How the West Was Done

I think we can now identify the precise moment at which we began our inexorable slide toward the death of our civilization.  It was the announcement this month that the EPA has made an endangerment finding vis a vis six Greenhouse Gases (GHGs). Hyperbolic? Unfortunately no. 

Let me see if I can do this is the unofficial 1Timmy4 word limit of 250 words:

Basically, in 2007 the SCOTUS determined in Mass v. EPA that states (along w/ private groups) had to right to sue the EPA to force it to regulate GHGs for motor vehicles under the Clean Air Act (CAA). The EPA had to make a determination that either: 1) GHGs are a danger to public health and welfare, 2) GHGs are not a danger, or 3) there is not enough information.

Unsurprisingly, Obama's EPA has chosen option number one.

They claim they will just regulate automobiles (already a bad decision, but that is a different topic). However, since environmental groups can now sue to make EPA regulate gases, they can make the EPA regulate GHGs not just for automobiles, but under ALL of the CAA. 

The CAA was written several decades ago, and revised most recently 20 years ago, with the distinct intent of regulating really terrible pollutants that like kill people. Concrete plants, smelters etc. It sets actual limits (100 tons in some cases, 250 tons) of gases before regulation kicks in, and for poison like CO, sulphur that causes acid rain this works well. But, it is insane for carbon dioxide (which we all breath out by the way, you are a pollution source now...)

Your average mid-size office building or large restaurant emits this much GHG, depending on how they are fueled. Making possibly millions of previously unregulated sites subject to EPA permits will not only grind the EPA to a halt, it will mean the end of development as we know it. Obama and his minions know this and are basically daring Congress not to re-write the CAA to include Kyoto style limitations or cap and trade. But Congress has not shown any desire to lose their seats doing this. 

So, essentially the EPA has said, 'Congress, you pass wildly unpopular legislation or we will grind the economy to a complete standstill.' Great. As Glenn Reynolds has become fond of saying, the country is in the best of hands. 

Visuals Help a lot

A good Rule

Nassim Taleb is one of my favorite thinkers.  He has written a very interesting list of rules in the FT today.  Chief among these is as he puts it: 2. No socialisation of losses and privatisation of gains. 

We have, as he suggests, combined the worst of capitalism and socialism. I think that the worst mistake the liberal and the lay person makes these days is that anti-Corporatism is anti-Capitalism. If we really had capitalism we would not have all these behemoth corporations. We would have a smaller, more entrepreneurial society. 

It is socialist impulses that create large corporations. When tax, reporting, zoning, environmental regulation, min wage–whatever socialist laws you like–are put in place, it changes the economies of scale for doing business. Now only large corporations can spread these costs over enough units to stay afloat. 

Here is what I am saying: The same retards that clamor for 'buy local' and independent businesses vote for the very policies that make these businesses fail.

Here is the easy solution: Constitutionally limited government. This is what our Founders wanted to avoid. They have been diluted through 250 years of lobbying by big business or elites claiming to act for the 'people'.

I will say it again so even the dullest can appreciate it: pro-capitalist policies are often the exact opposite of pro-corporate policies. If we limited our government once again so that it is not for the socialist desires of the elite and big business, we would then have the small local, entrepreneurial economy that yuppie troglodytes claim they want. 

Finance

Howdy Ya'll.  Sorry have been so quite.  Still very busy.  But I wrote this for something at school and thought it might be interesting to share here...

A completely free market would experience downturns and corrections. The idea at issue today is the proper role of policy and regulation in these cycles. There are two primary questions: 1) whether government regulation causes and/or deepens bubbles and corrections; and 2) whether government intervention will hasten or delay recovery. If the ‘free market’ instigated the current crisis then perhaps the solution is government intervention. If policy was the cause, more intervention may not help the situation.

Market Forces as a Cause

Owner occupied real estate is the principal investment for most Americans. Home prices historically tend to rise. Even if they fell, investors believed, the illiquidity of the housing market protects it from the type of volatility seen in the stock market. This ignores that most homeowners are highly leveraged, and continue to be so as they trade more desirable real estate.

In the past several decades, this may have led banks to offer loans to potential buyers with less and less money down. While the standard loan had been based on a 20% down payment, this number dwindled to zero over the past decade. With decreasing equity, it became more likely that buyers would be subject to foreclosure if home prices fell or even flattened. Why did bankers and buyers assume this great risk?

