TCS Daily

Tea Party Optimism and Skepticism

By Larry Kudlow - February 17, 2010 12:00 AM

Money and politics is about my favorite topic (apart from spiritual faith, of course). And we had plenty of both in the last day or two.

Moderate Democrat Evan Bayh retires from the Senate, kind of sticking it to Team Obama (and by the way, Harry Reid), basically saying, "You know, if you quit all this left-wing, cap-and-trade, government-takeover-of-health-care stuff, and the constant political favors and favoritism to the unions, especially the government employee unions, you might have a shot at saving your presidency and containing the midterm-election losses this November."

But Mr. Bayh's departure also opens up an eighth solid potential GOP Senate seat. And that brings Washington that much closer to grid-locking the left wing -- something that stock markets and the investor class are cheering, with share prices jumping 170 Dow points today.

Might the tax hikes be stopped? It's possible. Might the big-government assault on businesses and capital and free markets be stopped, or at least slowed? Again, it's possible.

And then there's the Gov. Chris Christie story. Out of the blue the moderate Republican turns to Reaganism by announcing a freeze on $1.6 billion of unspent balances, according to the Wall Street Journal, saying "government is the problem, not the solution." It's a veritable shot across the bow of Washington big-government leftism. The freeze might save New Jersey from bankruptcy. It might even save socialist Greece by setting an example of fiscal responsibility (although that's a bit far-fetched). Heck, it might even save America from bankruptcy if the political class in Washington takes notice.

Meanwhile, the tea-party movement rolls on. I call it free-market populism, or "leave us alone and let us keep more of what we earn." Fifty leaders are meeting with RNC chair Michael Steele, and I sure hope Mr. Steele listens carefully. It's Scott Brown, Chris Christie, Bob McDonnell, Prop. 13, Ronald Reagan, and the Constitutional Fathers all rolled into one. (There's even a little bit of tea party in Germany, which so far is rejecting a bailout of Greece.)

But here's the rub. The price of gold is booming again, up huge today, despite the fact that the dollar has been rising. This is a message of tea-party skepticism. It's a message that worldwide big government spending is still the dominant political thinking.

The dollar is not really strong; it's the euro that's very weak. But gold is saying a pox on all your houses. It's a currency substitute. It's an inflation play. It says that all this government spending will eventually be monetized by big-government central-bank money-creation. Therefore, gold becomes a safe harbor, still doubtful that a tea-party revolution in the U.S. will actually come to pass and possibly spread around the world.

Because I share the tea-party optimistic view that We the People, Thomas Jefferson style, can overturn central-planning elites and the left-wing college professors, I am hoping that the gold rally falls short.

Time will tell.

This article first appeared on Kudlow's Money Politic$.


You guys are so easy!
"Central-planning elites". "Left-wing college professors". Watching people like Kudlow push your buttons never ceases to amaze. They just build up these demons in your minds and you react like Pavlov's dogs, every time. Or, to make the analogy even more precise, like the bull, who always follows the cape-- and never sees the sword.

It's neither the Democrats nor the Republicans. And I'm sorry to have to tell you this, but the people who hold the secret strings of power over all our lives are not a handful of tenured college profs, like that fellow out in Colorado that every one of you can name but I can never remember. Ward Churchill.

He doesn't run America. I can't imagine where you ever got that idea. He's nobody.

It's the people with all our MONEY. Follow the money. If you want to know why some of us are rich and the rest have to hustle like crazy every day, just to try to hang on, look at who holds the money.

They get a special tax rate. Mere mortals have to pay full price. If they want a piece of land, they can just buy a city council, and have it awarded through eminent domain. And if they want all the money in your retirement fund, they can just have it artfully de-funded and dispersed into their own pockets, or used to pay their own debts.

And they can afford to hire PR people so artful they can convince you it was a really good idea. You're better off without that retirement. Or guaranteed health care. Or job tenure. Or anything that might make your life more than just a crap shoot, a chance to hit a bar that's been set impossibly high.

Unless you happen to be among the very few of us who're pulling down more than a million a year, YOU'RE paying THEIR debts.

So if you're so mad you want to bite someone, bite them. Not the "central planning elites" or the "left-wing college profs". Those people are mostly just figments, and petty complainers of no importance in the grand scheme of things.

But I'm thinking we can take forever debating this, and you still won't get it.

Roy salivates when bell rings
LOL.. you are the predictable one Roy. Pavlov has your number.

The Kudlow diary
Kudlow's article reads like a diary this time. Interesting that it seems to be in between and betwix a real change. Sort of breathy.
Reminded me of that anyway.
Here is a short but funny story of what it's like living in politcally correct Berkeley Ca, which I found to be true to life. Sacramento has a section of itself that is intolerably intolerant of diversity of thought and action too. Plus I have been to Berkeley on some missions to rescue books from Moe's and Shakespear books and witnessed the mass insanity itself on Telegraph Avenue.
Obama gave Lost Wages Nevada a million and a half dollars of taxpayers monies today as his way of mending fences and making real his power and support for Reid and Dem cronies. I wonder if W. Churchill will show up to support a fellow traveler... Ward, not Winston.

