Proud to be from Tennessee

by State Rep. Susan Lynn (TN-57th)

The following is a letter from Tennessee to the other 49 State Legislatures

We send greetings from the Tennessee General Assembly. On June 23, 2009, House Joint Resolution 108, the State Sovereignty Resolution, was signed by Governor Phil Bredesen. The Resolution created a committee which has as its charge to:

• Communicate the resolution to the legislatures of the several states,
• Assure them that this State continues in the same esteem of their friendship,
• Call for a joint working group between the states to enumerate the abuses of authority by the federal government, and
• Seek repeal of the assumption of powers and the imposed mandates.

It is for those purposes that this letter addresses your honorable body.

In 1776, our founding fathers declared our freedom in the magnificent Declaration of Independence; our guide to governance. They established a nation of free and independent states, declaring that the purpose of our political system is to secure for its citizens’ their natural rights. The Constitution authorizes the national government to carry out seventeen enumerated powers in Article 1, Section 8 and the powers of several of the ensuing amendments.

At the time of the Constitutional ratification process James Madison drafted the “Virginia Plan” to give Congress general legislative authority and to empower the national judiciary to hear any case that might cause friction among the states, to give the congress a veto over state laws, to empower the national government to use the military against the states, and to eliminate the states’ accustomed role in selecting members of Congress. Each one of these proposals was soundly defeated. In fact, Madison made many more attempts to authorize a national veto over state laws, and these were repeatedly defeated as well.

There are clear limits to the power of the federal government and clear realms of power for the states. However, the simple and clear expression of purpose, to secure our natural rights, has evolved into the modern expectation that the national government has an obligation to ensure our life, to create our liberty, and fund our pursuit of happiness.

The national government has become a complex system of programs whose purposes lie outside of the responsibilities of the enumerated powers and of securing our natural rights; programs that benefit some while others must pay.

Today, the federal government seeks to control the salaries of those employed by private business, to change the provisions of private contracts, to nationalize banks, insurers and auto manufacturers, and to dictate to every person in the land what his or her medical choices will be.

Forcing property from employers to provide healthcare, legislating what individuals are and are not entitled to, and using the labor of some so that others can receive money that they did not earn goes far beyond securing natural rights, and the enumerated powers in the Constitution.

The role of our American government has been blurred, bent, and breached. The rights endowed to us by our Creator must be restored.

To be sure, the People created the federal government to be their agent for certain enumerated purposes only. The Constitutional ratifying structure was created so it would be clear that it was the People, and not the States, that were doing the ratifying.

The Tenth Amendment defines the total scope of federal power as being that which has been delegated by the people to the federal government, and also that which is absolutely necessary to advancing those powers specifically enumerated in the Constitution of the United States. The rest is to be handled by the state governments, or locally, by the people themselves.

The Constitution does not include a congressional power to override state laws. It does not give the judicial branch unlimited jurisdiction over all matters. It does not provide Congress with the power to legislate over everything. This is verified by the simple fact that attempts to make these principles part of the Constitution were soundly rejected by its signers.

With this in mind, any federal attempt to legislate beyond the Constitutional limits of Congress’ authority is a usurpation of state sovereignty - and unconstitutional.

Governments and political leaders are best held accountable to the will of the people when government is local. The people of a state know what is best for them; authorities, potentially thousands of miles away, governing their lives is opposed to the very notion of freedom.

We invite your state to join with us to form a joint working group between the states to enumerate the abuses of authority by the federal government and to seek repeal of the assumption of powers and the imposed mandates.

Susan Lynn [send her email] is a member of the Tennessee General Assembly; serving on the Commerce Committee and Chairman of the Government Operations committee. She holds a BS in economics and a minor in history. She is the Chairman of the American Legislative Exchange Council’s Commerce Task Force. Visit her blog at http://susan-lynn.blogspot.com

Democracy is Slavery

from the pen of Kris Wampler.

Democracy is slavery

Posted using ShareThis

The Truth About the “Dismal Science”

I begin teaching a civics/economics class to local home school students this evening. The article below will be required reading:

Everything You Always Wanted To Know About Economists

by Art Carden and Steven Horwitz, Forbes.com 09.12.09

In a recent article for the Huffington Post, Pulitzer Prize winner Jane Smiley questions the wisdom and integrity of economists--as well as the value of economics. Unfortunately, she misunderstands what economics is and what economists do.

