Southern Bread Blog

Just to be arrogant and quote myself from three months ago:

I’ve been telling people for months that Republicans have no interest in stopping health care legislation. People like Rush Limbaugh have marveled out loud about why Congressional Republicans aren’t being more vocal and active in opposing it. There is a perfectly reasonable explanation for that. Because they don’t oppose it, as is evidenced in the above video. The only reason they have given passive resistance to it for the last few months is that it’s good positioning for campaign donations and re-election.

You have to begin looking at all politics from the angle of “who wins? who loses?” So let’s do that. If health care passed right now, would the Republicans lose? No. They’ll just claim that they tried hard to fight it, but didn’t have enough numbers on their side. They will still be re-elected and Democrats will get hammered in November. Plus, now they can enjoy the same benefits the Democrats wanted. Namely, large new campaign contributions from the healthcare lobby. That’s a win for them.

So, what if health care doesn’t pass. Do Republicans lose? No. They still get re-elected in November on the idea that they defeated the bill, and Democrats get hammered. They also still get massive campaign contributions from an energized base. That’s a win for them also.

See what I mean? That’s how politics works. Smart politicians always set themselves up to win on both sides of potential legislation. Values and ideology in Washington are like unicorns and fairies. They don’t exist.

–Dave Jones, SouthernBread.org

And so, today, we have this little nugget of a story from AP:

GOP Sees Risks in Push to Repeal Health Law

Republican leaders are stepping cautiously, wary of angering staunchly conservative voters bent on repealing the new law. In recent public comments, they have quietly played down the notion of repealing the law while emphasizing claims that it will hurt jobs, the economy and the deficit.

Asked if he advises Republican Senate candidates to call for repealing the law, Cornyn said: “Candidates are going to test the winds in their own states. … In some places, the health care bill is more popular than others.”

On Tuesday, Cornyn issued a 1,280-word campaign memo that mentioned “repeal” only once. It did not advocate repeal but noted that in a recent poll, “46 percent of respondents support a full repeal” of the health law.

Three weeks ago, Cornyn told reporters he thought GOP Senate candidates would and should run on a platform of repealing the legislation.

–AP, via Fox News

Ah. So the Republicans are cool with the bill after all? Surprise, surprise. Fire up the base for the fight and then cool ‘em down when it’s over. It’s all clockwork. It’s almost as if it was planned that way.

I’ve been having a really good back and forth with Jared in the comment thread on my “It All Starts With War” post. Please join in the fray if you so desire.

In light of that discussion, I’d like to post the material that I’ve read or listened to that changed my mind on the topic of war. I’ve tried to lay these out in the order that I encountered them. I did move John Denson’s lectures to the top of the stack though. Denson is a lawyer, and a Trustee at Auburn University. He is also a well respected history researcher with a focus on the history of American wars. I consider his lectures and books to be formative to my current thinking. It took a couple of years of research to go from being pro-Iraq war to totally anti-war as I am now. Hopefully you will put these links to use and maybe it will change your mind too. Cheers!

Denson – Six Months That Changed the World:

Denson – Roosevelt’s WWII Policies of Unconditional Surrender and the Morgenthau Plan:

Denson – Origins of War: Civil War and World War I:

[PDF] Denson – A Century of War

Murphy – The Cry For Security:

Murphy – A Critique of the Invasion of Iraq:

Woods – Interview on Antiwar Radio:

DiLorenzo – Trade Barriers as a Cause of War:

Higgs – War and the Leviathan State:

Higgs – The Myth of War Prosperity:

Higgs – Death Fuel:

This article on seeking alpha is worth your time to read. I just got it in my in-box yesterday and I think it gives my argument a lot of support, that the last 40 years, from 1970-2010, were a stock market aberration caused by massive expansion of the monetary supply. Therefore, we can’t assume going forward that this will continue.

http://seekingalpha.com/article/195390-what-if-it-was-all-just-a-big-bubble

I’ve been wanting to do this post for a while, but it takes so much research that I had to assemble it in little bits and pieces over a couple of months. The argument I’m going to present is that, if you go through life with an average salary, starting today, you will not be able to retire in the traditional sense. Let me be clear. I’m not making some type of blanket statement that starting now, retirement is over. No. I’m saying that what happened over the past 40 years is no longer possible, because it was all predicated on an unsustainable, exponential rise in the supply of money and credit. If you want to think of it as a ponzi scheme I wouldn’t necessarily argue with you. As we all know, the defining characteristic of a ponzi scheme is that the people who get in and invest early reap huge benefits while the latter groups get screwed.