There are two major strains of answers to this question that laid the blame on a ‘free market.’ First, economists such as Robert Shiller proffer the idea that it was irrational exuberance.  There is some power to this idea. The banks’ increased willingness to give out loans created more scarcity, which began an inflation that resulted in a bubble. Market participants were irrational (or there an inefficient market), and homebuyers were willing to pay significantly more than the real value of the assets. Some may have been hoping that they could exit before they would become a bag holder, but others truly believed home prices would never go down.

The second idea is related more to the bankers, namely that securitization of loans allowed banks to pass on this irrational risk to unwitting investors. When mortgage lenders take a risky loan, they package it with other loans that have a better credit rating and sell them as a securitized bundle to 3d party investors. It was the government’s failure to regulate such securitized loans and the credit rating agencies, they reason, that allowed this behavior. Once the bill became due, the bubble was bound to burst. Indeed, there were 18 million vacant units in the U.S. in Q4 2008, out of 130 million total households.

The Government as the Cause

While there certainly are inefficiencies, the idea that there is a free housing market is ludicrous. There are not just a few policies involved, but rather a bouillabaisse that stewed for decades. There were two major government policies (among many) that had a hand in the crisis: 1) encouragement of risky lending, and 2) restrictive land use policies.

 First, the U.S. government believes that people who are unqualified to own homes should do so. While large economies like France and Germany have lower than 50% home ownership, the U.S. is generally around 65-70%. In the 1970s, Carter decided this was not high enough. His Community Reinvestment Act (CRA), encouraged banks to lend to unqualified buyers. Clinton deepened the meaning and enforcement of the CRA. This was placed on top of the existing structure of Freddie Mac and Fannie Mae that have generally speaking, since the 1930s, had the goal of lowering the risk of lending.

The second major factor is geographic. Metro areas with restrictive land use policies create false scarcity, which contributed to skyrocketing prices. DC, LA and Miami, which all have relatively illiberal land use policies, saw some of the greatest increases on the Case-Shiller index during the past decade. Conversely, markets with more liberal land use policies, did not suffer from the same degree of boom and bust. (See Appendix: Case Shiller Home Price Index for Several Major Metro Markets, Jan 1987–Jan 2009).

Government as the Solution

Since policy has contributed to, or even caused this crisis, are the proffered solutions the best response? We would do well to remember Henry Hazlitt’s Economics in One Lesson: Always consider the unintended consequences of a policy in the near and long terms.

AIG and other bank bailouts: While bank bailouts will insure that capital does not dry up, they create a dangerous moral hazard. When risks are socialized and rewards are privatized, the incentive structure leads to increasingly bad decisions.

The Auto bailout: In the near term some jobs may be saved. However, those jobs will be for an industry that has proven itself to be uncompetitive on the global market. If the U.S. still has any comparative advantage in auto manufacturing, it would be better realized if failing businesses were allowed to fail. Businesses that create marketable products and that are willing to operate in right-to-work states, thus lowering costs, would take their place. 

Increasing the money supply: The goal is to ‘unfreeze’ the credit market so that investors can have cash to spend on growth. However, as Milton Friedman taught us, MV=PQ. Increases in the money supply will lead to inflation. With the massive spending program underway, we run the risk of hyperinflation the moment that we begin recovery.

Government Stimulus: The key Keynesian premise is that available cash will kick start demand. This is flawed for a couple of reasons (among many). 1) The Obama administration assumes a multiplier for government spending of about 1.57. His own adviser, Christina Romer, has said that: a) the multiplier is lower than that; and b) the tax cut multiplier is as large as 3.[1]    2) Make-work employment adds nothing to the GDP. This is the fallacy that that George Mason economist Bryan Caplan refers to as Sisyphusism, or the belief that an unemployed man is better off rolling a rock up a hill only to have it roll back down, ad infinitum. The market has already decided that much of what the stimulus package proposes to do is not important enough to fund. Therefore it is unlikely that these projects will lead to real growth.

TARP: This program carriers many similar dangers. The moral hazard created will incentivize poor investment. If bad assets were allowed to fail, there would be pain in the near term, however, as the market absorbs this failure, future investment will be more efficient.

Conclusion

As Hayek warned us more than 60 years ago, the fundamental premise of Keynesianism is that planners know better than the market. This ignores the wisdom of crowds. Millions of individual actors will happen upon better solutions faster than the smartest policy makers with unlimited resources. When a large portion of the GDP is socialized we will all suffer from unlikely negative events. When the economy is more decentralized on the other hand, there are winners and losers, but capital soon flows away from bad ideas and toward good ones.