Roy & who holds the money
I've noticed that you often rag on rich people and blame them for many things. But you never mention who any of them are.
Since you've already said that you liked Warren Buffet, one of th richest, I wonder who you mean. Can you give us some specific examples of the personalities, and/or companies that you are blaming all the time but not naming?
I've just read in Forbes, that the top 10 richest people in America "have lost a combined $39.2 billion in the past 12 months, a 14% decline".

But I do agree with you about the special tax rate some of them get. I think that all of us should get a tax break too, and I guess the tea-partiers do too.

I still wonder though if the left wingers who want even higher taxes, like Roy, and Michael Moore, call the original Boston tea partiers, tea-baggers too. I keep asking them but nobody will tell me. It seems some of them like the first tea party, but not this second one, yet the reasons for both were the same in many ways, like less taxes.

Here is the Berkeley diary I promised by didn't deliver

Names and tax facts
"I've noticed that you often rag on rich people and blame them for many things. But you never mention who any of them are."

Charles and David Koch.

"But I do agree with you about the special tax rate some of them get. I think that all of us should get a tax break too, and I guess the tea-partiers do too."

Passive income, like capital gains, interest and dividends, are taxed at half the rate of earned income (wages, salaries & tips). Plus, the recipients are not subject to payroll taxes (yet they yell the loudest about the injustice of Social Security).

When you do your tax return this year, figure out the percentage of your AGI you actually have to pay. Then compare it to the average paid by the 400 top incomes in America.

"To make the top 400, a taxpayer had to have income of more than $138.8 million. As a group, the top 400 reported $137.9 billion in income, and paid $22.9 billion in federal income taxes."

That would be an actual tax rate of 16.6%. How does that compare with your rate?

You'll yell that people like me are just jealous. But does this two-tiered tax system not strike you as being fundamentally unfair? The riders get the gains while the workers pay the freight.

"From each according to his gullibility...
to each according to his greed"..
That's capitalism, say skeptics of capitalism and tea party, less government, types.
I am waiting for the Washington Post to notice who said that one, (attribute it to its owner), and who said the similar and consonant statement.. To each according to his ability, To each according to his needs. Both crazy rather leftist statements I claim, but typical of the far far left really. Do I have this wrong?

[Off Topic] Breaking News! Obama to ram through his own HC bill thru reconciliation
Yeah! Yes! Yes! YES!!!!

If true, that will just make my day.

Most of the Dems who vote for this will be slitting their political throats in the process.


What do the undeserved rich do with your money?
Do they hide it under their mattress? Bury it in a hole in the ground?
Maybe they risk a little on T-bills or municipal bonds to keep your statist machine operating?

names & tax
Thanks for supplying the name of the Koch company you hate. Taking a quick look at them though, it looks like you be against some of their activites, like lobbying, and so am I. But it looks like you should be in favor of many more, like: "David Koch is also a major contributor to the Public Broadcasting Service (PBS) show Nova", and other money they dole out, but don't have to. And you should be happy that they are a family business, and not a publicly traded one. But I suppose you hate them mostly because they put a lot of time and effort and money into libertarian causes. That's to be expected.

I agree with you about the shittty tax system and have often recommended alternatives to it like: a flat tax system like about 25 other countries have done successfully; or the fairest of all tax systems, 0 taxes.

HC bill
It's not a surprise at all. Recently we alse heard Pelosi say that no matter what, they'll try to ram thru a HC bill in spite of all the opposition.

Taxation by the Sovereign...

You said "...does this two-tiered tax system not strike you as being fundamentally unfair? The riders get the gains while the workers pay the freight."

A sovereign government will take what it think it needs out of its own economy one way or the other. We call this taxation and we hate it. We can raise our voices but they do it anyway.

The French government was the original laissez faire state and the German socialists who were living in France held the opposing political view. Ultimately this led to Karl Marx. When Marie Antoinette was told that the people had no bread...she responded "Let them eat cake!" and that was a perfectly Libertarian attitude. Let the free market work it out.

The people, of course, who were captive human resources for the King and his wealthy friends saw things quite differently.

Here in America, we are still mostly human resources, some of us are not very good at that role, many of us live below the poverty level and a strictly Libertarian approach allowing the "invisible hand" of the market sort us out in some Darwinian manner might very well lead to blood in the streets...again.

Therefore, the government provides some bread and water. The money for our entitlements must come from somewhere. Thus, we have a redistribution paradigm from the creators of wealth toward those who only consume. We punish our poor people, but apparently not enough to motivate all of them away from such welfare.

In our own families, a 40-year-old who has moved back into the house, sleeps until noon and smokes dope all night is able to tolerate a great deal of abuse before he will go get a job and move out again. Can standing in line down at the Unemployment Office once a week be any worse than that?

One point. We are told that the National Debt burden on all of our children comes to some very large number derived by dividing the total by the projected number of people, etc. But that is simply not true. Only those people who will be paying taxes at any moment out there in the future will be so obligated. The rest of them will be along for the ride, as you say. It follows that the liability carried by the gainfully employed subset, the corporations and the wealthy will be very much greater and their taxes will be very much higher...perhaps to the point that some of those individuals will simply refuse to play and stay home all day too.