Let me try to prove my point. I took historical data since 1970 and charted it all out in order to get 40 years worth of baseline data.  Here’s what the 1970-2010 numbers looked like:

• Start Career: 1970
• End Career: 2010
• Starting Salary: $9,000
• Ending Salary: $50,000
• Years Worked: 40
• IRA Contributions Maxed Every Year
• Invested in: S&P 500 Index Shares (SPY)
• 2010 IRA Portfolio value:  $912,154

So, if you started working in 1970 at age 25 and immediately started maxing out your IRA contributions each year until age 65 you would end up with $912,154 because of compounding dividend re-investments.  This may sound like a lot of money, but there are caveats.  If you had retired in the year 2000 instead of 2010 you would have retired with only $903,269.  Huh?!  How is it that 10 years can go by and your portfolio only grows $9000.  Well, it’s because the stock market has been so volatile since the dot com bust in 1999.  These are the different ending portfolio amounts you would have retired with each year during the 2000′s:

• 2001: $853,933.42
• 2002: $743,572.41
• 2003: $594,285.05
• 2004: $774,562.06
• 2005: $832,896.55
• 2006: $893,126.56
• 2007: $1,043,059.58
• 2008: $1,095,382.45
• 2009: $689,155.16
• 2010: $912,154.77

As you can see, there have been wild swings in the stock market since ’99.  Up until about 1997 or so, there had been a nice gentle sloping curve of compound gains for an S&P 500, dividend reinvested portfolio.  Then it all went crazy.  But that, in and of itself, is not my point.  Of course there are short term technical reasons for this volatility that can be pointed to by brokers and investors.  But, I think the root cause is that the fundamental numbers in our economy are eroding. The stock market was able to garner these types of returns based on a huge inflation in the monetary supply that can no longer be sustained.

Here is a chart of our hypothetical worker’s retirement account:

Now we compare this to the increase in the U.S. money supply over the same period:

They track perfectly. If you were to smooth the curve on the portfolio to take out the erratic swings they would match almost exactly. A nice exponential curve upwards. Absent large, consistent injections of money into the capital markets by the Fed, this type of portfolio would not exist. For instance, if you kept the same S&P 500 Index(it used to be the S&P 90) portfolio(this is totally hypothetical since IRA’s didn’t exist then) from 1920 to 1960 with the same contribution percentages, you would have an ending value of about $85,000. The average salary in 1960 was about $5000. With inflation, that retirement amount would have lasted you about 10 years. Contrast that with our $912,000 figure from retiring in 2010. That amount would last you probably 16 or 17 years. Clearly, the numbers have been juiced.

That doesn’t bode well for my generation and beyond. Looking ahead, there will be no more of this monstrous infusion into the money supply. At least, we hope not for the sake of our currency. The fact of the matter is that I will probably not be able to retire at all. And, in all honesty, few people are able to today any way. Most people will simply not be able to afford the large contribution percentages required to fund a retirement plan such as our hypothetical one. The contribution percentage required in the early 1970s was well over 10% of your gross income. That’s just not going to be doable for most folks. A majority of the people you talk to today end up going back into the work force, or putting retirement off until into their 70′s.

And don’t forget that inflation has also tracked this increased money pumping:

That means the steeper the curve gets, the less real dollars of your retirement portfolio will be usable in the years after you retire. What this means for us is that our retirement portfolios will end with less real dollars in the future, and inflation will eat them away so fast that retirement would only last a few years before exhausting our accounts. Therefore, the idea of me retiring at 65 with a traditional retirement plan is not going to pan out.

