As pointed out in Lawrence White’s op-ed in today’s WSJ, George Soros, rent seeker par excellence, and his Keynesian economists friends were criticizing Germany’s fiscal austerity and advocating instead Obama’s borrowed money spending spree. Wolfgang justified his policies on Germany’s “aversion to deficits and inflationary fears.”

White discusses the roots of the aversion and fears in the wonderful story of post war Germany’s dramatic return to fiscal and financial strength. The devastated industrial powerhouse was under rationing and price controls continued by the Allied occupiers. John Kenneth Galbraith, FDR’s price control tzar, dismissed the idea of reviving the economy through decontrol. But Ludwig Erhard an economics professor who called the mess Der Papierkrieg, “the Paper War,” thought otherwise. He became the director of economics for the U.S.-UK. occupation Bizone. As part of a currency exchange of the old Deutsche mark with the new Deutsche mark and without approval from the Allied military command, he issues a sweeping decree abolishing most price controls and rationing directives.

Overnight almost, the “animal spirits”of Adam Smith’s “invisible hand” were unleashed! Construction started, factories were rebuilt, deals–buying and selling–were done! Erhard “later told friends that the American commander, Gen. Lucius Clay, phoned him when he heard about the decree and said: “Professor Erhard, my advisers tell me that you are making a big mistake.” Erhard replied, “So my advisers also tell me.” Between June and December of 1948, industrial production in the three Western zones increased by an astounding 50%!

So Schauble is justified in his free market thinking and his long view austerity decisions. And he can take pride in his predecessors like Erhard. Would that our socialists Obama administration had only half his smarts and guts! I highly commend a full reading of White’s article linked above.

Mitch Daniels in the governor of a state, Indiana. It’s a well run midwestern state. Has a AAA credit rating, as contrasted to say the bankrupt state of California. Mitch offeres the Community Organizer in Chief some advice in today’s WSJ, “Time for Emergency Economic Reform.”

Like any good leader he assesses the situation: dire. “Funneling borrowed billions to government workers hasn’t stimulated anything where it counts in the private sector.” Yep, that’s right Obama still thinks the government creates prosperity! He goes on to state that the impending and yet uncertain regulatory and tax regiemes are holding back investment and jobs. This is like the announcement of an impending rule change in the midst of a chess match. Damn if the match doesn’t stop until certainty of rules is restored!

He emphasizes the lack of growth necessary to get us even to break-even, to avoid national bankruptcy. We are currently at half the growth necessary to achieve disaster “with debt rising to 90% of GNP.”

Mitch offers a few specifics to counter the impending catastrophe:

• Payroll Tax Holiday of one year offset easily by a combination of the following:
• Impoundment Power: the president spends less than Congress has authorized on any number of programs which the taxpayers would never miss.
• Recall federal funds. Rescind unspent TARP funds, now in the hundreds of billions.
• Federal hiring and pay freeze. Cut the fat cats by 10% and freeze going forward. This may get the bloated bureaucracy more in line with the private sector that really produces wealth!
• Initiate a “freedom window” of regulatory forbearance in which job killing regulation is stopped.
• And, encourage business investment with accelerated write offs.

All, save for the frist and last, could be permanent reforms which get us back on track. Suffice to say we are in deep trouble and emergency solutions are in order and way overdue.

He highlights the games played: phony portfolio return assumptions, “spiking” promotions, and retirement at 55. Points out the fact that private employees make less and have less retirement security–their 401k s have declined 20% in value since 2007 while state employee pensions have grown during that period. The public employee effectively has $1 Million in retirement savings!

He calls for a stop to taxes and borrowing to fund pensions. He wants a reversal of the massive retroactive pension increases passed eleven years ago. He wants greater employee contributions to the pensions.

Unfortunately, he fails to call for a constitutional amendment prohibiting public employee unions. This is the only effective way to break the unholy alliance between the democratic legislators and the public employee unions that get them elected. Until that is ended the dirty money game between the two groups will continue.

I commend a full reading of Arnold’s call for reform. Note that it comes from a RINO, and that is a positive step indeed.

Of course, we the unwashed masses who will be taxed to pay for this unaffordable welfare program know the truth. EVERYONE WILL PAY….THE POOR STUDENTS…AND THE  EMPLOYEES. That’s right, you won’t need to earn over $250,000 to suffer under this monstrosity. The people who can least afford it will be penalized most.

This from my friend Joe Morabito to his U.S. employees: “Hello All:  We just sat through a horrible presentation done by our insurance broker related to the impact of Obama’s HealthScare Plan on our medical and other benefits.  Let me be clear, for any employee who believes this is a “scare tactic”, effective next January, 2011; all will be paying significantly more for medical and other benefits because Paragon cannot absorb the cost increases that are coming as a result of ObamaCare.   Further, as we go into 2012 – 2014, other elements of the plan kick in that will impact our entire benefits program so big changes will be coming related to how and from whom you buy your health insurance.  If ObamaCare is not repealed first, we may, or may not, have a company sponsored plan based on what is most advantageous to both Paragon and our employees.  What I know for sure is that Paragon cannot afford the insurance premium increases and additional administrative costs that are coming as a result of Obama’s HealthScare Plan.   We will have to consider all alternatives.”

