Sunday, October 3, 2010

Federal Reserve Policy Transfers Municipal Pension Wealth to Banks Too Big to Fail

The Federal Reserve Bank's near zero interest rates are impoverishing publically held pensions.

To permit Federal Reserve member banks to maintain profitable margins in a deflationary real estate, oil, equities, and big ticket consumable items (like cars) environment, the Fed. has kept interest rates historically low. This, in turn, has kept the return on bonds low. The result is that, despite a 25% recovery in the equities market, publically held pensions are neck deep in red ink.

The Troubled Asset Relief Program series of 700 billion dollar bailouts is not the only cost taxpayers are bearing to save institutions that should have failed. After all, taxpayers have earned back and been paid back almost 9 billion and almost 200 billion of the TARP authorization has not been lent out. Five hundred billion to save the world economy is chump change in 2009.

Of course, the bailouts have cost more. The 182.3 billion AIG bailout must be considered. Additionally, the FDIC insurance fund's spending to cover horrendous banking losses and looming liabilities (136 institutions added to the "problem" bank list making a total of 552) cost the U.S. treasury, in 2009, indirectly another 40 billion. Ok, just because I know how mad you all are, go ahead and include the 60 billion in the Chrysler and GM UAW bailout. In sum, that's about $780 billion. To save the world economy, it only cost the U.S. tax payer 780 billion dollars. What a deal. That's cheap, or so we're reassured by top government banking executives.
But this $780 billion dollars is less than half of the potential future cost of the unfunded, unlegislated, and unspoken Federal Reserve bailout policy that has continued now for over a year. This Fed policy of all but 0 interest rates, of printing money so fast that paper and ink commodities are out of sight, and of debasing the dollar until it's a debacle has one very clear price tag. While banks are still floating above a sea of funny money, publically held U.S. are going under to the tune of another two trillion dollars.

While the reduced value of assets held by pension funds are partially to blame, the low interest rates of bonds presents the most serious dilemma. Orin Kramer estimated (my emphasis) that public pension funds base their numbers on actuarial assumptions that use "8% returns a number that is ridiculously high in a zero-rate environment" but which still yields, especially in relationship to the market values in 2008, an aggregate $1 trillion deficit for public funds. Kramer, using current asset market values and a more conservative investment yield rate, says public pensions are currently underfunded by two trillion dollars.

It is important to note that Kramer's appraisal is that of a political fund raiser running a New Jersey pension. This is important because of the self-serving nature of Kramer's estimate. If pensions, in his estimation, are a trillion short, it follows that if the New Jersey pension Kramer runs is suddenly really short, it isn't his fault. Nonetheless, the relationship between typical yields and current yields in the Federal Reserve bailout era presents the horns of dilemma, not only to public but to private retirement funds.

In 2008, the financial meltdown's negative affect on stock prices, dropped U.S. public pension assets by more than a trillion dollars. Even though things have begun to slowly turn around for equities in 2009, conservatively, the returns for pensions are under 200 billion. Even though the turn around is slow, the dilemma for pensions is that the low Fed rates, savings rates, and bond rates make the higher risk stock market seem attractive. The Federal Reserve's policies, combined with the natural reliance of pensions on bonds is bring down the public retirement system. The last time U.S. pension funds saw a surplus was in May 2008. Since then they have had "19 consecutive months of deficits as markets reacted to the financial crisis" (Mercer).
Sometimes it is tempting to think that the trillions the U.S. Government is tossing around are as meaningless as phony campaign promises. The numbers can't be real. No one believes them. Sorry, the sad part is these insanely stupid acts, unlike the insanely stupid things candidates say, do have consequences. Bailing out the financial system is already costing private and public pension funds far more than the advertised $780 billion price tag.

What might have happened if McCain had led a revolution saying no to TARP, no GM, no to Chrysler, no to AIG and no GMAC? Would the DOW have gone to 2,000? Would the pensions have declared bankruptcy? Would the public, in outrage put the public lynching of Fannie and Freddie on UTUBE and would we have stormed the Bastille? Maybe, but maybe not. It does seem evident that the cure is killing the patient --slowly.

As gloomy as is all this news, the situation is probably far worse. Consider for instance, the House Banking Reform Bill with the Orwellian title "Wall Street Reform and Consumer Protection Act." This bill anticipates future bailouts at as much as four trillion apiece. Sure, we've got that kind of money lying around. Sure, no problem. (See also my article on what a banking reform bill should look like).

