The Indispensable Sowell

Thomas Sowell always puts it so well

Everyone is talking about how much money the government is spending, but very little attention is being paid to where they are spending it or what they are buying with it.

The government is putting money into banks, even when the banks don't want it, in hopes that the banks will put it into circulation. But the latest statistics shows that banks are lending even less money now than they were before the government dumped all that cash on them.

Even if it had worked, putting cash into banks, in hopes that they would put it into circulation, seems a rather roundabout way of doing things, especially when the staggering sums of money involved are being justified as an "emergency" measure.

Spending money for infrastructure is another time-consuming way of dealing with what is called an immediate crisis. Infrastructure takes forever to plan, debate, and go through all sorts of hearings and adjudications, before getting approval to build from all the regulatory agencies involved.

Out of $355 billion newly appropriated, the Congressional Budget Office estimates that only $26 billion will be spent this fiscal year and only $110 billion by the end of 2010.

Using long, drawn-out processes to put money into circulation to meet an emergency is like mailing a letter to the fire department to tell them that your house is on fire.

If you cut taxes tomorrow, people would have more money in their next paycheck, and it would probably be spent by the time they got that paycheck, through increased credit card purchases beforehand.

If all this sound and fury in Washington was about getting an economic crisis behind us, tax cuts could do that a lot faster.

None of this is rocket science. And Washington politicians are not all crazy, even if sometimes it looks that way. Often, what they say makes no sense because what they claim to be doing is not what they are actually doing.

No matter how many times President Barack Obama tells us that these "extraordinary times" call for "swift action," the kind of economic policies he is promoting take effect very slowly, no matter how quickly the legislation is rushed through Congress. It is the old Army game of hurry up and wait.

If the Beltway politicians aren't really trying to solve this crisis as quickly as they could, what are they trying to do?

One important clue may be a recent statement by President Obama's chief of staff, Rahm Emmanuel, that "A crisis is a terrible thing to waste."

This is the kind of cynical revelation that sometimes slips out, despite all the political pieties and spin. Crises have long been seen as great opportunities to expand the federal government's power while the people are too scared to object and before any opposition can get organized.

That is why there is such haste to do things that will take effect slowly.

What are the Beltway politicians buying with all the hundreds of billions of dollars they are spending? They are buying what politicians are most interested in-- power.

In the name of protecting the taxpayers' investment, they are buying the power to tell General Motors how to make cars, banks how to bank and, before it is all over with, all sorts of other people how to do the work they specialize in, and for which members of Congress have no competence, much less expertise.

This administration and Congress are now in a position to do what Franklin D. Roosevelt did during the Great Depression of the 1930s-- use a crisis of the times to create new institutions that will last for generations.

To this day, we are still subsidizing millionaires in agriculture because farmers were having a tough time in the 1930s. We have the Federal National Mortgage Association ("Fannie Mae") taking reckless chances in the housing market that have blown up in our faces today, because FDR decided to create a new federal housing agency in 1938.

Who knows what bright ideas this administration will turn into permanent institutions for our children and grandchildren to try to cope with?

Pelosi's Dumb Strategy

Besides the obvious moral implications from the self professed Catholic, it’s not like low birth rates have helped the economies of Europe.

Speaker of the House Nancy Pelosi boldly defended a move to add birth control funding to the new economic "stimulus" package, claiming "contraception will reduce costs to the states and to the federal government."

Pelosi, the mother of 5 children and 6 grandchildren, who once said, "Nothing in my life will ever, ever compare to being a mom," seemed to imply babies are somehow a burden on the treasury.

The revelation came during an exchange Sunday morning on ABC's THIS WEEK.

STEPHANOPOULOS: Hundreds of millions of dollars to expand family planning services. How is that stimulus?

PELOSI: Well, the family planning services reduce cost. They reduce cost. The states are in terrible fiscal budget crises now and part of what we do for children's health, education and some of those elements are to help the states meet their financial needs. One of those - one of the initiatives you mentioned, the contraception, will reduce costs to the states and to the federal government.

STEPHANOPOULOS: So no apologies for that?

PELOSI: No apologies. No. we have to deal with the consequences of the downturn in our economy.

Not Even Speculation!!!

I love how the media doesn't even speculate that Castro could be dead or in some serious vegetative state.

The media takes his "Castro's" newspaper articles as fact.

HAVANA – Fidel Castro said Thursday he doubts he'll make it to the end of Barack Obama's four-year term and instructed Cuban officials to start making their decisions without taking him into account.