Forest & Marie Antoinette
It is not true that the French government at the time of Marie Antoinette was libertarian; nor at any other time.
France was a highly manipulated mercantilist state; not libertarian at all.

I do admire the French economist, F, Bastiat though; Marx was around at the same time and hated him.

BTW, I still haven't received you book in the mail, as you promised to send. But if you're wrong about French history, it makes me suspicious about your US history too.

something from the beyond
Maybe they don't hold the strings of power, but surely it's right that most of those tenured profs are indeed left wing, and often get hired as consultants by the government. So the have a lot of influence there, and also on the colleges where they can propagandize for socialist statism, and hire like minded new profs to brainwash another generation.

Who is dong the duping?

No, that's not it
As you know, I believe in the value of social programs, ones that comfort the afflicted and give aid to the old and infirm. And to do such things, which a coldly capitalist society will just leave undone, you need taxes. So I admit the need to pay taxes. And have always paid my share gladly.

My problem has to do with a two-tiered caste system. Did you not see that in my comment? One group of people, those earning passive income, have set themselves up above the worker bees, by paying taxes only at a fraction of the rate set for wages, salaries and tips. Which strikes me as being fundamentally unfair and unAmerican.

Could you comment on that?

I will note a separate thread in your litany of woe. You are of the opinion that we have a big problem with the poor, in that we have to punish them severely to get them to move off welfare.

What kind of welfare do these people get? All I see is that there are 25.5 million among us who've lost their jobs and can't find new ones. They're losing their homes to the banks. Certainly you must have seen something in the papers about this.

"Welfare entitlements", like food stamps, are distinctly chintzy and not at all sufficient to deter someone from trying to earn a regular wage. It's true that at the bottom of society we have a few millions of unemployables who form an underclass. But they make do with enterprises like stealing from one another, and dealing drugs. They do not receive any kind of wage for being unemployable, on that I am very certain.

It's an open secret
This, to me, is pretty amazing. You're a bright person, and more politically savvy than a great many voters out there. But when I mention that the people who actually run things are not "a handful of tenured college profs", all you can say is "there has always been some talk of this.."

Wow. Did you stop to think that only one in four of us ever even graduates from college? And that of those, there are very, very few indeed who have internalized any social or political thought from their professors? Most are just there to get a degree so they can start a career. Any social studies they take are just course requirements, necessary to get that sheepskin.

So, as movers and shakers, this class of people haven't anything like the power enjoyed by ordinary preachers in church, who hold the attentions of a majority of average Americans, once a week, throughout their adult lives. And those fellows really don't know very much about anything.

Who does run our lives? The heads of the corporations whose jobs we depend on, obviously. The politicians who artfully play with our preferences for their various images, and whose deeds rarely match their words. And the heads of the major media, who decide which content is allowed to enter our brains.

You really ought to have aced that one, Joanie. To me, it's pretty obvious.

Now let's see what they all agree on. We can take the current flap over the gross national Debt as our topic of the day.

Haven't every last one of them been in agreement? The Ds, from Obama on down, have all said "everything, that is all nondefense expenditures, is on the table, even entitlements". While the Rs have all been saying "we should trim in every area but defense". So they're all in agreement that public funds, which come from We the People, should go toward the defense and security industries first, in unlimited quantity. And then we can trim freely among whichever funds remain, because they just go back to We the People when we get old or sick, or want to send our kids to school.

That's very deeply wrong. And no one notices. It seems normal to continue expanding defense spending-- something 'Obama the socialist' has been in favor of since he took office. They reach into our pockets to take money. But then they don't show us how it comes back to us in the form of social benefits. Instead, they just scare us with tales of monsters beyond our door. And spend unimaginable sums on expenditures that aren't even watched for waste and fraud.

Incredible. We just continue to sit there, watching Hollywood Squares.

Who do they threaten?
You're talking about a tiny sliver of the public. Only a quarter of us ever go through college. Even fewer go to the kinds of liberal arts places profs like that teach in. And of their students, only a tiny number take their ideas to heart.

It's a splinter group. I think it's likely there are fewer of those kinds of progressives in the US than there are Mormons. Are you worried about Mormons too?

If they had any numerical standing, Obama would be courting their opinion. And it has been obvious for the past year that he's not. Politically, there are too few of them to count.

So why is this so important to you?

The concept of laissez-faire was uniquely French when it was first articulated as such during the 1680's as the government's merchantile ministers and merchants themselves discussed how best to promote economic development. Vincent de Gournay used the term openly in the 1750's, Benjamin Franklin wrote about this as an ideal condition in 1774 and Adam Smith included laissez-faire in terms of allowing his "invisible hand" of the market to operate in his Wealth of Nations (1776). Laissez-faire is a Libertarian ideal whether or not the French thought of themselves as Libertarian or simply Libertine.

Whether or not Marie Antoinette ever said "Let them eat cake" it was attributed to her sometime after 1790 and is reflective of Libertarian inclinations rather than any Socialistic attitudes the Palace might have held toward the King's wealthy capitalistic friends.

French ministries certainly had their own ideas and policies...and tried very hard to enforce their merchantile rules because that is what ministers do. This does not mean that they were effective. However, the overthrow of the French government did move the nation dramatically toward socialism and more heavy-handed intrusions into the nation's ecomomy. We continue to see that over there today.