So, what am I saying? Well, my bottom line is that you cannot trust common wisdom on retirement any more. The financial advisor who gives you the same ol’ shpill about just keep on piling money into that IRA and stick it out long term will never tell you anything different. That’s what he’s selling and that’s the advice you’ll get. But I’m not so sure our modern notion of retirement was ever a good idea to begin with. I’ll finish my thoughts on this in the next post…

A lot of my family and friends think I’ve lost my mind because of how anti-war I have become. And I understand it. I really do. In our current political climate, the knee-jerk reaction to being anti-war is to assume common cause with “the left” or some modern liberal agenda. That couldn’t be further from the case though. We have to remember that the great classical liberals that conservatives hold dear today, such as F.A. Hayek blamed war as the first step toward the road to serfdom.

War is one of the most effective tools that the state uses to grab large amounts of power for itself. It’s the perfect excuse. Human nature longs for security and safety, but also bravado and pride. War touches on both of those base human desires. One understandable, one sinful. Anti-war is fully and totally consistent with a free-market, free-trade, pro-liberty ideology. If you don’t trust the state to run health care, why in God’s name would you trust it to kill people?

Yes, Victor Davis Hanson is neo-conny, but he manages to hit the nail on the head with this description of what’s going on in America right now. I tuned out of the health care debate a few weeks ago. I don’t care about that con game any more. It’s worth analyzing the broader climate all of this is taking place in though:

…we are not talking about hoi polloi versus hoi oligoi, or the commune on the barricades fighting the estate owners. No, not this time around.

Instead, the present attempt to remake America is the effort of the liberal well-to-do — highly educated at mostly private universities, nursed on three decades of postmodern education, either with inherited wealth or earning top salaries, lifestyles of privilege indistinguishable from those they decry as selfish, and immune from the dictates they impose on others.

They are all battling on behalf of “them,” the poorer half of America, currently in need of some sort of housing, education, food, or legal subsidy, whom the above mentioned elite, in the way they live, send their children to school, socialize, and vacation so studiously avoid. (The New York Times owners are likely to follow the cut-throat business practices of Wall Street, live in the most refined areas of New York, and assume privileges indistinguishable from other CEOs; the difference is that they so visibly care about those they never see or seek out).

Note well the term “poor.” These are not Dickensian or Joads poor, but largely Americans who by the standards of the 1940s would be considered lucky. Partly because of globalized Chinese consumer goods, and partly redistributive practices of a half-century, our current “underclass” has access to clothes, electronics, entertainment, apartments, cell phones, transportation, etc., undreamed of by the middle class of the recent past. I live in one of the poorest areas of one of the poorest counties in a bankrupt state; and those I see poor are not like those I saw 40 years ago in the same locale.

No, the revolution is not one of the abject poor and starving storming the Bastille, but of the angry and self-righteous well-off— angry as hell that the less well-off are living lives quite differently from the very well-off. (A trodden down poor person today flies standby from San Francisco to LAX; a very rich person gets into his $50 million Gulfstream — but note modernism’s paradox: the poor person’s United Airlines pilots are as good, he gets there as safely and in some comfort, and not much later as well.)

Some of the revolutionaries are guided by genuine noblesse oblige. Others act out of guilt and can justify their own consumption if they “care” for a distant poorer other. Still more explain their own privilege through using government to redistribute income. A few are driven by genuine hatred — stemming from the fact that the highly educated academic or artist makes far less than the doctor, lawyer, CEO, or — heaven forbid — tire store owner, family orthodontist, or owner of a half dozen Little Caesar pizza franchises.

How can that be that the PhD who reads Old English, or the painter who emulates Pollock, or the writer who is the next Fitzgerald, or the AP teacher is given so much less by society than the crass, smug captain of industry, who reads less, has no real taste, and hardly understands his own existential dilemma? Should not salary and capital be predicated on good intentions, high education, rhetoric and argumentation, and a bit of necessary sarcasm?

