close relationships and has overtly given Great Britain and Israel the back of the hand. And at the same time, he has attempted to reach out to our greatest enemy, radical Islam. His attorney general cannot even utter the term.

Reagan understood that government isn't the solution to our problems; it IS the problem. For Obama, there isn't an area of life that is off limits to the government.

Reagan courageously stood in front of the Brandenburg Gate and, even in defiance of this own state department implored Gorbachev to "tear down this wall." Two summers ago when Iranian citizens took to the streets in defiance of the Islamic thugocracy, Obama stood in silence.

No wonder that a group of us gathered together last weekend and felt nostalgic. Obama is as far away from being Reaganesque as I am from playing in the NBA.

The Death of the Bookstore

On nice summer days, I sometimes like to drive by Wagner Farm in Glenview, an operating farm run by the Glenview Park District. Amidst the stress and frenzy of adult life in a suburb of a modern American metropolitan center, I love having an opportunity to take a short break and retreat into another time and another place. There is something about seeing cows lazily chewing their cud, hearing the birds chatter, and seeing the red barn and white fence that brings me a measure of serenity. Farm life has mostly been relegated to the margin of our society. Our modern economy has developed so that agriculture is removed from most of our lives. We've gotten very efficient at it, few of us are employed in it, and the loss of that experience is part of the "creative destruction" inherent in the march of capitalism. Still, it's hard not to feel wistful for the sights and sounds and smells of a farm. There's something about it that is good for the soul.

Recently, there has been commentary on the decline and eventual demise of the bookstore (see becker-posner-blog.com post of 1/9/11). I tend to agree with Messrs. Becker and Posner that the days of the bookstore are most likely numbered. Amazon, the Kindle and other e-readers will eventually make this distribution channel of reading material obsolete. Bookstores, particularly the large chains like Borders, are simply a too expensive and inefficient delivery system that is being overtaken by technology. In my view, it is only a matter of time before Borders has a date in bankruptcy court, and it will eventually liquidate.

For a bibliophile like me, this represents an abrupt and dramatic change of life. One of my most prized possessions is my library and I have it stacked almost to capacity with volumes and volumes, from Winston Churchill's multivolume History of the Second World War to Gibbon's Decline and Fall of the Roman Empire to my collection of roughly 70 boxed editions from the Library of America. I love my books. I love the way they look on the shelves. I love cracking the binding of a new volume. I even love the smell of musty old volumes. And now the "creative destruction" of capitalism is threatening to take that away.

I have jumped on the bandwagon, though. I have been a regular customer of Amazon.com. I have a Kindle and I like it fine. The books are cheaper and it is convenient to download books instantly. I do find it antiseptic, though, and it is just not the same experience starting a new book on my Kindle as it is opening a new volume. Still, even an old traditionalist like me has embraced new literary technologies.

I will miss Borders and other bookstores when they. Browsing around a bookstore is one of my favorite ways to kill time. While bookstores cannot compete with the search engines on a Kindle or Amazon.com, I have often found great reads just because something caught my eye on a shelf. I hope some of the independent bookstores will survive, at least for awhile. Stores like The Book Stall in Winnetka have a chance to survive for awhile, I think. They bring authors in for book signings and their staff is excellent. They have a loyal customer base and have woven themselves into the community. Still, for all their advantages, the economics are not with them and they are also realistically on the endangered species list.

My best guess is that bookstores will soon be like the family farm. There won't be many left, and, just like the Wagner Farm, when you stumble across one, you will stop for a bit, sigh, and feel wave of nostalgia wash over you.

The Real Issue

It took my 17 year old daughter to clarify the issue, "This wasn't a political issue, it was a mental health issue." Spot on, kid. She went on to tell me how terrible she felt that there were those in the media that were referring to Jared Loughner as a "monster," and a "psychopath,"and there were some pundits that actually went as far as blaming his parents. "How do you think his parents feel?" she asked. "What he did was horrible, but it's clear that he was mentally ill."

The left has gotten the issue precisely wrong. They are busy blaming political rhetoric for the shooting of Gabrielle Giffords and wounding 12 others and killing 6. My email inbox is already full of messages advocating stricter gun laws and toning down political rhetoric (of course, mostly aimed at Sarah Palin, Rush Limbaugh, Mark Levin and folks of that ilk. The truth is that no amount of partisan restraint had anything to do with this. While pointing fingers at Sarah Palin, liberals missed a huge opportunity to raise a relevant and important social issue--- the treatment and care of the mentally ill. Since Ronald Reagan took office, government funding for research and treatment has been slashed. While they are busy protecting the wages and benefits of their constituents in the SEIU, those that truly need assistance aren't getting it. Prisons release inmates with inadequate treatment and follow up programs, virtually ensuring a return trip. Once an individual reaches adulthood and is out of the care of his or her parents, a mentally ill person has a very thin safety net. With state budgets in the shape that they are in, financing the care for the mentally ill will likely not increase anytime soon.