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[1] The Macroeconomic effects of tax changes: Estimates based on a new measure of fiscal shocks, Christina Romer, David Romer (March, 2007).

Urban Rural Political Divide: Part II

So. As promised, (or threatened) I want to also talk about this from the other direction: does politics lead to geographic separation. I think that this is mainly the case for low-density urban development, as there are little empirical data on folks fleeing the city for very rural places (anecdotally I am sure many do, as I would like to, but its nothing like a phenomenon). 

David Brooks wrote an interesting book on this called Paradise Drive, but the focus there was a bit different. In a nutshell, right of center people choose to live in lower density and left of center folks choose to live in higher density. Why? 

1. Children–More children equals more conservative. There are so many available data to support this idea that I will leave the cites up to the reader (as again I lack the time). The most liberal women are the least fecund, conservatives are the most. When you have a child (or especially more than one) city living is difficult and annoying. Even without children, married couples, who don't need to go to bars etc are likely to live in the burbs. This is the most obvious reason, but there are subtler ones.

2. Religion–This directly relates to point #1 (religious are much more fertile), but I think there is a more nuanced ancillary reason. I have no children and I prefer lower density. In the Jeffersonian sense religious people like some kind of nature, rather than the paean to man that cities are. Second, Christians in particular, which obviously make up the vast majority of religious in the US, at least partly desire to remove themselves from pagan culture. That is easier in the suburbs where you can be alone. The more dense, the more you are constantly exposed to any number of objectionable sights and sounds etc. As strange and silly as this may sound, I think it is a powerful motivator. 

3. Taste Culture–Liberals, yuppies, activists, these are all taste culture people. This often coincides with religion. If you worship created, rather than Creator, you are likely in this 'taste culture' idea. Don't get me wrong, I don't think there is anything wrong with it per se, but I think it can be related to the worship thing. What do I mean? Well, religious folks might draw their friends from church or school or scouts etc. Yuppies et al tend to derive friends from taste culture. They are 'foodies' or hikers, or insert social category here. High density living caters to this more simply because there are more opportunities for interaction and specialization.

4. Legal–This is a catch all category but perhaps the most profound. Firstly that the zoning laws of cities (along with higher density) make property more expensive. Therefore families move to the suburbs. But it is more complicated. Taxes are often lower in the suburbs, which is obviously a concern of conservatives (b/c you know, we are honest and actually pay our taxes, unlike Dem pols). It is also often easier to do what you like with your property in the suburbs, though with neighborhood covenants this is increasingly less true. The big one is of course that the draconian gun laws of cities drive conservatives out. 

About 80% of the country according to the census is urban.  Obviously, this does not mean urban urban, but rather developed vs. rural. There are those who believe that culture emanates like a radio wave out of the cities, and there is some truth to that. But I believe one of the reasons the U.S. is still tolerable compared to some other Western societies is that we have allowed for semi-urban development, without the problems and pitfalls. We need to encourage this. The lefties decry this as 'sprawl' and there is something to that argument that we can't ignore. Some suburban spaces are ugly, wasteful and dehumanizing. But hello! So are a lot of very high density urban spaces! What we need to is develop sensibly for a variety of needs. If we let the left command suburban policy to make it more dense, we will lose these spaces and the heart of America.

There is a lot more to talk about here so feel free to chime in. Next I will deal with the future, and how I think these categories are going to become even more difficult as I believe we are on the cusp of a transport revolution along the lines of the auto 100 years ago. 

Hypocrisy

Victor Davis Hanson, whose general perspective I pretty much fully agree with, has this excellent piece on the hypocrisy of our nation. When a Christian man is a stalwart fighter against immorality we assume naturally that he is a Ted Haggart creep. When a secular (or faux religious Obama style) crusader against ruining the earth or some such pablum, we do not assume, as we should, that he lives in a huge wasteful estate (as do Al Gore, John Ewards, etc.). 

More to the point, I am also uneasy about this. These children of the left are teenagers with power now. Think about it. Over the last eight years, all you have heard is how awful Bush is and how stupid he is and how on 1/20 they were going to party etc. Now that the tables are turned conservatives are quiet, respectful and still proud of our country. I join millions of Christians in praying for Obama. How many times have we heard that this past week? I have heard it from almost every major conservative leader. How many times have I heard a Jim Wallis or Tony Campolo lefty Christian say that about Bush.  Exactly zero.  Be glad if someone could prove me wrong. I haven't heard it. 