Where do these ideologies derive? Again, I wish I could say that they are grassroots driven, by the muscular classes who are victimized by business and, in their cry-from-the-heart protests, demand a fairer cutting of the pie. But so often the utopianism is from above, and predicated on abstract education, relative affluence, and little exposure to business or indeed much beyond the metrosexual world in general.

So fascinating these modern revolutionaries. A Buffet does not choose to pay the high income tax rate on his earnings, though he surely could in lieu of lecturing how taxes are too low. A Gates Sr. does not plan for his offspring to pay into the strapped treasury needed inheritance taxes, though he remonstrates that they must be raised on everyone else. A Geithner does not comply with the tax code, though he assumes it should be raised on others. A Gore lectures on honesty and truth and science on his way to a $100 million con that turns him from an affluent ex-politician into a global grandee.

I’m sorry — I don’t take seriously much of anything from this wannabe revolutionary bunch.

–Victor Davis Hanson, Pajamas Media

I picked out the good stuff from the article. A lot of the filler was just typical neocon history re-write, but his analysis of the phony ivy league liberal who fancies himself some sort of modern revolutionary is spot on. It’s how Obama can be best buddies and take money from every Wall St. fat cat in existence and still somehow come off as a Main St. populist. The Obama revolution was a classic collectivist campaign. That is to say, it was a campaign run by power elite who want to control, designed specifically to attract those who want to be controlled. With bitter ivy league and media technocrats acting as gatekeepers. It’s all so phony. It makes me sick.

Let’s just put it bluntly. When it comes to economics, most Christians are completely ignorant about even the most basic of economics principles. We might understand the concept of supply and demand, but we even get that wrong a lot of times because we don’t understand what those two factors really signify in the marketplace. There are lots of supply and demand scenarios that we don’t even recognize as such, even though it’s right in front of our face. The same problem extends to all areas of economic thought. Christians just do not have a good understanding of the basic laws of economics. And this is, to me, a serious error on our part.

Why do I think it’s so important? Well, partly it’s because of what i just wrote above. There are laws of economics, just like there are laws of physics. Gravity is a law. And, jumping off of a tall building means you will fall and kill yourself. Even if you don’t understand gravity and could care less about physics, you will still die. And, economic law might play itself out differently in the real world, but it’s no less of a law than physical laws are. If you do A, then B will happen. It’s that simple. And, because of that, Christians are consistently making stupid blunders in thinking on moral and social issues because we don’t understand these things.

Let me give you an example of what I’m talking about. I stumbled on an article the other day while doing some research for an upcoming blog post on retirement. The title is: “Does God only care about abortion and homosexuality?” The article was a critique of a response that William Lane Craig recently gave to a question about politics. In general, I see the writer’s point and agree with his conclusion that evangelicals seem to only get involved in politics when it comes to abortion, same-sex marriage and one or two other hot button issues. This has been a critique by the so-called “Christian Left” for a long time, and it’s generally true. But he attempts to make larger points that show his total ignorance of economics:

I was more than a bit dismayed by these comments. Craig only seems interested in the ethical dimensions of healthcare when the issue touches on the life of a fetus. But what about healthcare itself? Isn’t that a moral issue? What about a baby born addicted to crack? Or a single mom who cannot afford health insurance? Or a family who just had Cigna deny their request for their child’s organ transplant? What about the very idea of a system of healthcare that is driven not by care of the patient but delivering profits to shareholders? What about the soaring profits of corporations like Wellpoint even as they raise premiums on people already living at the margins? On what planet aren’t these moral issues?

–Randal Rauser, ChristianPost.com

This sentence is the heart of his argument: “What about the very idea of a system of healthcare that is driven not by care of the patient but delivering profits to shareholders?” That’s what he is complaining about, and the rest of what he describes are, in his view, logical outflows of that one issue. And that issue is an economic complaint about the nature of health care. He is complaining that health care workers care more about making money than helping people. The problem is that is a completely meaningless, but sadly oft-repeated, statement because of what is called the “economic calculation problem.” Let’s look at it in more detail.