Saturday, December 26, 2009

Political Reform 101 and Ending the Senate Right of Filibuster

In 1975 a rules change allowed senate filibusters to take place from back rooms, cloak rooms and from the local bar and grill. This change continues to inflate the “price” of legislation faster than the Fed can mint the money. Ending the filibuster entirely increases direct democracy. The increase of direct democracy will, ultimately, produce a more limited government.

The potential for a filibuster springs from the notion that any senator should be able speak as long as he wants on any issue. This right to speak became a filibuster (an act of piracy –from the Spanish filibustero) when a member decided to abuse his liberty to pirate the senate floor and block the peoples’ constitutional operations.

The gentleman’s filibuster has been around since the U.S. Senate revised Rule 22 in 1975. From that time forward, no senator needed to speak for a filibuster to be in force. Today, one simply files a motion. Since 1975, then, a filibuster has no longer been a filibuster, an abuse of the constitutional liberty of free speech; it has simply become an abuse of the constitution. Rule 22’s revision made it slightly easier to attain cloture and move legislation, but Rule 22 made it much, much easier to enact a filibuster. It is not surprising, then, that since the enactment of Rule 22, the number of filibusters has sky-rocketed.

The senate might at least be returned to the rules of filibuster made popular in the old black and white movie Mr. Smith Goes to Washington. Because the push-button filibuster focuses legislative authority in the hands of an even smaller group of legislators, a larger number of votes must be “purchased” by the majority. Hence, legislation is more expensive than it would be in a simple majority setting. Additionally, as the parade of Democrats filibustering their own majority’s legislation clearly shows, the last votes to break a filibuster are infamously expensive.

Senator Patrick Leahy’s vote cost 250 million; Louisiana’s Senator Mary Landrieu’s, 100 million to 300 million. Connecticut Senator Chris Dodd’s unwavering “aye” cost 100 million while Senator Ben cost 45 million. Finally, the Senator Sanders charged 10 billion in heath care centers for his vote. Nelson’s deal sounds like it is worth far more than 45 million. The public option in the senate bill is the expansion of Medicaid bought about through the destruction of Medicare.

Ross Perot used to say, diplomatically enough when speaking of reform, that the problem in Washington is that good people are caught in a bad system. It is awe inspiring to really look at how little the founding fathers prescribed when concerning the operation of the U.S. government. They fearless passed forward liberty, trusting in future generations to fully participate in freedoms humans in government never before experienced. There was never a prescription for or against a filibuster, but today it is so codified that you’d swear the senate couldn’t live without such a burden. The senate today would tell you that liberty itself would be jeopardized if this obstacle to direct democracy were removed.

That people took a better system, a system that allowed for greater liberty, and, over time, chose to allow the tyranny of a minority to impede the deliberations of the majority speaks volumes. Ross Perot was not entirely correct about people or government. Good people can be weak. Weak people can have redeeming virtues; none are, sadly barred from political office.

The operation of all politics is violence explicit or implicit. From taking taxes at the threat of fines, arrest and jail time, to defending American interests abroad with the active engagement of troops, all politics is about the use of force.

Hence, all active participation politics is “bad joss,” “bad karma,” or like using Sauron’s ring of power. The active use of political power brings out the worst in people. Such use should be limited at all costs. Such use should be shared by as many as possible, so that no one individual is burdened exclusively. The weight of power must be spread out as much as technology will allow and the use of such power should be as limited as possible.

The United States government must, obviously, be reformed. We are 11 trillion dollars in debt. Any institutional change that increases genuine debate (an not illicitly cuts off debate by abusing the right of free speech) must be sought. A line item veto should be given the president of the United States so that last minute items are put into legislation without debate. Public referendums ought to be considered, but more critically, more and more decisions about every category of life ought to be returned to state and regional governments where citizen participation can be more direct.

If history has taught us that absolute power in the hands of single monarchs is a wretched evil, it now seems she is liberally instructing her students that matters are even worse when such centralized authority falls on small numbers of men. In small packs, it becomes plain there is a mathematical certainly that many will be weak, others spineless, and others corrupt; that while virtue is the aspiration of man it is not his nature. Hence, the surest way to move the pack is to appeal to its vilest instincts. Even in better days it was the exception, not the rule, that an appeal to reason, virtue and the public good might win a legislative victory

In 2010 if one wants to know a reformer from a hypocrite, ask whether or not they would vote to change the filibuster rules in the United States Senate.