In an online column titled "Reflections of Comrade Fidel," the 82-year-old Cuban leader suggested his days are numbered, saying Cuban officials "shouldn't feel bound by my occasional Reflections, my state of health or my death."

"I have had the rare privilege of observing events over such a long time. I receive information and meditate calmly on those events," he wrote. "I expect I won't enjoy that privilege in four years, when Obama's first presidential term has ended."

He didn't elaborate, but the lines had the ring of a farewell, and Castro suggested he was on his way out.

"I have reduced the Reflections as I had planned this year, so I won't interfere or get in the way of the (Communist) Party or government comrades in the constant decisions they must make," he wrote.

Castro stepped down in July 2006 to undergo emergency surgery and hasn't been seen in public since. He turned over the presidency to his younger brother Raul in February after nearly a half-century as Cuba's supreme leader, but his periodic essays have continued to carry weight.

Waiting for the Utopia

Obama's campaign had promised change from the "old style of politics" and implied under him, we could easily fix all the problems. His dismissed his first promise by appointing many people who serve in the Clinton administration.

Although Obama gained much of his early support by promising to withdraw troops from Iraq, it doesn't look like he can or will. In order to appease the left, he will pick the low hanging fruit: banning waterboarding (an easy task after much of the harden terrorists have been caught or killed) and closing Guantanamo. However, with Guantanamo, he's still going to have to deal with the same issues Bush dealt with. I bet some will be released but many others with be moved to another prison elsewhere. In the eyes of the press, instead of "running a GUlag", Obama will be "navigating complex issues."

Only the most ardent Bush haters will release that he was dealing with complex issue without an easy solution:

Obama administration officials agree that certain Al Qaeda suspects at Guantánamo should be tried in federal or regular military courts rather than the special military commissions set up under President Bush. And they agree that many of the remaining 245 detainees can be returned to their home countries for release or further detention.

But there is less agreement over what to do with a potential third category of detainees – an uncertain number of terror suspects whose cases do not lend themselves to prosecution in civilian or military courts but who are viewed as too dangerous to release.

The Final Bush Report Card

I think the conventional wisdom assumes that you either have to love Bush or hate Bush. Well, he was okay.

Foriegn policy: B. He responded well to 9/11, responding to the safe haven of terrorism in Afghanistan. He didn't go all wobbly, like Gore might have done. I don't fault Bush for not finding WMDs in Iraq, because Saddam was good at playing a shell game. However, his ever changing justifications lead to what was actually probably the real reason for Iraq: a Wilsonian idea to turn Iraq into a democracy and create an area of stability. Whether the gamble works, may take years to decide.

Military: B. We was quite supportive of the military and of the sacrifice of the soliders. He made discreet efforts to visit wounded troops without trying to use it for political gain. However, he had shortcomings when facing political pressure. He called for the backdown in Fallujah in 2004 and against Muqtada Al-Sadr, giving the enemy motivation. When troops were unfairly prosecuted for fake crimes (Fallujah), he did little to support them, even behind the scenes.

Immigration & the Border: D-. In short, our immigration policy is awful. While there is a demand for low-skilled workers, the legal immigration process is very limited. However, the government turns a blind eye to illegal immigration, and then seeks to give amnesty. However, the illegal immigration also brings in drugs, crime, and people who don't pay taxes despite using resources. The allowance of illegal immigration allows Mexico to keep the same bigoted social and economic system that prevents actual change in Mexico. I can't get mad at many of the immigrants themselves as they are doing what is in their own self interest. You don't cross the Arizona desert for the fun of it.

Tax Policy: A-. His tax cuts were a great response in the face of the 2001-2003 recession. However, despite a majority of Republicans in the house and the Senate, we couldn't even make them permanent. Now with Democrats in control, they don't have to raise taxes, they just have to let the current ones expire.

Spending: D. For years Bush never met a spending policy he didn't like. He believed he could buy the support of Democrats on the war by signing every spending bill that came across his desk. But he under estimated how vicious they were. He thought the Democrats in Washington were like the Southern Democrats in Texas. Many people could have told him otherwise.

Judges: B+. Two good justices, but points off for the bitter fight over Harriet Meirs.

Conservatism: C-. Heavily increased government spending to pork and social spending, is not very conservative. Furthermore, George Bush said he "suspended his free market principles" to support the bailout of auto companies with a losing business strategy. The worst thing is that Bush was called a conservative and wasn't, so it forms people's perceptions. If you are give shoe leather and told it was chocolate, you are going to think chocolate sucks.

Overall: C+. Not much has changed since Yale. A fair President. He prevented any additional attacks and didn't otherwise send the country into misery.

