New Jersey Politics the Same as the Rest

Chris Christie, the governor of New Jersey, is proving that he will make a great presidential candidate.  He knows how to play ball with the establishment and he is great at exchanging political favors for money.
Of course, in our internet world today of near instant communication, Christie better be a little more careful in how much he tries to get away with.
After just coming off of the Bridgegate scandal, there are now reports that a big supporter of Christie is getting major financial favors in return.  This isn’t exactly a case of free market transactions, as it involves the use of political power and tax money.
Charles Baker is involved in two companies – General Catalyst and Oscar Insurance – both of which have benefited from investments made from the New Jersey public pension – a decision of the Christie administration.  Baker is on the board of both companies and has a direct financial interest in Oscar Insurance, receiving compensation in the form of equity.
Interestingly, Baker is running for governor of Massachusetts.  Yet he has had no problem in making large donations to the New Jersey Republican State Committee.
Of course, any allegations of trading favors will be denied by both Baker and Christie.  But this is the way that politics work.
Power Will Be Abused
It doesn’t matter the level of government (federal, state, or local) and it usually doesn’t matter who is elected.  Whenever there is power and money available, it will be abused.
When the Christie administration is determining how to invest public pension money, is it likely that they are going to pick an investment firm that is most likely to benefit pensioners and taxpayers?  Or is it more likely that they are going to pick an investment firm that will return political favors and campaign donations?
When Chris Christie first became the governor of New Jersey, some people within the Republican Party, and even some outside, were attracted to his seeming bluntness.  He seemed to hold no punches.  I think there was some real hope that he was a politician who would defy the establishment.  People want to believe that there is somebody out there fighting for them.
This should dispel any notion that you can just elect the “right guy” into office and then everything will take care of itself.  Unfortunately, whether it is voters on the right with people like Christie or voters on the left with people like Obama, it seems that some people will never learn that most people running for political office are seeking power to use against others.  And for the remaining who aren’t running for office for this reason, most of them quickly change once elected.  The power goes straight to their head.
Christ Christie has not turned out to be the conservative champion that many had hoped.  He has been lousy on spending, taxes, debt, and a host of other major issues.  Now it is becoming evident that he uses his political power to gain campaign money and to punish his enemies.
I don’t know how many more scandals Christie can go through before the Republican establishment gives up on him.  If he is going to run for president, he needs to learn to be a little more cautious and to add a few more layers between his campaign donors and those who receive his favors.  He needs to brush up on his skills as a politician.

The DHS Secures the Homeland

The Department of Homeland Security (DHS) recently defended and secured our homeland by raiding a couple of flea markets in Massachusetts.  Some merchants were selling counterfeit products such as CDs, DVDs, and clothing.
The DHS partnered with local law enforcement in arresting 46 people at the flea markets.  This was the culmination of a long investigation targeting individuals who were selling counterfeit goods.
While I am not defending people who are selling counterfeit products, we have to ask ourselves whether this should really be the role of the DHS.  When I said they were defending and securing our homeland, you can note the sarcasm.  I am reasonably certain that none of the people arrested were being accused of terrorism.
The DHS was created by the Bush administration after the attacks of September 11, 2001.  Its stated goal was to prepare and prevent terrorist activity.  And now it is being used to raid flea markets, something that local law enforcement should be quite capable of handling.
When I discuss the federal budget and talk about defense spending, I often put “defense” in quotes.  Much of what the Defense Department and military do have little to do with defense.  Sometimes it is offense and sometimes it is something that really has nothing to do with national security at all.
I suppose you could say that the DHS was defending shoppers at flea markets or the original producers of goods, but this certainly has nothing to do with defense against terrorism or any kind of violent criminal activity.
Government Expands Power
It is a common theme through history that the government will use excuses to create government programs and departments and then they will later be used for other things after they are set up.
I find that the war on terror in many ways imitates the war on drugs.  It is really part two.  The war on drugs was ramped up to supposedly eradicate drugs, to stop people from harming themselves, etc.  Of course, the war on drugs has been a complete failure from its stated objectives, but that is another point.
The war on drugs has been used for decades to justify other power grabs.  They use it as an excuse to search your car or to raid houses.  They use it to prevent people from doing business with large amounts of cash.  They use the war on drugs to snoop in people’s bank accounts and other financial transactions that should be private.
Now the so-called war on terror is used similar as the drug war to invade people’s privacy and take away rights.  The war on terror is the main excuse for the existence of the NSA and it is the excuse for its massive spying and data collection.
It should really come as no surprise that the DHS is using part of its budget for investigating and raiding flea markets.  This is the natural progression of a government program or a government agency.
As long as these agencies exist and they are granted big budgets by Congress, then we should never be surprised when power is used and abused.
So when you are lying in your bed at night worried about terrorists, you can rest easy knowing that the DHS is on the job securing the homeland.  You should never have to worry about flea market terrorism ever again.