Smiley points out that English majors know a lot more about human nature and motivation than economists. True--so do theologians, psychologists, sociologists, anthropologists, philosophers, artists, historians, garbage collectors, short-order cooks, accountants, nurses, baristas and many others.

But that is missing the point. The strength of economics is not in explaining human preferences but in explaining the effects of changing incentives given those preferences. We assume people are "rational," but we don't mean they are omniscient or wise or even quick learners. We mean people want to make themselves as well-off as possible; people try to shape the world according to their values, whatever those may be. Free-market economists also assume that people are ignorant, and we show that markets teach them how to use resources wisely.

Smiley claims that economists' enthusiasm for markets stems from a belief that people are basically good. This isn't the case. Economists from Adam Smith to F.A. Hayek saw our intrinsic moral limitations. They believed individuals were generally self-regarding and would put their particular interests--including family and friends--first.

Yet they did not see this as a reason to reject competitive markets. They understood that markets make it more difficult for the knaves among us to wield power because markets decentralize power among numerous private property owners. Firms' "power" comes from customers who buy their products, and it can be taken away just as easily (ask the U.S. automobile manufacturers). Free-market economists do not have to trust individuals; they trust that good institutions minimize the damage done by knaves.

Some notable exceptions notwithstanding, it is--as Smiley writes--"human nature to cheat, monopolize and buy off others." But we see this as a reason to distrust politics rather than markets. Political incentives exacerbate knavery. Centralizing power in the hands of the state, which is Smiley's implied alternative to free markets, will not make things better. It will put more power in the hands of the sorts of people Smiley fears.

The examples Smiley uses to call the economist who supports free markets a "fool," "monster" or "at least an ignoramus" are cases in which there aren't formal markets for the goods in question. No free-market economist believes that children should be bought and sold. They recognize you can't have a market without respecting rights. Markets presuppose that people have control over their own bodies and property. Hence, owning other human beings is antithetical to the free market.

Smiley next claims that capitalism keeps wages low because capital moves to low-wage regions in a "race to the bottom." Again, this is wrong. The law of comparative advantage shows how trade creates wealth and raises living standards, as Paul Krugman discusses in his essay "Ricardo's Difficult Idea."

Smiley argues that the international economy works to shove capital upon people with progressively lower wages, leaving those who produce without an ability to purchase what they're producing. This theoretical framework has been dead for 30 years and hasn't a shred of empirical support. In fact, economies that have gone more toward capitalism in the last few decades do better along measures of GDP per capita, education, life expectancy and democracy.

Smiley claims that economists "have always resisted calculating the costs of raw materials by calling them 'externals.'" We haven't. Raw materials are factors of production, and there's a lot of literature on how these factors should be priced. And we don't call the costs "externals." We talk about "externalities," which are costs and benefits from our actions that spill over onto non-consenting third parties, and there are hundreds upon hundreds of papers about externalities and "market failure." Indeed, one of the quickest routes to professional success as an economist is to find a new kind of market failure that might require government intervention.

Smiley also describes an example in which a country wages war for oil. This is an example of rent-seeking, which is trying to use government power to increase private wealth or power, and it is part of a well-developed tradition in economics. Free-market economists aren't sucking up to tyrants; we're the ones decrying institutional arrangements in which licking tyrants' boots is standard operating procedure. [emphasis added]

Smiley, like so many others, confuses "capitalism" with "corporatism." Being in favor of capitalism, in the sense of free markets, does not mean we support whatever is in capitalists' interests. We support competitive markets, which often work against the interests of capitalists who would generally prefer cozy monopolistic relationships with the state, such as those likely to result if the state gets more power. [emphasis added]

Murray Rothbard once said that "it is no crime to be ignorant of economics," but that it is "totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance." It is tempting, therefore, to dismiss Smiley's article as little more than sound and fury. Yet it does signify something profound and troubling: economists' failure to communicate the essential insights of our discipline. Jane Smiley's contemptuous and uninformed dismissal shows that we really need to redouble our efforts.

Art Carden is an assistant professor of economics and business at Rhodes College in Memphis, Tenn., and an adjunct fellow with the Oakland, Calif.-based Independent Institute. He is a regular contributor to Mises.org, Lifehack.org and Division of Labour.

Steven Horwitz is Charles A. Dana Professor of Economics at St. Lawrence University in Canton, N.Y. and an Affiliated Senior Scholar at the Mercatus Center in Arlington, Va. He writes for Liberty and Power and The Austrian Economists.