My book went to your foreign address via USPS on February 10th. Hung up at Customs inside another useless alien nation no doubt. Thanks.

Forest. rec'd ur book, thanks, eom.

Socialism is not the answer for us now that we are this wealthy...
There are capitalists who use their money as working capital that ends up on balance sheets creating more wealth and expanding the economy. And then there are workers who consume everything they get their hands on. The savings and investments of workers are only intended as delayed consumption to cover them after they've retired from the labor pool.

The government extracts what it needs from the economy without actually damaging the capacity of the economy to continue growing as projected. If the government leaves more money out there than the economy needs as equity to underwrite its working capital (and would only be consumed wastefully) then that money might actually be put to better use by the government...and should be taxed away.

There is no expectation that workers will have anything left at the end of the month or at the end of their lives. That is why we call them human resources. They are to be educated, engaged and exploited by this system of capitalism while they are useful to society...retired and maintained as efficiently as possible thereafter...because this system is utterly socialistic and the American people are productive resources under the total political control of the United States.

We needed to do that to compete with the Soviet Union, Corporate Japan and we need to be competitive with an entirely undemocratic, very effective and socialistic Mainland China now.

So that is how our government rolls. But it is worse than this. President Obama and his people sincerely believe that our economy cannot grow much faster than the 1% that Japan has been doing for 20 years. 2% at best. So we will stay about where we are whatever we do and it makes no difference to our economy if the government increases taxes on our workers or our capitalists because as socialists we will provide entitlements for our human resources and having given up on capitalism anyway we can do little harm to our economy as long as it gives us our 1%...and we don't go so far as to cripple it beyond that.

The poor are currently not the responsibility of their own extended families. No matter how wealthy we become that role defaults to our socialistic central government.

So we need to make a decision here in America. Is this what we really want? If so, the government will be more than happy to take our money away and chase our alternatively motivated cousins around to put them into programs.

And we can all live alone, next door to strangers who are similarly disconnected from their real relatives and we can all fall in love with the same exciting images on the television instead. Have a nice day.

"put to better use by the government."
Great campaign slogan.

The Think Tank types...
Here at the Hoover Institution at Stanford these academics are conservatives. At other places they are, indeed, socialists. They are all mostly tenured somewhere or have been, many of them worked in one Administration or the other and each of them writes one book a year that no one reads...except each other.

They go out on lectures, they are very smooth and they show up on the television. They don't run for office and they don't run companies. They each have a Doctor of Philosophy degree and they are philosophers. Bless their deep thinking hearts.

Those people can't agree about anything among themselves and they don't agree with the socialists or the libertarians or whoever sits on the other side of their ideological fictions. There's no conspiracy possible because any three of them in the same room constitutes a debating club. They'll argue the other side of whatever you say just for the sake of intellectual integrity. They will say with great authority any manner of thing that just happened to pop into their heads. Because they are just so damn smart they can't imagine they are ever wrong.

My wife does this same thing to me when we are going out someplace with terrible directions, we both know we are completely lost and she says "turn here" just like she actually knows the way. We laugh and laugh because it's always the same, I do make the turn, we still don't know where we are and then we call the people we're going to visit and they talk us in.

Relax. The capitalists are running this railroad and everyone else is along for the ride. You want to fix the government at a time that the economy isn't doing what you want? Elect some grizzled old capitalists. We'll make this thing do back-flips and whistle Dixie.

We're not that wealthy
Everything may be rosy up in your zip code. But it's not like that around the country. 25-1/2 million among us have lost our jobs, and many of those have lost homes as well. The pain is serious enough to require social insurance.

That's why we have unemployment insurance, to ease that pain and have at least a little money coming in until we can grab the next brass ring (more regular work). And that's why we have Social Security-- because now that we're a debtor society there's no more than a small number of us who've put away anything substantial for their old age and infirmity.

And in fact, with the regulatory regime that protects our private pensions stripped, even those who did think they had a safe retirement have mostly been disabused of that notion. So we ordinary people do need something in the way of a safety net. One that's not just a scam for someone to take our savings and grow rich off them.

And we need health insurance. No problem with getting private, for-profit insurance-- except that we now have the most expensive health care on earth, and it's still rising exponentially faster than any other costs in society. Because it's provided only in a way that maximises some guy's profits. Duh.

While every other country has a national plan. And while they're not trouble free, they're all FAR more under control than ours, and give comparable or better care for around half the cost. Coincidence?

The problem with your neat little formula, where investment capital creates jobs, creates wealth, is that beyond a certain point it's just not true. And demonstrably not true.

We do need a certain amount of investment capital. But whenever we REALLY need it, as in times of recession like now, it's just not there. It's in private hands, and they prefer to stand pat (as they did back during the Great Depression) until the good times return. So when things get bad, privately held capital just makes them worse.

Then in the GOOD times, when we're swimming in dough, nobody needs anything like the amount of investment capital that's out there. Because investment capital is nothing more than recognized profit, accumulating above a given individual's material needs. And a lot of profit has been made. So it becomes spare money, in search of something to speculate in.