The Post Office Shows Us the Future

The U.S. Postal Service just posted a quarterly net loss of $1.9 billion.  It has recorded a loss in 20 of the last 22 quarters.
What is happening with the Post Office may be a microcosm of what’s to come with most of the federal government.  This is not necessarily a bad thing in the long run.
Some say that once a government program gets going, that it can never die.  Even Ronald Reagan said that government programs, once launched, never disappear.  Unfortunately, this mostly held true during Reagan’s presidency.
This may not sound right at first, but the U.S. Postal Service is a government program that is going to eventually disappear.  Some people will say that it is a government program that is losing billions of dollars, yet still surviving.  This should be proof that a government program will keep going, no matter how disastrous.
But I am not saying that the Postal Service is going to end tomorrow or next year.  I am saying that it will eventually end.
Right now, it is stuck.  It just can’t be profitable without a massive bailout from Congress.  But Congress can’t come to any agreements and is content to kick the can down the road as much as possible.
The Postal Service doesn’t actually run its day-to-day operations with tax money, but it is subject to congressional control.  Congress mandated billions of dollars per year for future retiree health benefits, which the Postal Service obviously can’t afford.
In this sense, the Postal Service really is a microcosm of the federal government.  It is promising benefits to retirees that it simply can’t afford.  The unfunded liabilities are massive.
One thing many people don’t realize is that the U.S. Postal Service has been granted a monopoly on the delivery of first-class mail.  You, or anybody else, are not allowed to compete.
It used to be the same way for package deliveries.  When those restrictions were loosened, it did not take long for FedEx and UPS to take over a big part of that business.  Even now, these companies are not allowed to truly compete.  The government does not want them making the Post Office look bad and making the losses even worse.  But having alternatives is still better than nothing.
At this point, the solution is simple.  We don’t need to abolish the U.S. Postal Service overnight.  We just need to repeal its monopoly on the delivery of first-class mail.  We have to legalize competition.  Other companies would step in and compete, and the U.S. Postal Service would likely disappear in a rather short amount of time.
I think the Post Office is a great example of where technology can undermine government programs to a great degree.  Think of how many billions of dollars less has been spent on stamps just because of on-line bill pay.  If the Post Office raises its prices more, it will only encourage the last few holdouts to start paying bills through the computer instead of through the mail.
The Postal Service isn’t alone in being undermined by technology.  Think about what cell phones have done to phone companies, which were generally granted monopolies in certain areas.  The same is happening with cable companies.
I don’t think mail will ever completely go away, but it is being radically transformed and the U.S. Postal Service cannot keep up with the innovation.  Maybe there will be a bailout, but there won’t be endless bailouts.
My guess is that the Post Office will not be in existence in 20 years.  Hopefully it will be sooner than that.  Even if the retiree benefits are drastically reduced, it will still not keep things going that much longer.  The Post Office simply can’t keep up with technology.
The same things that are undermining the Postal Service will also undermine the entire federal government.  There are too many promises that have been made that won’t be delivered.  And technology will help in providing alternatives to so-called government solutions.
Technology is slowly undermining the government education system, the Food and Drug Administration, government libraries, and much more.  Hopefully one day we will not worry about government healthcare because technology will provide most of what we need.
It may take a while, but the Postal Service is going to be gone eventually.  Much of the federal government is not going to be far behind.
Ironically, one thing that differentiates the Post Office from other government programs is that it is actually constitutional.  But just because it is constitutional, it doesn’t mean it is mandatory or necessary.  It can be done without government funding and government interference.  Let’s hope it is sooner rather than later.

