Friday, January 30, 2009

Why the Goose Might Get Cooked

If the people of this nation ever decide to kill the goose (capitalism) that has laid the golden eggs (American prosperity) it will be largely the result of two quite different influences. The first is the righteous anger provoked in people by the sheer greed and opulence flaunted by the modern captains of industry. Maureen Dowd gives voice to this execrable insensitivity in a recent New York Times column:

Despite losing $28.5 billion in the past 15 months and receiving $345 billion in government investments and guarantees the corporate Marie Antoinettes at Citigroup went through with plans to purchase a new $50 million corporate jet.

Real people are losing real jobs at Caterpillar, Home Depot and Sprint Nextel; these and other companies announced on Monday that they would cut more than 75,000 jobs in the U.S. and around the world, as consumer confidence and home prices swan-dived.

The former chief executive of Merrill Lynch, John Thain, handed out over $4 billion in bonuses as the failing firm was bought by Bank of America.

"If you don't pay your best people, you will destroy your franchise," Thain reasoned, "and they'll go elsewhere." So, these guys are rewarded by Thain with billions of dollars of investor's money for losing $15 billion in three months for their clients.

Meanwhile, Thain himself spent $1 million to renovate his office. Big-ticket items included curtains for $28,000, a pair of chairs for $87,000, fabric for a "Roman Shade" for $11,000, Regency chairs for $24,000, six wall sconces for $2,700, a $13,000 chandelier in the private dining room and six dining chairs for $37,000, a "custom coffee table" for $16,000, an antique commode "on legs" for $35,000, and a $1,400 "parchment waste can."

Socializing financial institutions and industries would be a terrible move, but the anger that causes people to no longer resist it is certainly understandable. The goose has brought it upon himself.

The other factor that will lead us to kill the goose is the fact that so many people in this country are the recipients of government largesse, and so few, relatively, provide it. When a large percentage of the population in a democracy really have nothing to lose by socializing the economy and much to gain they will eagerly favor more government largesse. What do they care if the people who have the wealth are squeezed if it means more benefits for themselves? Neither capitalism nor democracy will survive a large lower class comprised of poor, uneducated, unmotivated people living at the expense of those above them on the socio-economic ladder. The lower classes will always vote for those who'll provide more benefits and those who seek their votes will be only too willing to oblige them.

The GOP is looking for a Moses to lead them back to the political Promised Land. What they need is someone who has a plan for teaching the poor that they have a stake in capitalism and freedom and someone who can shame the corporate "Masters of the Universe," to use Tom Wolfe's phrase in Bonfire of the Vanities, into setting an example of frugality and modesty for the rest of the society which has bestowed such good fortune upon them.


Rush's Plan

Rush Limbaugh has a serious, and very interesting, plan to restart the American economy, and to underscore his seriousness he presents it in an op-ed in the Wall Street Journal. It's not only a genuine bipartisan compromise it's also a great empirical test of two conflicting philosophies on how best to deal with recessions. I suspect that it's going to attract a lot of attention from both the right and center left. A lot of honest people, not just among Republicans but also in the Democrat party, are dismayed by what they see as a welfare/pork barrel bill masquerading as an economic stimulus measure.

Here's the heart of Limbaugh's proposal:

Fifty-three percent of American voters voted for Barack Obama; 46% voted for John McCain, and 1% voted for wackos. Give that 1% to President Obama. Let's say the vote was 54% to 46%. As a way to bring the country together and at the same time determine the most effective way to deal with recessions, under the Obama-Limbaugh Stimulus Plan of 2009: 54% of the $900 billion -- $486 billion -- will be spent on infrastructure and pork as defined by Mr. Obama and the Democrats; 46% -- $414 billion -- will be directed toward tax cuts, as determined by me.

Then we compare. We see which stimulus actually works. This is bipartisanship! It would satisfy the American people's wishes, as polls currently note; and it would also serve as a measurable test as to which approach best stimulates job growth.

I say, cut the U.S. corporate tax rate -- at 35%, among the highest of all industrialized nations -- in half. Suspend the capital gains tax for a year to incentivize new investment, after which it would be reimposed at 10%. Then get out of the way! Once Wall Street starts ticking up 500 points a day, the rest of the private sector will follow. There's no reason to tell the American people their future is bleak. There's no reason, as the administration is doing, to depress their hopes. There's no reason to insist that recovery can't happen quickly, because it can.

In this new era of responsibility, let's use both Keynesians and supply-siders to responsibly determine which theory best stimulates our economy -- and if elements of both work, so much the better. The American people are made up of Republicans, Democrats, independents and moderates, but our economy doesn't know the difference. This is about jobs now.

I'd prefer we cut the pork and transfer payments out of the bill altogether, but that's not going to happen with the Democrats in control of everything. So, why not give Rush's plan a go and settle the question for the next three generations of whether it's better to inflate the currency and throw money around like we're frantically bailing water out of a sinking boat or to cut tax rates and let businesses and private citizens kickstart the economy by creating more wealth.


Winter Irruption

This winter has seen a major irruption of several boreal species of birds into the northeastern United States. One such species that's being seen at backyard bird feeders everywhere this winter is the pine siskin:

The yellow on the wing is distinctive and helps to distinguish the siskin from a lot of other brown birds with streaked breasts. The siskin feeds primarily on nyjer seed.

Another more unusual bird that has been seen almost everywhere there are stands of spruce trees with healthy cone crops is the White-winged crossbill. The mandibles of this unusual bird are crossed rather than parallel. This allows it to peel away the hard bracts of conifer cones to extract the seeds that lie at their base. A crossbill will eat up to 3000 seeds a day, which requires an awful lot of work.

I was lucky enough to see about a half-dozen of these lovely creatures yesterday morning in some spruces along the Susquehanna river in York County, Pennsylvania.