“As you go to the polls next November, I suggest you vote for candidates that advocate REPEAL of Obama’s HealthScare Plan, which will be a disaster for Paragon and our employees.  Clearly, it is impossible to insure 30 million uninsured, (plus potentially 12 million illegal aliens) without someone paying the bill.   In this case, those who already have health insurance and senior citizens will be paying that bill.   Elections have consequences.  JM”

The hidden tax that is Obamacare is only starting to be unmasked. There will be more “surprises!” None of them will be good.

As Joe says, “elections have consequences!”

Randy got everyone’s attention with some recent economic headlines: gaming revenues down, A&E layoffs, land prices and real estate valuations plummet. The state leads the nation in unemployment; Lyon County’s rate is up at 18.5%. And predictions for job growth will be down for many years. With the $3.2 Billion deficit in mind the state’s budget director Andrew Clinger said you would have to cut everything but education (55% of the budget) to balance the budget.

The Democratic majority typically favors tax increases or new taxes to protect coveted programs and insure public sector jobs. Steven Horsford, the senate majority leader has proposed a 50-50 deal, $1.5 Billion in taxes and $1.5 Billion in cuts. Problem here is the lack of detail and the temporariness of cuts against the permanence of taxes. With over half the legislature being public employees, it is difficult to see how devastating tax increases will not come about. And, it is not as if those public employee salaries and benefits are cheap. Randy showed compensation charts that make NV look like Bell CA!

Simply put, more government, more spending and more taxes will drive businesses from NV and further tank the economy. The only way to guard against this is to elect conservative candidates who will block tax increases and insist on expense reductions and government efficiency.

Randy listed key Assembly and Senate races:  Assembly: District and conservative candidate: 5th-Williams, 13th-Hammond, 21st-Sherwood, 22nd-Stewart, 23rd-Woodbury, 27th-Jurado, 29th-Hill, 31st-Thompson, and 40th-Livermore. Senate: 2nd-Gustavson, 5th-Roberson, and 8th-Cegavske.

There has been some sentiment in our membership for a more active role in addressing the issues we discuss. Indeed, our tag line for the Reno Hayek Symposium is: “Articulating conservative solutions to current issues & supporting their intelligent champions.” As Randy ably pointed out, now is the time to support conservative candidates. To that end, we will have special meet and greet candidate interviews between now and the November election. The object is to raise money and where feasible offer “boots on the ground” help to get these folks elected. We will have both email and web notices of upcoming opportunities.

I also want to thank John Dunn for his NV4CFE (Yucca) update, Tom Gurnee for his China business comments, and Jerry O’Driscoll for expanding his recent WSJ article on the balance sheet recession.

Finally Joe Morabito announced a key federal race fund-raiser for Dr. Joe Heck who is running against Dina Titus; this will be held at his home on September 24th. RSVP to Nicole at 702-614-5900 or nsarouphim@gmail.com.



Barney Frank, co-author of the housing bubble and the subsequent financial crisis, calls for the elimination of Fannie Mae and Freddie Mac!

“August 21, 2010

Barney Frank Comes Home to the Facts

By Larry Kudlow

Can you teach an old dog new tricks? In politics, the answer is usually no. Most elected officials cling to their ideological biases, despite the real-world facts that disprove their theories time and again. Most have no common sense, and most never acknowledge that they were wrong.

But one huge exception to this rule is Democrat Barney Frank, chairman of the House Financial Services Committee.

For years, Frank was a staunch supporter of Fannie Mae and Freddie Mac, the giant government housing agencies that played such an enormous role in the financial meltdown that thrust the economy into the Great Recession. But in a recent CNBC interview, Frank told me that he was ready to say goodbye to Fannie and Freddie.

“I hope by next year we’ll have abolished Fannie and Freddie,” he said. Remarkable. And he went on to say that “it was a great mistake to push lower-income people into housing they couldn’t afford and couldn’t really handle once they had it.” He then added, “I had been too sanguine about Fannie and Freddie.”

When I asked Frank about a long-term phase-out plan that would shrink Fannie and Freddie portfolios and mortgage-purchase limits, and merge the agencies into the Federal Housing Administration (FHA) for a separate low-income program that would get government out of middle-income housing subsidies, he replied, “Larry, that, I think, is exactly what we should be doing.”

Frank also said that any federal housing guarantees should be transparently priced and put on budget. But he added that the private sector must be encouraged to re-enter housing finance just as the government gradually withdraws from it.