What’s called the “economic calculation problem” is a law of economics that, in part, describes the impossibility of making rational economic decisions when confronted with unknowable values. These unknowable values can be unknowable by virtue of the “knowledge problem” of central planning, or because their value is simply inscrutable, such as with slavery. What is the “value” of a slave? How do you rationally factor labour costs when you don’t value that labour(slaves in this case) in monetary units? You know that the slaves are costing you something, but you don’t know how much. You can’t know because you are trying to factor monetary decisions using non-monetary criteria. It’s the same problem as putting a price tag on “good will” when buying a business. The valuations of the owner, the buyer and independent valuators can be wildly different.

And, this is the problem with a statement like, “What about the very idea of a system of health care that is driven not by care of the patient but delivering profits to shareholders?” Health care providers must operate in the realm of monetary calculation. They cannot purchase 1000 gallons of betadine solution with 100 units of “care of the patient.” That’s completely irrational. There must be money(a medium of exchange) involved in order to make the proper business calculations to properly allocate the necessary resources to provide “care of the patient.” There’s no other way this can happen. And, what’s being completely missed in Rauser’s complaint is the role of the consumer in these calculations.

When he says, “What about the very idea of a system of health care that is driven not by care of the patient but delivering profits to shareholders?”, he’s making an implicit argument that valuing profits devalues your product. But this is silly. It doesn’t matter if the product in question is health care or basketballs. As consumers value your product less, more of them will buy that product elsewhere, which will reduce your profits. In a properly functioning free market, increasing profits requires increasing product value to the consumer. This is the way that businesses know what they are doing wrong and what they are doing right. By profits. As profits go down, good businessmen will see that for what it is: a signal that consumers are valuing their products less. As profits go up, the reverse it true. Thus, you must calculate “care of the patient”, not on some inscrutable emotional level, but by profits. How else do you know, as a business man, if you’ve given satisfactory care to your customers(the patients), unless profits increase. That’s called the price signal.

Rauser has, unknowingly, set up a false dichotomy between profits and product value that doesn’t make any sense. Profits are the results of increasing product value. They are inextricably linked together by economic law. And for good reasons. This relationship of profit to product is absolutely necessary to produce quality products that consumers need. But, Rauser is commenting on the basis of Christian conviction, without a proper understanding of economics to inform those convictions, so what he says comes off confused. He just doesn’t understand what he’s talking about.

I want to make a followup point, though. When the natural relationship of product to profit is interfered with by government intervention, as our health care system has been, bad things happen. Again, there’s the law aspect. I’m not saying that the health care industry as we know it now is functioning properly. It’s not. Government has been slowly encroaching more and more into health care for decades, to the point where most of the industry are actively in bed with government policy makers. They have destroyed their own pricing mechanism through government involvement in the market, so that now, many of them simply don’t have a coherent link to the consumer any more.

The channel of health care provider -> insurance company -> place of business -> consumer with hundreds of layers of mandated government compliance at every step has retarded the price mechanism beyond recognition. This is why the age old example of an aspirin costing $8 per pill in the hospital but .05 cents per pill at the grocery store holds true. The answer to our health care woes, therefore, is to eradicate government involvement from the industry. This would restore the proper competition and economic calculation to the industry. But, something makes me think this isn’t what Rauser had in mind. And that’s too bad. Because, if he understood the underlying economics better, as all Christians should, he would be part of a solution that would restore good quality medical care to even the most poor among us. The problems he lists would be solved once and for all instead of just band-aided with more government manipulation which will eventually collapse the whole system.

An oldie but a goodie:

The Alabama Education Association(AEA) has launched a new anti-charter schools campaign, complete with an ominously coloured website: Nocharterschoolsalabama.org to show that charter schools are where children go to be KILLED BY MANIACS! Seriously though, get a load of this site:

Clearly, if you go to a charter school, you will be unable to properly cut out things with scissors and will develop a habit of slapping primary colored large words hap-hazardly onto scary concrete walls. Please. How silly.