Oh, the vote on the filibuster rules, according to the courts, is itself filibuster proof -- probably.

Wednesday, July 15, 2009

Cut Costs and Improve Life in California: Kill BTSA Now!

California’s Beginning Teacher Support and Assessment program, or BTSA, is one of the least loved beginning teacher experiences in California. Like most liberal programs, BTSA’s name is doublespeak, the reality and the adjectival title are stark opposites. BTSA is the brain child of the University of California’s “educational research, but research does not show BTSA supports beginning teachers. Instead, quality assurance is based on an expensive series of annual conferences and peer reviews (see: "Program Evaluation and Accountability").

Anecdotal evidence (abundant on blogs) suggests just the opposite. BTSA is a jobs program for university faculty, administrators in training, and senior teachers. The evaluative process, the certification process, and the support processes are all redundant systems. Not many beginning teachers would pay for this “service” (see also BTSA is…). Killing BTSA saves money and improves the lives of countless new faculty members in K-12 classrooms. This though, is not happening. In the twilight zone of California government, the funding for the “support” is being used for books, but the BTSA requirements for credentialing remain. There is even talk of charging new teachers fees for the privilege of participating in this boondoggle.

BTSA, like much else in California’s educational system, is a top down program. PhD’s, and wannabe administrators who have been working most of their adult lives to escape the K-12 classroom, are in charge of future classroom teachers. The genuine support, as it does in most of life, happens for free. New teachers make friends who teach them the ropes or they don’t. Teachers share lesson plans or they don’t. The faculty generates department standards for excellence or they don’t. Hence, the Commission on Teacher Credentialing, part of the massive K-12, 40 billion dollar education budget, is a place for far more than the proposed 10% across the board cuts, for it is a perfect place to cut government to improve lifestyle. This is a place for draconian cuts. This part of the budget can be reformed so that it all but pays for itself.

Most K-12 teachers would be shocked to know that the California Commission on Teacher Credentialing actually draws 32 to 33 million dollars a year in funding from K-12 education. That's because most teachers have direct experience with this agency as a blood-sucking fee machine. In fact, the licensing, testing, and credentialing fees do generate 21 million dollars a year while the actual hard work of fingerprinting, collating extensive teacher applications, and issuing certifications accurately costs only 9 million dollars. The 12 million surplus should be able to run the California Parks Service, but no, the Professional Services and the Professional Practices divisions cost tax payers 45 million dollars a year. Hence, the California Commission's yearly drain on the general fund.

The Professional Practices Services Division is the Commission's legal division. It's packed with lawyers. The income producing part of the Commission had about seventy employees, now they are down to sixty-five. That was the "across the board cut of ten percent." These sixty-five employees run their office at about $136,000 per person. The offices the lawyers run cost about $227,000 per person. Surely, Practices Division can run with four or five fewer attorneys. Fire the ones with the greatest seniority. They have the highest salaries and they delegate most of their work to underlings anyhow. Plainly, the State ought to cut more lawyers. This is the sort of fired worker that still saves California money after he is unemployed. Most low wage workers, like the folks that do the fingerprinting in Certifications, cost the state almost as much in unemployment insurance, renters' assistance, and food stamps as they do to employ. This, however, is not true of the lawyer. Firing a lawyer is actually a net gain for the state. The only mitigating circumstance is that an unemployed lawyer runs a serious risk of getting involved politics. The added expenses of imprisoning a lawyer who has turned to such white collar crime, or worse, not catching his criminal activities, may, in the end, outweigh the temporary fiscal budgetary gains of terminating his or her services. One last caveat: although both the Certifications Division and the Practices Division took a 10% personnel cut in 2008-2009, the projected cost of each office is up again in the 2009-2010 budget.