Virginia County to Test Property Rights

There is currently a proposal in Fairfax County, Virginia that would limit “frequent and large gatherings” in neighborhood homes.  The zoning ordinance, if passed, would limit houses to 49 people per day and large groups would not be able to meet more than three times in any 40-day period.
While there have been complaints about large groups meeting at homes, the number of complaints has been small when considering that Fairfax County is the most populous in Virginia.
This new ordinance, if passed, could put a damper on Superbowl parties, church groups, and meetings for other organizations.  Of course, you could think of any number of potential issues from open houses to garage sales, which would easily draw more than 49 people in a day.
Some opponents are already starting to prepare for lawsuits on constitutional grounds.
From a constitutional standpoint, I’m not sure that this ordinance would really be in violation.  From a pro-liberty standpoint, decentralization is better.  When you give the federal courts the power to do good, they are also going to use it for bad purposes.  These zoning and ordinance issues really are meant to be handled at a local level.
Of course, we know that the federal government violates the Constitution every day and would not hesitate to rule on something where it should not have any jurisdiction.  I can understand why liberty advocates would still use the federal courts to their advantage when possible.  It is not as if the federal courts are going to stop ruling on local issues either way.
This proposed ordinance is obviously a violation of property rights in that it would punish people who have done nothing wrong.
I’m sure there are some valid complaints about a few people who had big parties that caused a lot of noise and chaos.  But should property owners who hold a quiet church group meeting once a week of 50 people have to suffer because of the misdeeds of others?
The interesting thing here is that the county obviously isn’t enforcing the rules that already exist.  I don’t think there is a county or local jurisdiction in the U.S. that doesn’t have a noise ordinance.  There are laws against disturbing the peace.  Even liberty advocates can agree with such laws as loud noise can be considered “noise pollution” and a violation of other people’s property rights.
If there are complaints about loud parties, then the party-goers and the homeowners throwing the party are already in violation of an ordinance.  If they aren’t following the rules, then why are they going to start following a new rule?
I suppose you could make a comparison with anti-gun laws.  When the government makes it harder to legally own a gun, it makes it harder for the law-abiding citizens.  It doesn’t make a difference to criminals, because they weren’t following the laws that were already there.
The good news about this proposed ordinance in Fairfax County is that it is limited to one county.  When there is a bad law, it is better that it affects one local area than affect 300 million people.  And at least at the local level, there is always a slight chance for repeal, which is almost impossible in Washington DC.