Of course, as a homeschooling family I don’t really have a dog in the hunt, but it’s still interesting to watch the mud fly from the sideline and develop some commentary. The thing that really got me were these phony reasons they are giving. They are so funny. Here’s how the site lists them out [my commentary in green brackets]:

• Charter Schools Drain Funding from Local Schools. [$10,000 per student is what Alabama government schools spend. Briarwood private school tuition is $6,375.00 per student. Go figure.]
• Charter Schools Compromise Teacher Quality. [This is probably the same teacher quality that the AEA fought so hard against a few years ago when No Child Left Behind required "highly qualified" status for all public school teachers.]
• Charter Schools are Plagued by Abuse, Corruption, & Failure. [LOLOLOLOLOLOLOLOL!!!!!]
• Charter Schools Perform Worse than Other Schools. [ "Because charter schools vary as widely as traditional public schools, their academic achievement also varies widely. It is difficult -- not to mention scientifically invalid -- to make blanket comparisons of charter schools to traditional public schools." --NEA Website. Someone needs to get the AEA and NEA on the same page quick.]
• Charter Schools Weaken Accountability, Standards, and Local Control. [Somehow, this will be the first time in human history that competition has weakened accountability. It's a miracle!]
• Charter Schools are Being Forced on Us by Federal Bureaucrats. [Somehow, I imagine that if we already had charter schools and the Feds wanted to make them illegal that this bullet point wouldn't be on that list. ]

–Nocharterschoolsalabama.org, AEA

Please. Give me a freakin’ break. Nobody believes for a minute that the AEA cares about any of this baloney. The AEA has one purpose. To use education as a cover for getting more money into it’s stakeholder’s pockets. That’s it. End of story. If a certain law, policy, agenda, event will bring more money to the AEA and it’s members/leadership then they will back it. If it doesn’t, then they will come out against it. The actual content of the item in question is irrelevant. The AEA is a public employees union, and the fact that charter schools don’t require their teachers to be unionized might have something to do with their opposition. Ya think? Just maybe?

I’ve held off on commenting any more on the whole health care thing. Honestly I’m just tired of the whole thing. I wish they’d just get on with it already. Go ahead and just pass something or don’t and just shut up. Through all of my numerous posts on the subject I’ve pretty much covered most of my thoughts. Of course it’s going to be a complete disaster. Of course it’s going to cost about 10 trillion dollars. Of course it’s going to mean an overall decline of quality in health care. Of course it’s going to do all of those things and a million other bad things that there’s just not enough time in the day to discuss. But that’s just the obvious stuff. The boring stuff.

The more interesting thing to me is that as this process has moved along, the consequences have shifted in a direction that I don’t think was ever anticipated. In order to get this thing passed, they are having to break all of the “rules” in the senate and house. The whole thing with reconciliation being used in the Senate and the new proposal of the so-called “Slaughter Solution” in the house is frightening. Not in some Glenn Beck, we need to go back to the Constitution sort of way. That’s naive. None of these “rules” are constitutional any how. No, the real problem is that the more of their own rules they break, the more they get used to not having any rules at all.

Once they break a rule, it’s dead. As soon as they violate their stupid reconciliation rule, the whole process of filibuster is gone. They will never again need anything other than a 51 vote majority to pass anything. That’s the definition of tyranny by the majority. And, of course that violates the constitution in every shape and manner, but what’s the constitution? It’s a dead piece of paper. It’s meaningless. The sooner people understand that, the sooner we can move on and stop buying into the notion that politics is ever going to be “good.”

The health care “bill” has become an end game to an entirely new endeavor. It’s not about health care any more. It’s become a starting point that will kick off a long, systematic dismantling of any and all congressional limitations. I foresee that in 20 or 30 years there will be no recognizable rules in congress any more. They will pretty much write whatever legislation they want and pass it with bare majorities in each house. There will be no more limits on them. And when there are no more checks on their power, God help us all.