Really, the Division that sinks the Commission on Teacher Credentialing is Professional Services. The thirty-three employees of this division spend 40 million dollars of California Taxpayer monies annually. The offices in this division cost over 1 million dollars per employee. Of course, unlike the revenue producing Credentialing Division, or the bloated legal division, the one million dollars per employee is not related directly to individual salaries. These State workers distribute funding. But to whom? It is hard, of course, to tell what bureaucrats don't do for their money by the literature they produce explaining their work. Still, to this much the Division of Professional Service will confess (without the use of water boarding): "The Professional Services Division is responsible for the development of licensure standards for all credential areas for which the Commission issues credentials." If California is serious about cutting budgets, so serious that the legislature wants to raise the sales tax, issue debt, and fire health care workers, can it not simply leave the standards from last year in place for a while? California should lay off sixty percent of the people involved in assessment. Their salaries are significant. They have PhDs, are committed to fighting global warming, and are some of the few with minds that can truly understand that the Spotted Marsh Mouse is more important than most people. To any self-respecting state bureaucracy, these folks are worth any three lawyers and any fifteen or twenty teachers, especially teachers so lowly that they are still seeking certification. Still, as valuable as these members of society are, California should release them and their fantastic intellects to do more meaningful things.

Again, where the Professional Services Division describes its work as: "the development and implementation of licensing examinations as required in the Education Code" there is room for draconian cuts. Mix and match eighty-five percent more of the past test questions for a while and reduce the internal validity assessments. If teachers start teaching that the Darwin theory, especially regarding natural selection, is antiquated or that the Democrats have plagiarized large sections of the Communist Manifesto in the party platform (page 6 last paragraph), then, then California educators might have a problem. Until then, trust the previous tests. They are absurdly irrelevant enough. No one will teach a clear thought in a public school for at least another half a century. The testing development people worry too much. California could fire sixty percent in this department and sleep better as well.

Where the Professional Services Division spends the real money is in "the administration of state-funded programs including the Paraprofessional Teacher Training Program, the Alternative Certification/Intern Program, and in conjunction with the Department of Education, the Beginning Teacher Support and Assessment Program. Related activities include data collection, reporting, and policy research."

These funds are distributed to local school districts for use in small, localized programs, the merits of which are very difficult to assess. Certainly, even if there were no budget crisis, the Beginning Teacher Support and Assessment Program should be axed. Right now the program is clinging to funding. The 2009-2010 grants have been made Tier 3. That is, Local Educational Agencies (school districts) may redirect the BTSA grant funds to areas of need. But this is not enough. The legislated BTSA requirements for credentialing must be expunged. It is an outrage that the highly paid experts that have administered this debacle still have jobs in this cost sensitive environment.

The fact is that most beginning teachers would pay good money to avoid this service. Why not let them. Let them pay $200.00 to avoid the service entirely. See how many actually would. That’s research. Better yet, do an auction. With fifty new teachers in the room, auction off twenty BTSA free credentials. See how despised this program truly is. If there ever were any beneficial aspects of BTSA, they emerged from good teacher education programs already in existence, programs that are already part of teacher's credentialing process. If recruitment and retention of high quality teachers is still California's goal, these programs should all be dissolved and the funds used to reduce class size or increase teacher salaries.

Tuesday, July 14, 2009

California Could Save 50 Million a Year by Reforming the DMV

California has chosen not to go forward with the biometric facial recognition software required by the federal REAL ID Act of 2005. That will save the California Department of Motor Vehicles 4.5 million dollars in this fiscal year and an estimated 25 million dollars every year thereafter. Though the District of Columbia Department of Motor Vehicles is moving forward on biometrics, it offered a savings plan to offset REAL ID costs. California could apply these reforms and double the 25 million per year in savings. The D.C. reforms illustrate the opportunity citizens of California have to both save money and improve their life-styles.

The District of Columbia’s DMV is moving ahead with what many consider to be what President Reagan coined a "mark of the beast" national ID. Even though the national I.D. idea Reagan referred to was suggested in conjunction with a tattoo, the invasion of personal privacy biometric I.D.’s represent would be almost has horrible. However, the D.C. DMV's 09 Budget saved money for its change to facial recognition software and the computer indexed biometric photo’s of its citizens. The choices D.C. made in order to generate the savings are changes California’s D.M.V. could easily implement. If, like the District of Columbia, California changed the license expiration period from five years to eight years and allowed the registration fees to reflect a seven years value rather than five, California could “save” millions.

Although the logic of raising the fees while reducing the service is very typical of government, many taxpayers would happily agree to pay the same amount of money per year for an extra two years simply to avoid contact with the DMV of California. To reduce costs, the D.C. DMV extended inspections (which include smog tests in California) on new cars from a two year to a four year window. This extended window was supported by the E.P.A (p.3). California liberals, though, consider themselves special. They have managed to get special gasoline for California cars, and special emission protections especially designed for California, and of course, they have an especially strict smog testing requirement. California is also special by being a byword for impossible budget impasse. In other words, only the federal government is more impossibly in debt than California. We in California are proud to admit that we are more red than the Red Chinese. Sadly, we are more in the red than the Reds.