Fortunately, there are advocacy groups and one of the best is the National Alliance on Mental Illness (http://www.nami.org/). I urge you to donate to this fine organization. It does great work and has done much to assist families and remove the stigma from mental illness, along with advocating for the mentally ill with government on the state and federal levels.

As a conservative, I generally advocate limiting government's involvement in our lives. But the battleground (can I use this word in our new era of civil discourse?) between conservatives and liberals is often discerning between the "can'ts" and the "won'ts" and holding accountable individuals that are appropriately to be held accountable. I do accept the notion that government does have a role in caring for some that cannot care for themselves. There is no group that has been so overlooked as the mentally ill. And it is very unfortunate that liberals were so quick to push their partisan views. They missed the real issue entirely.

Please make a donation to NAMI. This group is on the right track and it is worthy of your support.

Finger Pointing

The tragic shooting this weekend of Gabrielle Giffords and several other people this weekend reminds us of how vulnerable we are. It's just not that difficult for a psychopath to do a tremendous amount of damage, and it wasn't lost on me that we just commemorated the 30th anniversary of the murder of John Lennon in a similar fashion. The shooting was heinous and deplorable. Fortunately, as open as our society is, and as protective of 2nd Amendment rights as we are, these events are relatively rare, and assaults on political figures are rarer still. We had the shooting of George Moscone and the attempted assassination of Ronald Reagan some years back, but there have been no noteworthy assassinations or attempts in the last 20 years.

Yet, on the front page of Sunday's New York Times, without one whit of evidence that this act was anything other than a rogue sociopath, the left has started the blame game, fingering the vitriol of American politics, Sarah Palin (mostly for her imagery of "targeted" districts), and some of the excesses of a handful of Tea Party members. The town meetings last summer were heated, they argue. The rhetoric was inflamed. The politics was bitter and partisan, and overboard and it leads to incited incidents like this, claims the left.

Nonsense, I say. The opposite is true. True, American politics is a rough and tumble business at times. We argue constantly. We do it in town meetings at every level. We spout our views in newspapers. We do it on TV. We do it on the radio. We podcast it. We do it on Youtube. We email dissenting views. And then we vote on people that most closely represent our views. That is what we do, and have done for a couple of centuries. Does our rhetoric get heated? You bet. But check your history books and look at political cartoons from 150-200 years ago. We have more media outlets today, but the politics was pretty rough then, too.

Since Obama came to office, this administration has expanded the reach and scope of the Federal government beyond anything that we have every experienced. It has expanded its spending as a percentage of GDP beyond its historical norms. It is using the power of government to force people to enter into contracts with private parties approved by the government. It is telling us what kind of cars we can drive and what kind of light bulbs that can light our homes. It is now writing regulations for how large our microwaves can be and scheming of ways to limit our "carbon footprint." The White House website urged people to report "fishy" activities in opposing Obamacare and his director of Health and Human Services warned that "disinformation would not be tolerated." Obama publicly lectured the Supreme Court for its ruling upholding 1st Amendment rights for corporations in the Citizens United case and openly threatened to pass legislation to overturn this ruling. This is an administration that has worked overtime to quell opposition.

Yet, the opposition showed up at town hall meeting and showed up at the ballot box in a big way in November. The energy of the Tea Party movement was an important ingredient of the turnover in Congress last November. At its core, we will be in a heated debate for the forseeable future about how much government is appropriate and necessary and there is a large contingent, likely a majority that believe that what Obama and his crowd have in mind for us is much too much. And we will continue to say it and say it loudly.

I am truly sorry for Gifford's family and the families of the other victims. The perpetrator should be prosecuted to the fullest extent of the law, and it is after incidents like this that I call into question my opposition to the death penalty.

But we should not bend to the left's argument that this incident means that we should shut up, and go quietly into the night while government continues its relentless path toward expanding its scope and reach and abrogation of individual and state sovereignty. I firmly believe that it is precisely because we have these free and open exchanges that political violence is so rare here.