California Leads the Way in Anti-Business Policies

California, along with a handful of other states, has the reputation of being a state that is against free market policies and in favor of central planning.  The business climate in California is particularly hostile, as more businessmen consider moving to more business-friendly states such as Florida and Texas.
Just when you think the government of California wouldn’t possibly risk enhancing its reputation as an anti-business state, now there is a bill in the legislature that does just that.
SB 1372 is a proposed bill that would have varying tax rates for companies based on the compensation ratio of the CEO.  Right now, the tax rate is just under 9 percent for corporations in California.  If this proposed bill passes, then rates would vary anywhere between 7 percent and 13 percent, depending on the compensation ratio.
The compensation ratio is determined by taking the top company salary and dividing it by the median salary of the company.  If the ratio were under 25, then the applicable tax rate would be “only” 7 percent.  There is a sliding scale all the way up to a ratio of 400.  If a company’s compensation ratio were over 400, then the tax rate would be 13%.
From a free market perspective, there are so many things wrong with this bill that it is hard to know where to begin.
First is the moral aspect, which is really about property rights.  A company should be able to pay its employees whatever it wants.  Nobody is forcing anyone to work for a particular company.  Nobody is forcing anyone to buy from a particularly company.  Nobody is forcing anyone to own stock in a particular company.  So if a company wants to pay some executive 400 times the median salary, that should be a decision for the Board of Directors and the shareholders.  This bill would be a complete infringement on property rights.
The second question to ask is how the writers of this bill came up with these numbers.  Why is the top tax rate 13% if the compensation ratio is over 400?  Why is the tax rate 9% if the compensation ratio is between 100 and 150?  Who came up with these arbitrary numbers?  Why not just tax every company at 20% that pays its executives more than twice the median salary?  Why don’t we have complete “fairness” and have companies pay everyone the same amount?
A third thing to ask is what the unintended consequences will be of such a bill.  It seems that whenever government (at any level) passes legislation with a certain stated intention, it ends up resulting in the exact opposite of the stated purpose.  In this case, it will somehow lead to executives making even more and most workers making less.
Companies will find loopholes in some way.  We can’t be certain of what they will be for this particular legislation.  Maybe companies will find a way to offer certain benefits that don’t get counted in the so-called compensation ratio.  Maybe executives will end up retiring with bigger multi-million dollar pensions.  Maybe they will end up with bigger stock options and ownership opportunities.  Maybe employees will be offered higher salaries and have benefits taken away.
Another thing we have to look at here is why this is supposedly a problem in the first place.  In almost any society, there is a big gap between rich and poor.  While the more socialist countries are supposed to even things out more, it tends to be the opposite.  There actually tends to be a greater gap between rich and poor in an economy that is centrally planned to a great degree.  The overall population also tends to be poorer.
There will always be major gaps between rich and poor and between wages.  But this is actually more exaggerated because of government policies.  The central bank tends to favor the rich at the expense of the poor.  Government regulations tend to favor big companies over little companies, as bigger companies can afford to abide by the regulations.  Big companies often push for more regulation to keep competition out by raising the barriers to entry.
I completely understand the sentiment that some people feel against highly paid executives.  Many middle class workers are working hard and generally not seeing increasing wages.  They see that the rich are getting richer.  But the problem here is the Federal Reserve and government policies.  They are making the middle class poorer, while protecting the rich.  We saw this in the bailouts of 2008.
The answer isn’t to punish companies who pay their CEO or executives an extraordinarily high salary.  Some executives actually deserve it.  It isn’t just a matter of attending a few meetings and collecting a huge paycheck.  There are vital decisions made at the top that can make or break a company.
There certainly are some CEOs and other executives who are total duds.  Their expertise and decision-making are worthless.  In fact, some of them manage to drive their company into the ground.  The problem here is that either the companies are getting bailed out by government or they are being protected from competition by the government.  In a true free market, the executives of a failing company would go down with the company and they probably would not be sought after by other companies in the future.
If this California bill passes, it is going to cause all different kinds of distortions.  It is also going to encourage more people and businesses to leave California.  The socialists in California may get what they want.  They will get rid of highly paid executives and they will get rid of businesses that want to be profitable.

Should Religion and Politics Mix?

There was a debate recently between the Republican candidates for the open senate seat in Iowa.  It turned out to be a little bit of a contest between a couple of the candidates on who could most impress the religious conservative wing of the party.
When the candidates were asked about their requirements for a federal judge, there was some discussion that a judge should adhere to God and the Bible.
Candidate Sam Clovis had the best answer (for those in favor of liberty) when he talked about natural law and natural rights.
Candidate Joni Ernst added that a judge should understand that our laws “come from God.”
Candidate Matt Whitaker had the most alarming response.  He said, “What I’d like to see are their worldview, what informs them, how do they live their lives, are they people of faith?  Do they have a biblical view of justice?”  He continued on to say that he would be concerned with a judge who has a secular worldview.
Here, I think we have to make a distinction between basing one’s views on religion and the necessity of adhering to a particular religion.
The major religions teach common law.  There are general rules that you don’t do harm to others, you don’t steal from others, etc.  When Clovis discussed natural law and natural rights, there is nothing wrong with this.  A potential judge, or anyone else, can believe in natural law regardless of whether he holds particular religious beliefs.
If someone believes in natural law and believes those laws are derived from God, there is certainly nothing wrong with this as long as the person is not trying to use force (government or otherwise) in imposing those views on others.  But it is also wrong to simply disqualify someone if he believes in natural law but does not derive those beliefs based on his religion.
When some people hear comments such as those made by Whitaker, it makes them run in the opposite direction.  I am convinced that there are a sizable number of Democrats out there simply because they fear people like this who want to shove their religion down other people’s throats.  And in the case of Whitaker, he is not just trying to use persuasion.  He is trying to use the force of government to impose his personal religious views on to others.
In a free society, politics and religion shouldn’t mix.  It doesn’t mean that religious people should be kept out of politics or that politicians have to keep quiet about their religious beliefs.  It also doesn’t mean that you can’t derive your own moral code based on your religion.
The big question for anyone is if they will allow others to be free.  Will they impose their religion, or even certain aspects of their religion, using the force of government?
Any politician running for office, who says that a potential judge should hold certain religious beliefs, is not a friend of liberty.  It is a scary thought.
Requiring a judge to have some kind of belief in natural law and natural rights, whether or not those beliefs are derived from God, is positive.  If a judge believes that individuals have certain natural rights that can’t be overridden by government laws, then this would be a good thing.
Many of the laws on the books today are not really laws at all, at least in the natural sense.  They are only enforced by the use of force.  They are not natural and they are not just.  You don’t have to be religious to understand that.