Nevertheless, even those that are very sensitive to carbon footprints must admit that a registration inspection on a new car is probably not necessary for at least three years. California has no such exemption for out of state vehicles.

The D.C. DMV hopes to generate enough savings from these measures to pay for its transition to facial recognition software, and although the cost of the facial recognition software per capita is difficult to compute, perhaps it is still safe to say that if California enacted the D.C. DMV reforms, a savings of 25 million per year would be a conservative estimate. Saving 25 million per year by not going with facial recognition software and then using the D.C. DMV proposals to reduce expenditure's another 25 million totals a tidy 50 million per year.

There is a larger principle behind such reforms of the California D.M.V. that that can save Californians the millions and millions more: California can no longer afford to needlessly pester its citizens. There are certain "services" provided by government that are odious to the majority of California's citizens. These should be ended now. Is a thumb print really necessary in applying for a commercial license? It wasn't before 1997. Is a ten-year history really needed for renewing a commercial driver's license? Aren't a social security number and a photograph enough to check for recent drunk driving and traffic violations? Aren't those violations already part of the applicant's records as "points" against his license? How much money can be saved by reducing these regulations? It is plain that a background check can be run without a thumb print. It is plain that the thumb print is "needed" to guard against crimes one might commit in the future.

The regulations that are a boondoggle to business in California cost money. Cut the regulations to save money and encourage economic growth.

After the most egregious bureaucratic infringements on personal liberties are expunged from California's Department of Motor Vehicles, consideration should be given to increasing fees for superior service. For instance, in any given year, budget shortfall or no, complaints of four hour Kafkaesque waits for the simplest services can be heard. Surely, as furloughs and full time positions are reduced, this will again be the case. Perhaps citizens would be willing to pay for an appointment on days that are "furloughed."

Why should a doctor who could bill at least $200.00 an hour spend nearly $1,000 of his time waiting in a line! Instead, he could be helping reduce another long line, the line of seriously needy patients waiting in an emergency room for treatment. Perhaps, the MD would be willing to part with a tenth of this wasted salary for an appointment on a furlough day? Let the tables be turned: three MD's per hour ought to make opening the DMV with it priceless services possible after all.

Departments of California's government that provide services, like the DMV, ought to be self-supporting. Greater transparency should also be required. For instance, how much does each driver's license driving test and knowledge test cost the taxpayer? Such information is vital to evaluating DMV services and practices. For instance, driving a car is so often connected to earning a living that the initial tests offered by the DMV are included in the small fees for a learning permit and license; however, how many times should citizens be allowed to fail these tests without additional fees? The D.C. DMV proposed savings by limiting the number of written tests (knowledge tests) to three per year. Perhaps it is better to have an increasing fee for each written and driving test an individual fails. Without a clear and transparent accounting for the costs of each DMV service such savings are difficult to evaluate.

Friday, July 10, 2009

Drill California! Drill! Seepage NOT Production Threatens Beaches

The black glob on the beach is not a dead whale. It is a hunk of tar washed ashore, not from an oil rig, but from a naturally occurring seepage of oil from a vast underwater reservoir California has refused to tap.

The best way to ban oil is to use it all up, so, if you are an environmentalist you should say, "The sooner we burn this stuff the better!" In 2008 the state's offshore seabed produced 37,400 barrels of oil per day, while federal offshore tracts produced 66,400 barrels of oil. We'll never rid ourselves of big oil! At that rate your children will be facing the same environmental evils. Offshore oil is a ticking time bomb waiting to spoil the pristine wildlife sanctuaries environmentalists have always treasured. End it now. Use the oil!

Even without the deleterious scheming of greedy, profit hungry capitalist oil companies, the oil just beneath the Santa Barbra Canal is seeping to the surface on a continual basis.

The oil on the beaches of Oxnard, Ventura, and Santa Barbara is not because of Exxon. Some estimate that in the 40 years since the Union Oil spill of 1969 nearly two million barrels of oil has seeped into California's coastal waters. Extracting the oil in Santa Barbra's coastal region has the potential to protect the environment. The seepage is well documented. Newer underwater mapping technologies have brought increasing evidence of the sustained environmental hazard the untapped offshore oil presents. The tar on the beaches will not go away until the oil beneath the surface has been removed. Perhaps, Oh Environmentalist, the removal of oil is part of man's Divine purpose on earth!