So once all the startups and expansions have been funded, and the legitimate business opportunities have all been satisfied, there's still a couple of trillion left over. And THAT investment money goes into the creation of bubbles.

Don't tell me you don't understand this. Instead of doing legitimate work, all that leftover capital just blows up some speculative bubble and then disappears in a big POOF. And we've been at this game long enough that the bubble-to-bust cycle just keeps getting shorter.

And the national bottom line is that between 1932 and 1973, incomes in this country were gravitating toward a comfortable center, where everyone was relatively safe and secure and earning a decent wage. Since then, the rich have been getting richer and the poor falling off the bottom end of the ladder. That is, income inequity is growing.

People around here like to delude themselves that I just have it in for the rich. Which is just not so-- if their excess was not so intimately connected with the privation and want being visited on millions who are losing their place in the middle class, I could care. More power to them. But instead people are growing rich off America's inherited wealth because they've bought the government, and have used it to finagle the game for their own advantage.

Worse, they're leaving nothing left for their own grandchildren to live on tomorrow. This "wealth" you celebrate is just a short term cut and run affair.

You can just forget about the sorry ass poor and jobless and dismiss them all with an airy "have a nice day" if you like. But since so many of us are losing a share in the Big Pie, I do care. Because with so many people grabbing an extra piece or 5,000, it will only get worse with time. And the joy of the one, at winning more than he's due, does not outweigh the pain of the many who get left out.

People do want to work. It's glib and thoughtless to think that they don't, so why should we care about them. It's an excuse to just slough off the thinking that needs to be done about the creation of a just society.

Let's stop depending on the corporations and the government...

You said "25-1/2 million among us have lost our jobs, and many of those have lost homes as well. The pain is serious enough to require social insurance."

In the end the only sustainable solution is to stop working for other people, to stop putting our money into the banks and the corporations of strangers and to get ourselves out from under the thumb of the government. As long as we are living at their mercy then they will continue to exploit us at will. All of them. Those people.

We are going to survive, of course, and the average household income will still be close to $60,000 in the United States but that cashflow should go into our own small banks (credit unions here in America) to underwrite our own capitalism and to recapture our housing, auto loans and credit card payments as credit union income instead of hemorraging all this money out to third parties month after month.

We need our own clinics where the doctors and nurses are our partners. We need our own K-12 schools where the teachers and coachs are also our partners. We need lawyers, CPAs and arcitects who are our partners. We need to govern and police our own social units that are large enough to be efficient and small enough to be effective.

We need to own the profitable and competitive small companies we work at. And those of us who are not gainfully employed...our own realtives...need to have a place to stay, some work to do and a start to make again. Therefore, we need to build our residential real estate to accommodate larger families here in closed neighborhoods where our domestic space is actually defensible.

This is what rich people all over the world have always done and the people who immigrate here already understand how that works. We are only a baby-step away from transitioning this society into such a paradigm. Soon we will see such social and economic units as our only alternative to an out-and-out paractice of socialism that Americans really would be lousy at.

We don't like giving our hard-earned money away to strangers. Too many of us have too much to lose and we simply won't go for that.

Your stirring advice
Forest, I understand. You're running for office, you have to choose your words carefully. And it is certainly more popular today to tell voters "We don't like giving our hard-earned money away to strangers. Too many of us have too much to lose and we simply won't go for that."

They will take heart in your comfortable thought that "the average household income will still be close to $60,000 in the United States". But out here, it's still too easy to see a system as being fundamentally misdirected when increasing numbers of us are being thrown off the merry go round while others, nearer the center, are accruing wealth adequate to feed tens of thousands of families.

The average, with their comfortable earnings of $60,000, are becoming less and less the typical. Centripetal forces are at work, as I think you suspect.

It's sad to think that words like those of John Paul I (the unacceptable Pope) are considered to be radical:

"It is the inalienable right of man to own property. Yet, it is the right of no man to accumulate wealth beyond the necessary while other men starve to death because they have nothing."

So you are correct. If we only all had the souls of entrepreneurs, we could all go off, invent successful companies and each be quite rich and fulfilled. Only we don't. Most of us are happy just to find a decent job with some tenure, work hard and well at it til we're 65 or perhaps beyond, and retire with enough money to cover the bills.

That's our dream. What we have now isn't it, and the future for us is looking bleak indeed.

Imagine this then...leadership...
A number of us who are indeed entrepreneurial and who want to underwrite our own small businesses should organize a Credit Union. Here in California, the minimum number to charter a Credit Union is 500 members. Five-hundred households. About three-thousand people. We will invite our associates and family members to join an ESOP trust partnership entity that makes them eligible to become members of the Credit Union according to its covenants. All 500 households should transfer their mortgages (if they have any) and their credit card accounts into the Credit Union so that the interest lost to third parties on those payments would be recaptured. New car loans and student loans should be done inside but any existing (such) loans are typically outstanding at low interest and we have less interest in those.

The ESOP partnership trust would purchase apartment buildings and some (undervalued) single-family houses opportunistically, also underwritten by the Credit Union, as residences for our families who have been renting. Insofar as those properties require work any of our unemployed partners would immediately be so engaged. Indeed, all of our unemployed partners would be employed by their own ESOP trust doing something that produces wealth.