But Will They Listen?

This afternoon I will present a talk (Lord willing) at the Advanced Appraisal Seminar in Greensboro, NC. My topic will be the economic theory of real estate bubbles. I will borrow heavily from the work of Auburn University’s Roger Garrison, who has created a handy macroeconomic overview of how speculative bubbles arise.

At the core of the theory is the action of the Federal Reserve. In my talk I will point out that, between 2001 and 2004, the Fed lowered its federal funds rate (the rate at which banks can borrow from other banks to meet their reserve requirement) from 5.5% to 1%. The Fed also purchased bonds from commercial banks, which injected reserves into the banking system. The net effect was to increase the money supply and the amount of loanable funds. Borrowing from Neil Young, I call this phenomenon “the needle and the damage done,” because the resultant reduction in interest rates was not the natural, market result of consumer savings. In fact, as Fed policy artificially lowered rates, consumers actually saved less of their incomes, and began demanding immediately consumable goods. A great disconnect occurred in the economy: consumers’ time preferences rose (consume in the present) while investors’ time preferences fell (divert production to more roundabout, future-oriented enterprises).

By the end of 2007 most American consumers were so over-leveraged (using their home equity accounts as virtual ATM’s) they hit the proverbial wall. By mid-2008 it became manifest that investors had over-extended themselves in real estate projects, many which had to be abandoned. Those are the very basics dynamics of a “recession” (depression) – the natural and inevitable correction following a central bank induced “boom.”

Even as I sit in my office I can look out the window and see five construction cranes over the Charlotte skyline. Far from being harbingers of future growth, they represent to this appraiser future vacancy – the continued effect of malinvestment in real estate projects.

When you see retail shops close and the space going “dark” (as we say), don’t think, “business failure.” Rather, see it for what it is: overcapacity. Our economy has been on a heroine rush for years. The time for cold turkey has come, but the manipulative State, through the agency of the Fed, is continuing to pump liquidity into the blown economy. Those cranes, and the derelict skyscrapers they are raising, are the sobering evidence.

Sort of like pumping air into a blown tire.

The question is, will my fellow appraisers receive this theory? They ought to, seeing that the values they have placed on an untold number of properties have been exposed as inflated.

In the meantime, a public service announcement: contact your representatives and insist that they support a stand-alone version of H.R. 1207, the bill that will require an audit of the Federal Reserve. This represents a key first step toward exposing the Fed and, hopefully, bringing it down.

Threescore and Ten

Traffic for this blog has dropped off significantly. That means one of two things: 1) I can quit writing here and focus exclusively on posting controversies on my Facebook wall, or 2) throw caution to the wind and write whatever I fancy here.

Well,

I continue to be astounded by the breathless embrace of socialism by a growing number of young Christians. Speaking of blogs, Jim Wallis’ “GOD’S politcs” rag is commanding the attention of these well-meaning but misguided souls who believe the State can be turned to good purposes. Wallis’ latest preoccupation is the Obama healthcare plan. Legions of young believers agree that providing universal healthcare for the poor and uninsured is the “red letter” thing to do.

Frédéric Bastiat – who, incidentally, was also a Christian – taught us 160 years ago that good intentions in political economy have unintended negative consequences. The “iron law” of economic reality is this: a subsidized system expands coverage and causes the demand to rise; higher demand results in higher prices, i.e. higher costs to the government; higher costs lead to government price controls; and price controls invariably lead to shortages.

Right-wing nuts, whose demagoguery about “death panels” (Sarah Palin, El Rushbo, et. al.) does little but discredit the argument against socialized medicine, wax long about “rationing.” I suppose a shortage of doctors, procedures and medications could be so labeled; but it implies some shadowy, bureaucratic goon deciding who gets what treatment. The economic truth is that shortages translate into delays in service delivery to patients. And delays can, in many cases, lead to diminished quality of care.

But the rise of the “Christian Left” is merely symptomatic of bad, fallacious reasoning. Tom Woods, the author of the New York Times best-seller Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse (and a Catholic), wrote a challenging piece on the Church’s tendency to endorse erroneous economic policy prescriptions.