Energy wealth is the outer wall of the human sanctuary that is the modern world. This is a perfect time for California to turn to Sarah Palin's energy model to balance her budget.

California must return to its roots to continue its liberal lifestyle. Historically, California's dreams were not built on gold, nor on platinum blondes, but on gushers of crude. Once a net exporter of oil, California now imports more than 40%. California's oil production decreased dramatically in the 1950's. It was during this period that, via the Submerged Lands Act, the federal government granted California increased jurisdiction over its coastal waters. The tendency to regulate oil production and refining out of existence accelerated after the Union Oil spill in 1969. In 1995 the California Coastal Sanctuary Act basically shut down new offshore oil drilling in California controlled waters. Despite great progress in safe drilling, under Governor Gray Davis historic leases were not renewed, reducing offshore production even more. As a result, estimates of untapped oil under the direct control of the State of California now run as high as a billion barrels. Even more conservative 1995 estimates put offshore California Oil reserves as high as 750 million barrels.

As long as California remains a net importer of crude oil, a severance tax on oil is only a VAT tax on every Californian. The California refineries will mark up their prices by a multiple of the oil price increase. The sate and federal governments will then get more cents per gallon from every Californian. The goods transported by truck will increase by yet another multiple. The same forces that want oil out of California are in favor of a severance tax on oil. The severance tax will not bridge California's budget deficits; it will deepen California's insolvency.

However, should Governor Schwarzenegger allow the severance tax of 9.9 % on newly leased oil production, the equations change. The increase in oil supply will reduce the price refineries pay despite the increase in taxes. The increased production will allow oil companies to increase net profits despite their per unit declines in profit. If the Democrats will allow the Governor's proposed offshore drilling at Tranquillon Ridge, the Republicans and the Governor should allow the severance tax on new production.

Even without repealing the California Coastal Sanctuary Act, much of the 750 million to a billion barrels of oil sitting off the coast may become accessible. If Lt. Gov. John Garamendi is correct, "new leases off the Mendocino Coast, the Orange County coast, as well as the Santa Barbara coast" could result from the precedent set at Tranquillon Ridge.

The impact on California's fiscal issues would be immediate. The leases at Tranquillon are 1.4 billion over fourteen years. The additional restoration work, land grants, and funds for Santa Barbara County promised by PXP bring the total revenues for the state to over two billion dollars. (For those who accuse Californians of being too soft on "Big Oil", compare this leasing price with the federal government's Alaskan lease to Shell). This is what PXP is willing to pay for the rights to extract about 105 million barrels of oil. If the 1 billion in new oil is extracted at these rates, it would mean twenty billion dollars in leases alone. If one considers the 10% tax on a $70 price per barrel, the new drilling is worth another 7 billion. Depending on the jurisdictional battles over state and federal waters, there may be as much as another 10 billion barrels of oil for Californians off the coast. That's potentially another 70 billion in tax revenues and another two hundred billion in leasing revenue. None of these figures include the immense supplies of natural gas that will be leased, taxed, and used in California even as oil resources are discovered and drilled.

There seems to be some buzz in Sacramento about adding a severance tax on new oil production to balance the budget. That is of course, a measure meant to encourage Democratic environmentalists to allow new production. A horse trade is what is needed. The coffers of California need new oil lease dollars yesterday. There may be more production on tap than Tranquillon. (See: California’s Untapped Oil Beckons Occidental’s Irani), but the new leases money needs to be spelled out along with the issuing of the severance tax.

If Republicans need to trade the 9.9% tax on all production, it is still worth doing to get Tranquillon done. Why? Because California is $ 24 billion in debt (and climbing). But if much of the historic production comes from privately owned land, the 9.9% tax could reduce production in the short term. Privately owned oil rights are part of the property’s value. Hence, production on privately held lands may be subjected to a double taxation, a property tax and a production tax. Since the land rights don’t sunset, the motivation to produce less to avoid higher taxes may be significant. A Democrat-Republican compromise on taxes and drilling should include specific exclusions

Thursday, July 2, 2009

Conservatism & Libertarianism: Natural Rights Vs. Inalienable Rights

The notion of natural rights is not the same as that of the inalienable rights enumerated in the Declaration of Independence. These are akin, but the declaration inalienable rights bestowed on man by his Creator is a declaration of faith, and, hence, of a Supernatural design and purpose for man. For or founders, diverse in belief, this was the least common denominator of faith. No one rejected these tenets. However, in the spirit of synergy, let us see how far we Conservatives may walk with our natural law Libertarian brethren.