The Trust would launch medical clinics staffed by physicians, nurses and technicians who would join us as partners. The Trust would launch K-12 private schools staffed by teachers and coaches who would also be our partners. Inasmuch as possible these Trusts would consolidate their real estate properties into walking-distance closed campuses including residences, retail spaces, professional offices, clinics, schools and light industrial shops populated and operated by partnership households.

These numbers are small enough for the estates to be self-governing in an entirely Jeffersonian manner yet large enough to be competitive in the modern American small business arena. They would be self-contained, integrated and sustainable with financial feedback loops to recapture most of the period expenses that normally leak away from our $60,000 annual income average US households to third parties.

In one move we would solve the banking, the health care, the education and the small business development problems that are essentially forcing this nation into socialism. These mechanisms (the Credit Union, the ESOP, the Partnership Trust, on-campus infirmaries staffed as out-patient clinics, and K-12 private schools funded by state vouchers, etc.) already exist as legal options here in the United States. This paradigm merely brings together the various elements into a functioning social unit, that also operates as a competitive economic entity and that governs itself. We have simply downsized the technology of living in a modern capitalistic society so that individual households are not at the mercy of corporation, bankers and the government.

We did that same thing with modern transportation when automobiles and trucks replaced railroads for most applications. And with information technology we downsized mainframes into personal computers so small that we and now carry them in our pockets.

The scope of the problem
I highly approve of credit unions. But they're like the old S&Ls, they can only loan out the money they have on deposit.

So you get your 3,000 people together and let's say they each put in a thousand bucks on deposit. That's three million dollars.

How many of those 250K mortgages are you going to be able to buy up? I'm thinking twelve.

The reason the people on top are on top is that they've been at this thing, stealing the wealth other people create, for generations now. That's why the size of the derivatives market is measured in trillions of dollars. And why no two estimates of its size even come within ten trillion of each other. They really do control a lot of, what's the word? Money? Wealth? Power? or is it "Us"?

But I don't want to dampen your enthusiasm. I'm just playing at being Devil's Advocate here. Changing society's trajectory, at this late date in history, is something of a tall order.

Keep on fighting.

It's certainly true...
Good teachers really do make a difference.

Now let's look at the other kind of teacjer, the one everyone here gets so excitable about. Let's look at Ward Churchill.

He certainly knows how to scandalize everyone. Why he even called the people who were working in the World Trade Center "little Eichmans". How dare he!

Do you think this sort of thing makes a very big impression on the average 18 year old? You appear to know those kids pretty well.

I don't. I think a lot of juvenile romantics will toy with ideas like that for a while, just because they think they're edgy and stylish. But after a few years they'll settle down, have kids and vote for someone in the middle of the road who'll promise them a bit more of their paychecks left over to spend.

I like your approach. In your place I'd have told those young folks they had better develop a taste for doing business. Because like it or not, they'll be doing plenty of it... and they're not going to die very happy if they only do it poorly.

Banks mostly get their money from other banks...
Don't worry about my enthusiasm. I'm one of those people who've been doing this myself for generations now. We know how to make this economy do anything we want it to. Within the law, of course.

That's why I need to go be a lawmaker now for a couple of years. Our practice of capitalism needs to evolve again just like it did after 1980 when the Republicans were the opposition party coming back to power and the US economy was sitting there hopelessly trapped in Stagflation.

Interesting... Pelosi has been quiet as a churchmouse after the WH put this out.

This is Obama's Plan. As in the plan with his name on it and his cronies wrote. It is basically a tweaked version of the Senate Bill that sucks so much, according to genuine bipartisan consensus.

I think Pelosi is quiet because she doesn't have the votes to shovel this s--t and she knows it. And what votes she does has are not guaranteed, either. She knows that too.

Which means, if she pulls this off in the House, then I'll have to grudgingly accept that she's not the moron I usually think she is.

The truth about the quote 'Let them eat cake'
The ignorance of the over-educated:

In popular culture, the phrase "Let them eat cake" is often attributed to Marie Antoinette. However, there is no evidence to support that she ever uttered this phrase, and it is now generally regarded as a "journalistic cliché"[89] which first appeared in The Confessions of Jean-Jacques Rousseau, written before Marie Antoinette even arrived in France.

You should demand your money back from Wharton.

What do you want to make the economy do?

We are post-Keynesian now just like the Japanese...
We need the US economy to expand at 4%-5% sustainably, with low inflation and full employment for the next 20-30 years as the rest of the world's nations develop their Keynesian economies out there and they try to catch up to us but we can't afford to let them.

For this we need something better, faster and more efficient to add to our mature Supply Side practice of capitalism. Otherwise we will now join Japan with a post Keynesian economy delivering only 1% GDP growth and 2% inflation that threatens to drop into deflationary recession with the least little disruption.

Of course, our multinational (Supply Side) corporations, our banks who serve them and our socialistic government will do just fine...but at our expense as their captive human resources.

How do you do it?
What post Keynesian?
The government still believes and is trying to spend its way to prosperity.

Bottom-up small companies...
We foster a fresh paradigm that engages all of our great wealth and terrific managment capacity enabling 10's of thousands of entrepreneurs by downsizing the magic of banking.