FOMC Statement – April 30, 2013

On April 30, 2014, the FOMC released its latest policy statement.  The Fed is going to continue with its so-called taper.  This is the fourth straight meeting where it has announced another reduction of $10 billion per month in asset purchases.

Throughout 2013, the Fed was buying assets (creating new money) at a pace of $85 billion per month.  It will now be down to $45 billion per month.  This is still a lot of money, but it is still a reduction in the rate.

For this reason, I believe there could be some major economic turmoil in the near future.  While stocks are hitting all-time highs, there has also been a lot of volatility lately.  If the economy goes down, the stock market will probably lead the way.

If the Fed continues to taper, I think a recession becomes more likely in the short term.  The big question will be what the Fed’s response is after the recession hits.  Will the Fed keep tapering in the face of a new recession?  I doubt it.

I am really cautious right now in terms of investments, particularly regarding stocks.  The latest boom in stocks was built on the Fed’s loose monetary policy.  As that is removed, the support for stocks is removed.

It will be interesting to see if Yellen and the Fed keep tapering.  The next meeting and policy announcement will be on June 18, 2014.

Is Military Spending Exempt From Corruption?

DynCorp International, a company that contracts with the federal government, has taken in $2.8 billion from 2002 to 2013 for supposedly rebuilding Afghanistan.  This has accounted for 69.3% of the government’s spending on rebuilding projects during this time.
DynCorp is in business because of government, and in particular, because of government wars and interventions overseas.  About 96% of the company’s revenue comes from government contracts.
If this weren’t bad enough, much of the contract money has gone to train police and drug warriors in Afghanistan.  There are even accusations that money was used to hire “dancing boys” to perform for the contractors.
Of course, DynCorp isn’t the only one.  PAE Government Services, a former subsidiary of Lockheed Martin, saw one of its managers and his wife go to prison for fraud and kickbacks.
While these companies are referred to as defense companies, it is hard to see what any of this has to do with defense, especially when you start looking at the details.
While many conservatives are good at recognizing government waste and corruption, there are too many otherwise good conservatives who can’t seem to grasp that the same waste and corruption that politics inflicts everywhere else, also applies to the military and overseas spending.
Whenever politics and money are involved, there is always going to be abuse of power and corruption and waste.  Sometimes waste is preferable to the spending that just does further damage.
Politics plays just as much of a role in so-called defense contracts as it does anywhere else.  Eisenhower got it right when he referred to the military-industrial complex.
If a politician listens to lobbyists and special interests when it comes to welfare spending at home, why would anyone think it would be any different when it comes to overseas spending?  Why would these politicians all of a sudden become noble and well meaning when it comes to military spending or anything referred to as defense spending?
Government Contracts Does Not Mean Privatization
Some quasi-advocates of the free market make the mistake of thinking that when the government contracts out services to a for-profit business, that this a reflection of capitalism.  But this is really just fascism or cronyism.  When the government is spending money, even if to award contracts, this is not capitalism.
By this standard, you could say that Obamacare is capitalist because some of it is administered by private companies.
Sometimes contracting out services can be even worse than if the government just used its own employees.  When contracts such as these are awarded, there is little accountability and a lot of politics involved.  Lobbyists and special interests will actually just encourage even more spending and bigger contracts by returning favors and lining the pockets of the politicians who support them.
It doesn’t matter if it is food stamps, Obamacare, or rebuilding Afghanistan.  When politics and money mix, there is sure to be waste and corruption.  It doesn’t matter if it is 5 miles away or 5,000 miles away.

The Non-Aggression Principle and Libertarianism

You can ask many libertarians what makes a libertarian and you will get many different answers.  But perhaps the most common answer is that you have to advocate the non-aggression principle (NAP) in order to qualify as a libertarian.