The 'reality based community' of the left are actually whiny little 13 year olds. The conservatives are classy adults who fight with ideas and action not with weasel words. But... We need to start being as proactive as the left has been. When an enviro nut gives you crap challenge them. When a lefty whines about the poor, compare how much they give versus how much you give. I know, because the data and my anecdotal observation prove, that we do better on helping the poor anyway. Being adult and respectful does not mean that we have to be walked all over.

Death of Free Speech

It is coming.  Faster than we think perhaps. The left, who are seemingly gaining adherents and power hate free speech. Christians are not the target of the future. They are the target now. 

This story highlights some of the more absurd p.c. objections to inaugural goings on. The most alarming of course is the outrage and shunning that has surrounded Rick Warren. 

What the lefties don't know is that Warren isn't exactly known as a conservative or even orthodox Christian within evangelical circles. For the record I think he's a pretty good guy (giving away 90% of your income is a lesson many of the outraged celebrities could stand to learn). But what is really alarming is that Warren is shunned primarily for not backing down to a basic Biblical truth. 

As I mentioned in my last post, sinners of all stripes are now going to be pestering our all leftist federal government to legitimize their errant behavior. What we will inevitably get out of that is legislation that limits our rights to speak Biblical (or otherwise) truth. 

Our 'more enlightened' neighbors to the North (forgetting of course that they have had a rightist gov't for the past few years) have long entered into this territory, despite the fact that they also have a right to free speech. Just ask Stephen Boisson or Ezra Levant. 

Church and State: Using the Gov't to Legitimize Behavior

Jumping off my comment following SirCAL's comment on the drug post, I think this is worth a separate post. I have not heard a lot of folks float this idea around, though, I do not credit myself with creating it or anything, I just can't think of a cite for it off the top of my head. 

I think that the left and some right liberals (libertarians et al) tend to want to use the government to assuage their broken consciences. As I mentioned in my posts about the problem of evil, we have what I believe is an innate feeling of oughtness.  Not just about the world but about ourselves. Both the OT and NT tell us that the law is written on our hearts. Everyone knows they are a sinner. Having some authority above them give its blessing to their sin makes them feel better. 

Why for example do homosexuals, the vast majority of whom are non-monogamous, do not want families (as sick as that is) not settle for being merely left alone, but desperately want the State to marry them? I can totally understand that they want to not be criminally prosecuted for their sins. I cannot understand, outside of my present point, why they care so deeply that the State provide its imprimatur of acceptance to their lifestyle. 

Perhaps so much the same for prostitution, drug and other behavior crime advocates. Obviously there is an element there of just wanting to avoid arrest etc. But I think they are also motivated by a desire to feel as though their errant behavior is legitimate. After all, we implicitly understand, like it or not, that the gov't is a sovereign authority. 

Legislating Mental State

So there is a very interest series of articles concerning the criminalization of drugs over here.  I am wondering if my fellow bloggers might want to chime in with their opinions. As Christians should we vote for morality? Where does that line end (kept in this case specifically to drugs)? Freewill and liberty are also moral.  How do we balance these? I will be honest, my viewpoint has changed on this over the past year or so, but I am curious what you both have to say. 

At this point, let's restrict it to drugs, but it has ramifications for other 'victimless' crimes such as prostitution. To me any way, that is a much easier question to answer. As of now there are hundreds of thousands of women in slavery as prostitutes in this country. If prostitution were 'legal' I don not believe that situation would improve, but rather get much worse. 

I think drugs are a more difficult problem. On the one hand, there is no doubt that there is a criminal enterprise that exists only because pot (leaving out hard drugs, which I dont even consider an option for legalization) is illegal. There are millions of people in the justice system because of pot. This seems unjust and counter-productive. On the other hand, places with liberal pot laws have become bastions for harder drugs and other undesirable behavior. Sin will beget more sin. Thoughts? 

O'Doyle Rules!

So I was reading this post from Rod Dreher and it reminded me of what I said to my wife yesterday while we were spending an unfortunate afternoon at Tyson's Corner mall.  Looking around at the pornographic, anti-Christian, anti-American propaganda that passes for ads these days, and the way rich suburban teenagers dress and talk, I said to my wife: remember that scene from Billy Madison?  Where he tells the O'Doyles that he has a feeling they are going down soon?  It's hard not to get that feeling looking at these people.  Also a very funny clip.