The government is only buying us time until we figure this thing out but they have the wrong people...lawyers...working on it up in Washington. It's time to send in the professionals. The capitalists. Us.

Be careful.
The real professionals are the entrepreneurs.

Not those with inflated egos from business schools.

Some good advice:
"There is no limit to the good man can do if he doesn’t care who gets the credit."

This may be quite a challenge for a Wharton grad wanting to be a politician.

to Zyn re; Forest's book
Zyn, did you get a copy of his book, Eukarioutsu Capitalism? I did and am reading it now, and will comment later; wish you did too since you seem to be the guy who knows most about economics around here.

So far all I could say is that Roy would like it better than you and me. Some of the stuff, like the intentional communities he refers to above would be ok since they're voluntary, but in the book there is a lot of false and justy plain weird economic thinking.

re; bank problems
I notice that you guys, Forest and Roy, bad mouth banks often. What do you think about the banks that were solvent and didn't take any bailout money, and didn't make bad loans or anything else wrong?

In this article it lists dozens of them:

Roy's scope of the problem
You have accused some top people of "stealing wealth other people create". Recenctly on a similar topic I asked you for specifics and you mentioned your hatred for the Koch private company. In some preliminary research I don't see how they have cheated people, and you never answered my query about that.

So if you now mean somebody else, please tell us who has been doing all that cheating. You could mean Madoff, but he's only been cheating for a few years. It can't be Warren Buffett because you said you liked him, even though his billions come from 'unerned income' according to your false labor theory of wealth creation.

So who do you mean, Wendy's, GE, Toys R uS, Gillete?

Shades of grey...
The banking industry in America is dominated by our top-down practice of capitalism...Supply Side. Banks want to be very large and they compete for the business of our largest industrial companies and investment house clients. Retail customers and other small entities are discriminated against, expoited and abused during the normal course of business. Even credit unions want to move up into this part of the arena and consolidation into a smaller number of larger banks continues. Nothing wrong with this if that is the way the game is played. And for certain the Supply Side players need their bankers.

However, small businesses are the engines of any economy and financial capitalism implies that those balance sheets must be leveraged up with bank created funds in order for them to expand into larger markets, hire more people and underwrite working capital requirements in excess of their own retained earnings.

Therefore, it follows that we need smaller banks to really understand, work closely with and aggressively serve such small companies. Otherwise, the US economy will only expand as rapidly as Supply Side can carry us. We need 10's of thousands of small banks (credit unions) in addition to the 8,000 large banks we already have.

false and just plain weird...
See. That's why I needed to write the book. Much of this capitalism is counter-intuitive so it seems false to outsiders and other elements of it fly in the face of commonly held ideologies from the right and from the left so such logic seems unusual to you.

Nevertheless, we Americans fancy ourselves to be the finest capitalists the world has ever seen but what we are doing now simply does not seem to work the way most of you think it should. Something must be wrong with our plan of attack or with our execution of tasks. And the government should fix it. That's why God made politicians and the Founding Fathers made elections every two years.

Note that the bankers on Wall Street seem completely able to make this economy do back flips for them, put mountains of money into their pockets and whistle Dixie simultaneously during a recession...and all legal. The pharamaceutical giants were similarly able to increase the price of prescription drugs 9% last year (2009) during that same recession and with deflationary pressures everywhere.

These boys definitely know something about capitalism that our politicians and most of our civilians completely miss. As far as the rest of you are concerned these things are obviously false and completely weird. Smoke and mirrors. Magic. But you are not supposed to understand how it works. These are proprietary secrets, protected by misdirection, lawyers and lies.

But those of us who've been doing this stuff professionally for 30-40 years definitely do understand our own practice of capitalism in the post-industrial society and the post-sovereign economy. And that's why I wrote the book. You can't fix it if you don't know how it works. Weird, isn't it?

Nope, haven't read it.
But I do make it a point to read TRULY progressive works, like "America Beyond Capitalism", "Capital Homesteading" (both strongly influenced by binary economics) and PARECON (modern participatory economics as Karl Marx meant in principle).

What they all have in common is they have novel ideas worthy and specifically capable of small scale experimentation. They also make clear in contrast that conventional liberal ideology like the Obamunists keep pushing is extremely hidebound, unoriginal and dogmatic despite that fact that most elements of it has been thoroughly discredited by the actual historical record.

Much of the above observations, I have to say, also adequately describes Forest's misguided views that he has been dogmatically indoctrinated by the Wharton School of Business.

As a Bay Area resident, I consider Forest's GOP candidacy to be a waste of time and an even greater waste of a congressional seat (he's a RINO with some weird SF flavoring) should his opponent suddenly get hit but a bus on the day before the election so Forest can actually win.

So, you read his book and give us the summary. I can't find it on Amazon so I assume it is less widely read than the Unibomber Manifesto (which actually makes some sense).

Forest's book, eukariotsu capitalism
I'm only on p.116 so far.
Re the 'Cote' idea, I don't see any problem with them, either from my point of view, or the possibility of actually forming them right now, or legally. They are sort of like other kinds of 'intentional communities' postulated over the years. If they are voluntary, as you imply they would be, then I wouldn't say anything against them. But I think you underestimate that come about when several generations of relatives live so close together. That's why a lot of people were happy to leave their small communities, precisely to get away from dysfunctional families, child abuse, intrusiveness, gossip, etc. In the traditional societies you seem to admire in your book, those people pretty much HAD to keep together, but in modern societies many people prefer to be away from nosey, busy-body relatives.