If I have ever said this in the past, I take it back.  I don’t really like this definition, even though I generally consider myself an advocate of the NAP (not to be confused with sleep).  Ironically, I think there are many libertarians who will say they advocate the NAP, but really don’t.

If you advocate the NAP, then this means you have to be an anarchist or panarchist.  I suppose you could also be a minarchist if you also advocate that tax collections can only be strictly voluntary.  Otherwise, you are technically violating the NAP.

If you believe the only function of government should be for police and the courts, then you are still violating the NAP if people are forced to pay for those things.

For this reason, I do not disqualify someone as a libertarian if he doesn’t fully hold to the NAP.  I am not going to eliminate someone like Ron Paul from being categorized as a libertarian.

Lew Rockwell recently posted a piece written by Murray Rothbard in 1977.  Rothbard was a self-described anarchist, but he did not believe you had to be an anarchist to be a libertarian.  He just believed you had to be a “radical in the sense of a deep commitment to the spirit of liberty and anti-statism.”

I basically agree with Rothbard’s reasoning and his definitions.  I look for people who are principled and consistently opposed to government solutions.  If someone believes in a government court system but opposes every other piece of the state, I am certainly not going to shun this person away as a non libertarian.

Defining a libertarian is not easy.  It is highly subjective and everyone has their differing viewpoints.  I can’t say that I have my own special litmus test for what makes someone a libertarian.  I certainly have my litmus tests for someone not being a libertarian.

There are way too many people today who call themselves libertarians, but whom I would not classify as such.  You need to be a radical.  You need to want drastically reduced government.  You need to demand radical solutions that do not involve state action in any way.

I like the Libertarian Party’s pledge.  Anyone who truly believes in this pledge is probably a libertarian. Unfortunately, many people sign it who don’t really believe it.

But I have concluded that you can still violate the NAP and be a libertarian.

Border Patrol and Property Rights

There was a story recently by John Ladd, an Arizona rancher whose land happens to lie along the U.S. and Mexican border.  While he “owns” the property, apparently Border Patrol agents don’t take property rights very seriously.
Ladd says that his property rights are violated every day.  Border Patrol agents drive vehicles through his property and fly helicopters right overhead, scaring his horses and cattle.  Ladd has even had some of his animals killed when hit by vehicles.
He also has dogs that used to roam free on the large property, but he has since had to build a fence to keep the dogs in a smaller area.  Border Patrol agents were threatening to shoot the dogs for going after them.  This might be understandable except that it was all taking place on Ladd’s property.
To top this off, not only are border agents physically violating Ladd’s space, they have also set up surveillance cameras, one of which is pointed directly at Ladd’s house.  In other words, he gets to feel the wrath of the federal government from all angles.
Ladd says that things weren’t always this way, especially prior to the 1990’s.  At one time, he says that ranchers from the U.S. and Mexico would help each other out.  Now it is more like some kind of a military zone.
The Consequences of Government Power
This is another example where we see government power being used against innocent people.  It is another example of where a government program does not produce the results of the stated intentions.
Immigration is debated heavily in the U.S.  But if you are in favor of closed borders or a tight immigration policy, you have to be careful in asking the federal government to accomplish this goal.
The government can’t keep drugs off the streets and it can’t even keep drugs out of the prisons.  It can’t bring freedom to Iraq and Afghanistan.  It can’t even operate a website for Obamacare.  Why would we think that the government can solve an immigration problem without there being severe negative consequences?
What are we willing to sacrifice in order to keep Mexicans from crossing the border?  Are we willing to give up a great degree of our liberty?  Are we willing to allow a massive fence to be built that could also be used to keep Americans in?
There is one thing where the government has been successful in stopping immigrants from crossing the border, although it has little to do with Border Patrol agents.  The lousy economy has deterred some Mexicans from taking the risk of crossing the border due to less opportunity for work.
The subject of immigration reminds me of terrorism.  This isn’t to equate Mexican immigrants with terrorists in any way, but there is a fear amongst many Americans of both.  It is an irrational fear for different reasons.  And in order to relieve some of that fear, too many Americans are willing to grant vast amounts of power to various government agencies.
Personally, I fear too much power in the hands of government agents than I ever would with a Mexican looking for work.
It is only in a welfare state where people fear poor people coming in and rich people leaving.  In a free society, there is no such concern.  A free society will tend to attract those who want to work and be productive.

Combining Free Market Economics with Investing