It is obviously not “dissent” [from the Church] merely to observe that the cause-and-effect relationships that constitute the theoretical edifice of economics are not a matter of faith and morals. They simply do not fall within the range of subjects on which a Catholic prelate is endowed with special insight or authority. Catholic laity cannot head up petition drives against them. They are facts of life. Facts cannot be protested, defied, or lectured to; they can only be learned and acted upon. There is no use in shaking our fists at the fact that price controls lead to shortages. All we can do is understand the phenomenon, and be sure to bear it and other economic truths in mind if we want to make statements about the economy that are rational and useful.

Here’s hoping our Christian brethren of all stripes come to some rational understanding of economics. After all, we can no more successfully sustain an alteration of market behavior than we can change the direction of the wind. I think our old friend Richard Hooker would remind us that economics, like other spheres of the natural order, is subject to its own laws.

********

On a far more encouraging note, we visited a new mission church this past Sunday. My wife and I had met the pastor and his wife several weeks ago and instantly hit it off. The little mission is the result of the pastor’s “undercover work” (spiritually speaking) as a part-time employee at a Starbucks coffee shop (he maintains a full-time teaching job at a Christian school). There, he led an informal Bible study that resulted in conversions to Christ. When the church had its inaugural service this past week, it marked the first time some of its members had ever attended a Christian worship service.

There were around 20 that showed up for the first service – including parents and friends of those new believers. The little flock met in a former consignment shop that the pastor and his wife have transformed into a cheerfully bright worship space.

I don’t want to say too much about this little testimony lest I jinx it. But it is off to a very promising start.

The Alternative Continuum

Edmund Burke (1729-1797) was my kind of man – a strange quantity known as “liberal conservative.” He taught that we live not for ourselves but in honor of our ancestors and for the sake our children. He was an Anglican man through and through – a respecter of historic Christian tradition passed down by generations of faithful saints, but an embracer of necessary reforms. A role model for G.K. Chesterton, Burke was loyal to his culture and his king (a friend and advisor to King George); but he was for the American Revolution (secession) – after all, the Americans had forged a new society based upon the rights of Englishmen, thousands of miles removed from London. Why should their wealth be expropriated to fund the empire’s continental and oceanic wars? That wasn’t citizenship but slavery. The Americans had taken risks in the New World; Burke believed in the self-determination of people on their own ground. On the other hand, Burke despised the French Revolution and its appeal to abstract “universal” rights. In it he detected the makings of a Total State, a rebirth of Babelesque idolatry of the worst sort.

Albert Jay Nock (1873-1945) and Frank Chodorov (1887-1966) helped me distinguish the State from government. Nock perceived one detail about the American Revolution that Burke missed; that its underlying motivation had been little more than rank land speculation. George III didn’t want Anglo-Scots and German settlers pouring over the Appalachian spine and agitating his anti-French Cherokee allies (whose stateless society Thomas Jefferson admired). That wasn’t to say that the Americans shouldn’t have been cleared of the British yoke; but early on the Antifederalist instinct was snuffed out by a group of opportunists who recreated a modified British system on this continent. Nock identified the State as a “criminal gang,” a group of men who use constitutions and charters to seize as much power and expropriate as much wealth as possible within their term limits.

Hans-Hermann Hoppe (1949- ) taught me that term limits have the ironic effect of making democracies far more violent than monarchies ever were. The 20th century was bloodier than all previous centuries combined in a world “made safe for democracy.” Hoppe is a proponent of natural orders within society.

Hoppe’s Austrian School predecessors (Mises, Hayek, Rothbard, et. al.) taught me that central banking – a key element of Alexander Hamilton’s plan for state-building – devalues currency in order to fund internal improvement projects, often at the expense of farmers and small merchants. In modern times the bank also suppresses the price of borrowing money below its natural rate, which causes consumers to stop saving for the future while simultaneously luring entrepreneurs to invest in the future – resulting in the pernicious “boom/bust” cycle.

The Southern Agrarians (1929) and Richard M. Weaver (1910-1963) taught me the beauty of small things, of rustic values, of humility towards nature, of living off the land and within one’s means. When the former Marxist-skeptic historian Eugene Genovese (1930- ) embraced the Christian faith and an earthy conservatism, his lifelong study of the Agrarians and the Southern tradition helped reshape his thinking.

All of them, from Burke to Hoppe, have taught me that while all men are indeed created equal none of them demonstrate equal talents, abilities, or gifts. To act as if that were untrue is the height of folly.

A special acknowledgement is due historian Joseph R. Stromberg, whose essays and articles directed my attention to, or affirmed my already-existing interest in, many of these thinkers and their alternative ideas.