Whether they would work to more than just some small ones here and there is another matter. Your analogy to the biological world probably also isn't valid since humans are different than those organisms in that we are rational beings, not just instinctual/biological, or whatever you call those things doing in nature.

Also, your argument re banks isn't convincing either. You say that the 8000 banks are not enough, and don't supply credit to small businesses adequately. Your ideas about banking are certainly not normal from any point of view. You say governments don't create/print money, but banks just borrow from each other instead. But banks are supposed to be lending out money from clients savings, not from fiat money, or other banks. In your little credit unions, I don't think they would have enough money to do all you claim they would be able to. It seems like your making the case that there would be enough if it were not lost to outside interests, but the case is not clear, so far at least.

I'll add more when I've digested more of the 'epistles'.

to Zyn re Forest's
Right, it's not on Amazon, but just published by a german company in 2009. I had asked him to send me a copy and he did. I'm only on p.116 or so yet, and have put a few comments in a message just above.

He doesn't like Austrian Economics, the school that makes the most sense to me. LIke Roy, he says there is no inflation, and makes strange economic comments about it. He also seems to blow off the FEDs involvement, or at least influence in the overall scheme of things, as far as I can make out so far. His definitions of the common terms like Capitalism, Supply-Side, Keynsianism, etc. are also non-standard.

Let's keep it civil, shall we?
This is actually very typical of you. You asked me who, exactly, I consider to be a thief of the wealth created by labor, and I gave you the example of the Koch Brothers. But then you go on, "I don't see how they have cheated people, and you never answered my query about that."

Maybe that is because you NEVER MADE such a query. Now that you have, I will answer it.

"In 2001, Koch Industries paid $25 million to the US Government to settle a federal lawsuit that found the company had improperly taken more oil than it had paid for from federal and Indian land. The suit was initiated by William Koch, one of the Koch brothers, who said that the company engaged in "organized crime," and had made more than $230 million in profit from the stolen oil."

That would be a very specific example of theft, from the public.

But we were speaking more broadly, when you asked me who I "blame" for their abuses arising from power. And the names would be legion, if we include every owner of a factory who underpaid his workers, relative to the value they imparted to the operation, just because he held the power to hire and fire them. That kind of abuse is inherent in a labor market that maintains a pool of unemployed workers.

Every factory owner is entitled to a fair profit. You can quibble about the definition, but everyone knows it. In one factory, management is seen as being fair. In another, they are hated and feared. And it is in that latter kind of company that the owner grabs the loaf, and leaves his workers the crumbs.

If you have further questions, (and I know you will) please be civil enough to just ask them. I will offer you my best answer. But to frame them as something I "never" answer is to prove yourself to be an unpleasant martinet, bent on painting the unwary into some corner made of words. It's an attempt to drag the discussion ever lower into the depths of invective.

Let me now bring up one other item, in which you are in error. You say "please tell us who has been doing all that cheating. [...] It can't be Warren Buffett because you said you liked him, even though his billions come from 'unerned income' according to your false labor theory of wealth creation.

No, it would be your definition that's false. As I recall mentioning, Buffett has actively managed his company through the years. Both the IRS (who own the definition of the term) and I would agree that Mr Hathaway's income in running his own company, hands on, is "earned".

The onus is on the student
I think just about every teacher would want his or her students to end up thinking the way they do. And the merely adequate teacher would be happy if they just adopt the same conclusions they hold; the superior teacher would want their students to think in the same fashion that they think, and then establish their own conclusions after critical analysis.

Most science teachers teach the attainments and discoveries of science. That's barely adequate. But a teacher who instructs them in the use of the scientific method? That's a teaching of priceless value, that they should carry with them throughout their lives.

So let's return to your well below average teacher, who threatens them with failing grades if they don't adopt his conclusions. Anyone who has been through undergrad school has met such people. One parrots back to them what they ask for, and gets his grade. They cannot be uplifted.

The student of above average intelligence understands, usually by grade ten, that it is his or her responsibility to find the superior teachers, so as not to waste his time. Those of below average intelligence? I suppose they don't know the difference anyway.

"Every factory owner is entitled to a fair profit. "
What's fair?
What does earning a 'fair' profit have to do with how management treats its employees?
If you look at how many people have read 'Theory of Constraints' and have sought out Goldratt for assistance, most factory owners want to make money and treating employees well is a significant first step.

Beginning to sound like Obama.
"Listen to me because I went to a great school and I am smarter than you."

That attitude might take you far in an ignorant state like CA, but not where people have common sense.

His definitions of the common terms like Capitalism, Supply-Side, Keynsianism, etc. are also non-st

Just like in his postings here. Then he will make the claim that those opposing his stance don't know what they are talking about simply because they use conventional terminology as defined in common usage and in the dictionary instead of his warped realty versions.

The Kool-Aide at the Wharton School must be fine stuff indeed.

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