Strike The Root Blog

Most people would agree that the government giving gifts to a small number of corporations is wrong. It falls outside the powers and thus the rights of the US federal government, and thus it is also unconstitutional, for those who think there’s any value left in that document.

The problem with doing something wrong is that it often generates even more wrongs. Now that my money has been stolen to reward AIG’s failure, the US house of representatives has felt the need to selectively punish the same corporation it wrongly gifted. In passing the bill that taxes select AIG bonus recipients at a confiscatory 90% rate, 328 ignorant congressmen violated Article I of the constitution twice.

Most people need to be reminded what section 9 of article 1 says: “No bill of attainder or ex post facto Law shall be passed.” A bill of attainder is, per Wikipedia, “an act of legislature declaring a person or group of persons guilty of some crime and punishing them without benefit of a trial.” An ex post facto law is a law that “retroactively changes the legal consequences of acts committed or the legal status of facts and relationships that existed prior to the enactment of the law” (per the same source).

Ex post facto, really? Yes, the bill would make the 90% tax on AIG retroactive to December 31, 2008.

This is a solution that pleases a very angry and very dangerous president. For those willing to defend Obama’s actions, imagine the havoc for which this precedent paves the way. Think about a Bush-like predecessor, perhaps. Do you want this person arbitrarily gifting favorite companies, or arbitrarily punishing companies that have fallen out of political favor?

There is no justifying either the bailout or the punishment. “But, we had to bail out AIG and these companies…” Well, no. By allowing AIG to succeed, we reward failure, and instill a system that will create larger and larger corporations. That should be frightening to even the socialist left who likes the idea of government control over corporations.

Instead, AIG and ilk should have been allowed to fail, or better, do whatever it had to in order to figure out how to survive. The outcome? Lots of people would probably have suffered. Better “lots” than “all.” But what positive might have come out of this? Perhaps ingenuity from some of the bailed out companies, cleverness that would have enabled their survival and advanced our survival skills in the face of severe economic problems. Perhaps the failures might even have signalled the end of monstrous corporations like AIG, begat by a widespread lack of trust in them; this failure might have led to the rebirth of small, competitive financial firms with little political power. I know who would be happy with that!

The cynical, conspiracy-theory side in me says that all of these events are scripted. From failure (long predicted by sensible economists) to bailout to revenge, it’s all about granting the monstrously bloated US federal government even more power over you.
Too bad for all of us that a petulant Obama will likely get his way for a while.

Pennsylvania’s liquor board will be sending their employees to training in order to teach them how to be friendlier and more well-mannered. This will come at a cost of $173,000. I like to think in terms of how many tax slaves that a given stupidity like this one requires. A bit of searching reveals that the average Pennsylvanian pays $4,463 per year in state and local taxes. Doing the math, then, there are 38 people whose full tax burdens are taken by the state of Pennsylvania in order to ensure that government workers learn how not to be rude, i.e. so that they learn what it takes to run a real business instead of a true, pure monopoly that succeeds only by force.

Well, it’s probably not that they’re too stupid, but rather that they just don’t care. Absent competition, “civil” servants are allowed to be anything but. It’s not like they’ll ever be put out of a job.

Government has no business running liquor stores. End of story. If you live in a state (like Pennsylvania or Virginia) stupid enough to insist that only the government can sell you liquor, demand better, or just move.

Mises.org recently published a transcript of the late Austrian economist F.A. Hayek’s appearance on NBC-TV’s Meet the Press back in 1975.

Then, as now, there was a great deal of economic turmoil facing the U.S. and much of the rest of the world. Hayek contended then that the turbulence was mainly caused by the central bank’s inflation of the money supply in order to finance unsustainable central planning, a criticism that equally applies today. Hayek suggested that the answer then was for the Federal Reserve System to simply stop inflating and allow resources to be reallocated according to consumer demand, however painful that adjustment may be in the short term. That’s a suggestion that equally applies to today’s turbulence, but one that Republicans and Democrats alike have shunned in favor of bail-out capitalism and pie-in-the-sky “stimulus” spending and all the massive debt and inflation that goes along with it.

The interview is interesting enough to read for all of the parallels to recent events, but there was one answer from Hayek that I found particularly striking.

One of the interviewers suggested that to simply cease inflation and allow for new economic adjustments to take place would most likely lead to more unemployment, and for that to happen in the already troubled inner cities would most likely lead to anger, frustration and violence amongst those populations, which would then most surely be followed by governmental crack-downs. The interviewer asked Hayek what he would do to ameliorate any ill social effects deriving from further unemployment among urban populations during any post-inflationary adjustment period.

Here’s Hayek’s answer:

“Well, I don’t think there is anything I can do about it. We’ll have to tide over the storm which may be threatening.”

Wow, how refreshing it is to hear such an intellectually honest answer from a public intellectual! How incredibly rare that is. Your typically neo-Keynsian/neoliberal court intellectual–blindly assuming the interviewer’s implied assumption that predominantly black and hispanic populations in inner cities are simply incapable of pulling themselves up by the bootstraps to be gospel truth–would have heard his cue and trotted out all sorts of half-baked ideas for wasteful government welfare programs. Hayek, however, did not so arrogantly assume that he knew what was better for people he knew nothing about.

“I don’t think there is anything I can do about it.” To hear any of your court intellectuals and assorted think tank “experts” make such an admission today would probably cause a complete tear in the space-time continuum, simultaneously catapulting all of us into an alternate reality.