Saturday, January 31, 2009

Don't throw out the baby with the bathwater

I don't expect the economic stimulus package, in any form, to save the economy. In fact, I expect the financial situation in this country to get worse; much worse. This is when we find out who we really are. Take away all of our goodies, our easy money, our leisurely comforts and what do you have left? What does it mean to be an American?

I submit that the thing that most ties us together is our Constitution and especially the Bill of Rights. It is the Covenant we have made with each other; our Ten Commandments.

The first thing we have to realize is that we absolutely can survive incompetence in government and even the total collapse of our financial and monetary system. It's okay to get angry, but don't panic. Our principals have not failed us. Our representatives have. We can replace our representatives without abandoning our principals. If we have to start from square one with our financial/monetary structure, we can do that too, but let's not tear up the foundation.

There is a fundamental battle going on between those who believe government's role is to enable opportunity and those who believe government's role is to direct the allocation of resources and provide for the basic needs of the people. The latter sounds more compassionate and has also been proven time and time again to be an abysmal failure. You can't redistribute wealth if you destroy the incentive to create wealth.

The Constitution and the Bill of Rights were designed to ensure that we never lose focus of the fact that the individual is the driver of economic success. Society is our servant, not our master. We engage it when and if it suits us, not because we are compelled to by a central authority. Government's job is to take the use or threat of force out of individual interactions, not to micro-manage those interactions.

We are at a turning point in history. We can make yet another amazing comeback or we can dive into the abyss. It's time to go back to the basics. A clear understanding of the ideals that made this the greatest country on Earth to date is essential to keeping it that way.

Friday, January 23, 2009

The best government stimulus plan; stand down


Ronald Reagan was right when he said the scariest words a person can hear are "I'm from the government, and I'm here to help."

If you hold government action on the economy in check, market cycles are fairly predictable. Low interest rates, falling real estate prices, companies going out of business, leads healthy companies and entrepreneurs to snap up assets on the cheap. Some people take huge losses, while others take advantage of huge opportunities and the new growth cycle begins. That's not happening today. The reason is that government has come to the rescue. In doing so it has caused so much uncertainty in the marketplace that making major investments in new projects and ideas at this point would be irresponsible and dangerous.

Nobody wants to commit sizable amounts of time resources and money into a company or project, only to find out six months later that the government has decided to subsidize a competing company or project. Who wants to hire 1,000 new workers only to find out later that their unemployment insurance has doubled and new benefits have been mandated. You don't want to borrow a lot of money right now and then have to refinance it in an environment of sky-rocketing interest rates due to runaway government debt.

Winners and losers, or at least survivors and non-survivors, are increasingly being selected by a handful of government policy makers rather than by 300 million individual consumers. Believe it or not, the mob is much easier to predict and more efficient at directing resources than any Washington committee, no matter how many degrees they have hanging on the wall.

If the government truly wants to help, they need to stand down. Have some faith in the American people. We can work this out. The road to the next Great Depression is paved with good intentions. Pull over and let us drive for a while.