Of what does nature’s design for humanity inform us concerning the purpose of mankind? Perhaps the least common denominator would be to consider a Darwinian view of the natural world. Man is designed, in so far as he is designed by nature, to survive.

I’m not sure why some enlightenment thinkers assume abundance of any element when discussing the state of man in nature. It seems that the lack of natural resources has driven humanity to war many times. Likewise, the most peaceful societies, and, historically, the most advanced cultures are not hunter-gatherers, they are agriculturally based, husbandry based. The notion of real property and property rights comes from agrarian roots and is in conflict with the ideals of hunter-gatherers.

Is man’s mind more functional as it exists in nature, or should it be augmented by mind altering agents? In which case is the human consciousness performing according to natural design? As that answer is obvious, so also is Darwinian nature plain concerning human sexuality. The needs of children show what is proper in the responses of males and females. We aren’t bugs, cats, reptiles, or apes. The complexity of the human mind requires time and nurture. It is not that because nature teaches morality, that a government must enforce each and every natural precept. However, one cannot claim as a natural right what nature teaches is amoral. Logical consistency among Libertarians concerning their own stated beliefs should take them thus far, for even the next thought, a transcendant thought, is often much beloved as a Libertarian ideal.

Stealing is wrong according to natural law. Why? Not because of a Darwinian world view, but because, even though a dishonest thief claims justification --see the Communist Manifesto for an elaborate example--, those who are stolen from clearly understand the wrong that is committed. Hence, natural law is not based only on a supposed ideal view of humanity alone in a Darwinian natural world but also on the writ of human decency found in the heart of every man. This is a notion of natural law that transcends the Enlightenment thinkers. A Darwinist might argue that it proves evolution designed man's survival through community action, but we have left the carte blanche of the tabula rasa far behind.

Humanity is a strange creature that knows how to deceive and yet, at the same time, knows deception is morally abhorrent. What sort of creature is mankind? Some would argue that the love of freedom and the prevalence of religion among this paragon of animals indicates a purpose for man that is higher than that of even the greatest of apes. People thirst for things not of this world. Are our brethren with us still? For since this last step is on a road higher than natural law, one may deny one's own heart and write off the course of human history as an escapade in ignorance. Without malice, I'd ask my cousins to tarry just a while. For while we walk apace a moment, we will soon return. Here, though, follow elements of the corallaries that are the framework and basis of conservatism.

From this recognition of man's highest longings flows a strange notion: freedom of religion and freedom of speech are more sacred than the rights of property, for from these arise our faith choices wherein lies the truth of human destiny and the essence of human liberty.

Of the hunger for glory not of this world, history testifies, and of the common calling of the family of man his experience proclaims. A propertied man in conflict with a government over freedom of religion is a subject of a greater tyranny than he whose property rights are violated by an onerous welfare system. Although it is hard to respect those of us who too readily accept the tyranny of property, history has shown that religious persecution produces rebellion far more quickly. The long train of abuses that Jefferson cites, and the tendency of humanity to suffer the abuses he detailws, relate to the tyranny over property. Some abridgement of property is often suffered as a tolerable tyranny; however, there is no partial abridgement of religious liberty.

Laws not only govern; they instruct. That which is higher in man recognizes laws, regularities in the natural world that may be harnessed for the purpose of work. Likewise, humanity is instructed by the laws of national governance. We can approve or despise a national government according to the morality of its laws.

Returning to earthly things, those Libertarian brethren who tarried can perhaps walk with Conservatives again on these final thoughts:

If there are natural laws by way of which humanity is instructed in the precepts of right living in this world, then it is by nature humans are best taught. The fewer laws providing a safety net against humanity’s tendency to ignore natural laws, the greater freedom those who obey natural laws can practice. Laws of generosity, of service, of courage, loyalty and faith are as faithful as gravity. Those who oppose themselves, though, must be granted as much freedom to learn these lessons as is possible, for none of these can be commanded but by governments.

Finally, a genuinely free people will be the most moral, and a genuinely moral people will be the most free.