2010 Books of the Year

The New York Times Book Review recently came out with its 2010 Books of the Year, and it is not surprising that my list didn't quite match up with theirs. It's not altogether easy for me to come up with a definitive list as I only get to read 25-30 books a year, but during 2010 there were some good ones. My reading is disproportiately nonfiction. Generally, to absorb and appreciate long, complex novels you have to devote large chunks of uninterrupted time to them, and that is hard to do with full time work, a spouse, children and all the other accoutrements of adult lilfe. Nonetheless, I did try my hand at some contemporary fiction this year and came up with a couple beauties. Here are my recommendations for the best books of the year in 2010.

NONFICTION

We are living in the aftermath of the worst financial catastrophe in a couple of generations, and I have gobbled up books on the topic. I read 13 Bankers, Too Big To Fail, In Fed We Trust, and a number of others (although I managed to miss The Big Short by Michael Lewis which received great reviews). It is not surprising that my nonfiction book of the year and runner up focused on this topic. My nonfiction book of the year was This Time Is Different by Carmen Reinhart and Kenneth Rogoff. This is a copiously researched book that studied financial panics across time. This is not an easy read. It overlays quantitative analysis and historical analysis, and its approach is very thorough. Of course, you need to be a bit of a data junkie to fully appreciate this book-- a degree from MIT or The University of Chicago is helpful. But if you can wade through it, you will have a much better understanding of how the U.S. financial system and economy ran into a wall. The punchline is that the kind of crisis we experienced is infrequent in U.S. history, but not uncommon worldwide. They follow certain patterns and take a long time to recover from. They show that, "banking crises almost invariably lead to sharp declines in tax revenues...on average, during the modern era, real government debt rises by 86 percent during the three years following a banking crisis." Sound familiar? And they eerily predict the next leg of this crisis, "In some cases domestic debt is eliminated through high inflation; in other cases, governments default on external debt." Any wonder why many economists are nervous about the current round of quantitative easing? Although laden with charts and graphs and data, This Time Is Different illuminated and put into context our current malaise, and it is deserving of my vote for nonfiction book of the year.

The runner up and a close second was Fault Lines by University of Chicago professor Raghuram Rajan. Fault Lines connects the dots between the widening gap between rich and poor in the U.S. and the financial meltdown. Rajan sees the radical loosening of credit and real estate boom as a deliberate attempt on the part of government to provide the appearance of an improving lifestyle in the face of stagnant and falling wages in lower income brackets. As the world bid up the wages of highly educated, highly skilled wages, it depressed those at the lower end. By liberalizing credit (and creating the housing bubble) through Fannie, Freddie, CRA and FHA, people at the lower end of the spectrum were able to improve their lot in life. Until the bubble burst. Rajan is true to is free market Chicago roots, "A forced equalization of wages that disregards the marginal contributions of different workers will deaden incentives and lead to a misallocation of resources and effort." However, Rajan does not marginalize government and is not blind to the strain on society and policymakers that the growing gulf between rich an poor is causing. He offers no magic bullets, but places a large emphasis on fixing our horrendous K-12 education system. Overall, Rajan presents an interesting synopsis of the roots of our current financial crisis and deserves to be one of the best books of 2010.

FICTION

My vote for fiction book of the year goes to David Mitchell's The Thousand Autumns of Jacob De Zoet. The book takes us to 1799 to a trading post of the Dutch East India company in Japan, and the tightly controlled and monitored intersection between East and West. While Japan permitted a limited amount of trade, it restricted the import of religion, culture and mores. The protagonist is a young clerk that seeks to build his fortune there, but gets tangled with a Japanese woman and the issues that cause friction between cultures. The book is richly textured, meticulously researched, and a joy to read. It also points out why the Kindle has not yet taken over my entire life. This book has a beautiful cover and binding and textured pages and reminds us that reading remains a sensual experience, even in the electronic 21st century. I highly recommend that for this one at least, you skip the Kindle version and buy the book.

My runner up in fiction is Man in the Woods by Scott Spencer. While it received mixed reviews generally, I liked it. I'm a sucker for stories that involve a life changing random event that you could easily see yourself responding in the way the protagonist does. In this case, the main character Paul Phillips stumbles upon another man with his dog while on a walk in the woods, and the man begins to brutally abuse his dog. Phillips intervenes and a fight ensues and in the scuffle, Phillips kills the dog abuser. Because Phillips knows that he cannot use self defense as a defense- he was defending the dog, he does not report the incident to the authorities. Man in the Woods reminded me of Deliverance-- the killer was morally justified in his actions, but the authorities probably wouldn't see it that way, and that sets up the tension that permeates the book. I liked Spencer's book very much, especially the nature writing and was one of the best books I read this year.

Happy Holidays, Happy New Year, and happy reading.