Some would say Frank’s mea culpa is politically motivated in advance of an election where bailout nation and big government are public enemies No. 1 and 2. Of course, poll after poll shows that the $150 billion Fan-Fred bailout, which the Congressional Budget Office estimates could rise to $400 billion, is detested by voters and taxpayers everywhere.

In fact, these failed government agencies are in such bad shape that they can’t even pay Uncle Sam the dividends owed under the conservatorship deal reached two years ago. That’s right. In order to pay a $1.8 billion dividend on Treasury department stock, Fan and Fred had to borrow $1.5 billion from — you guessed it — the Treasury.

Then there’s this head-scratching detail: In an absolutely outrageous move last Christmas Eve, President Obama signed off on $42 million in bonuses for the top 12 Fannie and Freddie executives, including $6 million apiece for the two CEOs. (Hat tip to attorney Stephen B. Meister.)

Voters are on to all this. So politics may indeed be motivating Barney Frank’s turnaround. But I’m going to credit him with more than that.

I think Chairman Frank watched these government behemoths descend into hell and then witnessed the financial catastrophe that ensued. And I think he has come to realize that the whole system of federal affordable-housing mandates that was central to the real-estate collapse — including the mandates on Fannie and Freddie and the myriad bad decisions made by private banks and other lenders in response to the government’s overreach — simply needs to be abolished.

Noteworthy is the fact that Treasury Secretary Tim Geithner has come to a similar conclusion. Geithner told a recent Washington conference on the future of housing finance that the system needs fundamental change. He said, “We will not support a return to the system where private gains are subsidized by taxpayer losses.”

Of course, the withdrawal of housing markets from government programs, and the onset of a reinvigorated private sector for providing mortgages, must be done gradually over a period of years. But it is possible that the federal mortgage madness is coming to an end.

We will have to see if Congress really does say goodbye to Fan and Fred, as Republicans like Jeb Hensarling are advocating. Equally important, we will have to see if the federal affordable-housing mandates created by Congress and implemented by HUD and banking regulators are similarly repealed.

And then we will have to see if reformed federally guaranteed housing insurance includes larger down payments, stricter underwriting standards and greater reliance on private capital markets, lenders and insurers. In other words, we need to see if housing will be restored to a market-based system and removed from the government-backed system that has proved so disastrous.

The broader lesson here is that government planning doesn’t work. And if left to their own devices, market processes will work. I don’t know if President Obama gets this. But my hat goes off to a man who does, Chairman Barney Frank.”

Today’s WSJ pens a great editorial on the subject, “Stimulus Pushers.” As the title suggests, Hussein Obama is the dope pusher further addicting these leftists spendthrifts with a high powered dose of bailout. The addicts don’t care about the hidden costs or the consequences; they just want the fix.

A few principled governors like Haley Barbour of Mississippi are pushing back. The federal government is hijacking state budgets. Rick Perry of Texas is in disfavor with the DC crowd so Texas gets penalized in the legislation. What’s astounding in this is the sheer hubris, the sheer abuse of power with the simple justification that the leftists have the power.

Two points are clear: One, this stimulus only postpones the day of reckoning for these bankrupt states. And, two, these parasites if left unchecked will eventually kill the host—the private sector that pays taxes will no longer be able to afford the excessive pay and benefits sucked up by the public sector. Atlas will indeed shrug!

For Nevadans, Reid must go, and the Pelosi’s democratic lackeys must be defeated. By piling up deficits and debt they are stealing from our children and grandchildren, the height of immorality!

Those who forget history are doomed to repeat it!

“Some of its media members and participants: WaPo’s Ezra Klein and David Weigel. Spencer Ackerman of the Washington Independent. Ryan Donmoyer of Bloomberg. Time, Politico, the Huffington Post, the Baltimore Sun, the Guardian, Salon, and the New Republic. In all there are about 400 members, a veritable who’s who of the left-wing journalistic pseudo intellectuals!

They plotted to protect Hussein from the ill effects of  Reverend Wright’s preaching hatred for America. They plotted to characterize the Tea Party as Nazi. They continually plot to push socialism and leftists causes.

“Some comments are just plain hateful. Sarah Spitz, a National Public Radio producer, wrote about what she’d do if she saw conservative radio talk host Rush Limbaugh stricken with a heart attack: “Laugh loudly like a maniac and watch his eyes bug out.”. Nice, And remember, you pay part of her salary through taxes.”

“When the debate turns to Fox TV, Journolisters become positively unhinged, recommending that the full power and force of the federal government be used to shut up the one network that dares to present center-right viewpoints in its programming.

“UCLA law professor Jonathan Zasloff asked on Journolist: “I hate to open this can of worms, but is there any reason why the FCC couldn’t simply pull their broadcasting permit once it expires?”

“Yes, “professor,” there is a reason: It’s the First Amendment.”

As the editorial points out, truth is abandon in favor of political activism. This expose’ is a must read.