Tuesday, June 30, 2009

Terminating CalWorks' SSI and Food Assistance Helps Everyone

Governor Schwarzenegger’s May balanced budget proposal included almost 650 million in savings from Welfare Reform. These reforms were enacted for the rest of the United States back in the 1990’s, the last time the federal government had even a look at a balanced budget. The reforms are good for everyone. They will work for the individuals involved. They’ll work for the State of California, and they’ll help the nation.

“A mouse! Whisky (the cat) has a mouse!” my daughter shouted. Then I knew it was on when I heard, “the poor thing. It’s so scared.” Scenes of chasing daughter, cat, and mouse around the house leapt to mind. Thankfully, it actually fell to my oldest to perform the mouse salvation attempts. Twice he spared the mouse and released it to freedom, and twice within that hour Whisky ended up catching it again and dutifully returning the little gray rascal to the living room. The catch and release ritual must be the cat version of “fetch.” With one last superhuman effort my son, a prayer on his lips, released the mouse far beyond our farthest fence. Needless to say, by dinner word reached us that the missus had found Whisky with a dead mouse. When it comes to animals I tend to be Roman: “May I fare as well when my day comes,” I thought…

There is a point to this parable. Life is filled with paradox and with unintended consequences. The most merciful thing might have been to simply kick the cat out of the house with its mouse and let nature take its course. The unintended consequences often cut both ways. While on the one hand, who would suspect that people who are giving often reap the most out of life? On the other hand, grey beards will note that it is the choice of the easier path that most often damages the lives of people. The Governor’s May budget proposal on CalWorks is a study of such instructive paradoxes. For instance, $647 million dollars of the Governor’s Proposal eliminates programs California enacted in the 1990’s to counter Federal Welfare Reform. This includes reductions in monthly grants ($614 million) to $1,407 per couple, for blind, disabled, and elderly couples, and reductions ($35 million) in food assistance (State Funded Food Stamps) for legal immigrants. Even with a 24 billion dollar deficit, no one is talking about eliminating programs. Five hundred million of the reductions are simply bring one program to the very generous federal minimum levels, and the other $147 million are reductions to programs the federal government eliminated in the 1990’s. Even in California’s penury, her generosity to the poor abounds. However, one of the paradoxes, the unintended consequences of being exceedingly generous is that California has more than 30% of the nation’s welfare recipients while having only 11% of its population.

This unintended consequence arises because the Federal Welfare Reform program of the 1990’s worked. Individual programs had been piloted successfully in the states (unlike the liberal plans for health care reform) and then applied with significant freedoms for individual states to continue experimentation. The welfare rolls shrunk, employment rose and, lo, for a brief shining moment the deficit appeared almost balanced. Welfare Reform is good for people. Prosperity cannot begin without first being profitable to others. Millions of people prospered because of those reforms, but not in California. California, feeling kind-hearted towards her hapless poor, enacted program after program to counteract these successful reforms. Hence, the large welfare rolls (see also: Tom Blumer, “California Draggin…”)

The other reason for these unintended consequences is, ironically, that supply and demand works every time it’s tried, even in the welfare state. Welfare recipients flocked to California because of the looser eligibility requirements and the higher returns. The greater the return on one’s investment in the government became, the greater the demand for the government’s program. This last paradox is the reasons these reductions and reforms must occur now. As unemployment grows, the numbers of dislocated workers will likewise grow. California will have challenges enough without attracting trouble from the other 49. One final irony: because these reforms were not enacted when first suggested, there is a serious possibility that California will not use the TANF Emergency Funds allocated in the Stimulus Bill because welfare rolls will go down. One can only hope this holds true. The stimulus bill was supposed to keep unemployment at 8%... We’re at 10% and still climbing. California’s welfare rolls are rising more rapidly than any state in the Union except Florida’s.

Some complain that losing the federal TANF Emergency Funds is bad economics. After all, the stimulus funds will stimulate the economy. This is cave man logic borrowed from ne’r-do-well economists like John Maynard Keynes. It is only repeated today because such discredited formulations worked so well in fooling so many in years gone by. Increases in demand not accompanied by an increase in profitable employment only results in inflation. The demand stimulated by welfare payments is inflationary because the dollars are not backed by labor, they are "funny" money. The economic troubles of the day are caused by fear. People are frozen by fear. They cannot act. The Stimulus bill, the increasing nationalization of the private sector has shown the common man the abyss. Let California show a glimmer of light in this darkened land. Make the reforms California. Lose some stimulus money, and make a big show of giving it back. Petition the federal government to take those extra funds to pay down the principle on our national debt.