California's Decline

States provide is a mini economic system. If taxes and costs are too high in one state, people can move. No where is that more apparent than California.

People are both leaving and coming in California. But which people are leaving and which people are coming. While Californian politicians can promise goodies to the non-working at the expense of the middle class, they can't force the middle class to stay and eat the taxes. Conversely, lots of "free" goodies attract those who wouldn't pay into the system leave.

When the middle class and rich leave, the tax revenue decreases, while the set of government expenditures remain the same.

My biggest fear is California going broke and the Federal Government bailing them out... which means people in other states have to pay for it anyway.

LOS ANGELES – Mike Reilly spent his lifetime chasing the California dream. This year he's going to look for it in Colorado.

With a house purchase near Denver in the works, the 38-year-old engineering contractor plans to move his family 1,200 miles away from his home state's lemon groves, sunshine and beaches. For him, years of rising taxes, dead-end schools, unchecked illegal immigration and clogged traffic have robbed the Golden State of its allure.

Is there something left of the California dream?

"If you are a Hollywood actor," Reilly says, "but not for us."

Since the days of the Gold Rush, California has represented the Promised Land, an image celebrated in the songs of the Beach Boys and embodied by Silicon Valley's instant millionaires and the young men and women who achieve stardom in Hollywood.

But for many California families last year, tomorrow started somewhere else.

The number of people leaving California for another state outstripped the number moving in from another state during the year ending on July 1, 2008. California lost a net total of 144,000 people during that period — more than any other state, according to census estimates. That is about equal to the population of Syracuse, N.Y.

The state with the next-highest net loss through migration between states was New York, which lost just over 126,000 residents.

California's loss is extremely small in a state of 38 million. And, in fact, the state's population continues to increase overall because of births and immigration, legal and illegal. But it is the fourth consecutive year that more residents decamped from California for other states than arrived here from within the U.S.

A losing streak that long hasn't happened in California since the recession of the early 1990s, when departures outstripped arrivals from other states by 362,000 in 1994 alone.

In part because of the boom in population in other Western states, California could lose a congressional seat for the first time in its history.

Why are so many looking for an exit?

Among other things: California's unemployment rate hit 8.4 percent in November, the third-highest in the nation, and it is expected to get worse. A record 236,000 foreclosures are projected for 2008, more than the prior nine years combined, according to research firm MDA DataQuick. Personal income was about flat last year.

With state government facing a $41.6 billion budget hole over 18 months, residents are bracing for higher taxes, cuts in education and postponed tax rebates. A multibillion-dollar plan to remake downtown Los Angeles has stalled, and office vacancy rates there and in San Diego and San Jose surpass the 10.2 percent national average.

Median housing prices have nose-dived one-third from a 2006 peak, but many homes are still out of reach for middle-class families. Some small towns are on the brink of bankruptcy. Normally recession-proof Hollywood has been hit by layoffs.

"You see wages go down and the cost of living go up," Reilly says. His property taxes will be $1,300 in Colorado, down from $4,300 on his three-bedroom house in Nipomo, about 80 miles up the coast from Santa Barbara.

California's obituary has been written before — "California: The Endangered Dream" was the title of a 1991 Time magazine cover story. The Golden State and its huge economy — by itself, the eighth-largest in the world — have shown resilience, weathering the aerospace bust, the dot-com crash and an energy crunch in recent years.

But this time, the news just keeps getting worse.

A state board halted lending for about 2,000 public works projects in California worth more than $16 billion because the state could not afford them. A report by Sen. Barbara Boxer, D-Calif., last month said the state lost 100,000 jobs in the last year and the erosion of home prices eliminated over $1 trillion in wealth.

"I don't think the California dream, per se, is over. It has become and will continue to become grittier," says New America Foundation senior fellow Gregory Rodriguez. "Now, perhaps, we have to reassess the California of our imagination."

Gov. Arnold Schwarzenegger is among those who say the state needs to create itself anew, rebuilding roads, schools and transit.

"We've lived off the investments our parents made in the '50s and '60s for a long time," says Tim Hodson, director of the Center for California Studies at California State University, Sacramento. "We're somewhat in the position of a Rust Belt state in the 1970s."

Financial adviser Barry Hartz lived in California for 60 years and once ran for state Assembly before relocating with his wife last year to Colorado Springs, Colo., where his son's family had moved.

"The saddest thing I saw was the escalation of home prices to the point our kids, when they got married, could not live in the community where they lived and grew up," Hartz says. "Some people call that progress."