In the movie, Far and Away, there is a scene where Tom Cruise (Joseph Donnelly) tells Nicole Kidman (Shannon Something) in a perfectly articulated Irish accent, “America has got so much land they’re givin’ it away for free.”  Her response is to express incredulity.  To which Joseph replies with something like, “You’re a corker, Shannon.”  The movie then proceeds to a climax where they race to claim their free land in a post-Louisiana-Purchase land grab.  Ahhh! the good ole days when the federal government had so much land they were giving it away for free.

About 524 million acres

The size of the Louisiana Purchase was 524 million acres.  Most of this land is now privately owned.  It would be hard to argue that America would be as prosperous and powerful today, if this “Breadbasket of the world” was managed by federal bureaucrats.  Because this land is managed by private owners and corporate interests, America has been a significant exporter of food and has been able to feed its people with abundance with few minor exceptions.  When you have a country that is geographically capital rich in its ability to feed its people, this frees its population to engage in other industrious activities like building microchips, aircraft carriers, and entitlement programs.  You would think that with such a clear historical example of the virtues of private ownership of land, that the federal government would have continued this trend during the rest of the Westward expansion.  With the exception of Texas, this hasn’t been the case for the rest of the West.

Go West, Paradise is there...

The Louisiana Purchase was a massive acquisition for the United States Government.  However, the federal government’s current land holdings, mostly in the West, dwarf the Louisiana Purchase in size.  The federal government currently controls 623 million acres.  In Martin L. Gross’ book, National Suicide: How Washington is Destroying the American Dream from A to Z, he discusses the negative impact that the federal mismanagement of these lands has on the respective states.  He mentions a current real estate boom in Arizona, California, and Nevada, where solar energy companies are trying to develop solar energy plants as a response to generous subsidies from Washington.  The Bureau of Land Management, however, halted this development to wait for environmental impact studies.  We can only hope that these environmental impact studies are conducted with the same scientific rigor and discipline as the University of East Anglia’s climatology department.  Needless to say, what this travesty reveals is that the reason our country isn’t energy dependent isn’t because we don’t have the technology and resources to make it happen.  We are dependent on foreign oil imports because our lands with the most energy resources are located in the West on lands owned by the federal government.  One of the primary reasons we are dependent on foreign debt imports, is because our capital rich and resource rich geography is being severely mismanaged.  Anyone with basic knowledge of finance knows that if your overextended with your credit, then it is time to start liquidating assets.  It would be a great idea for the U.S. to sell its massive holdings of Western land to private American enterprises, individuals and State Governments as a means of reducing our national debt.  However, in order for a change of this magnitude to happen, we need leaders who recognize this opportunity.  My friend, Michael S. Lee, is considering running for the Senate in Utah to replace Bob Bennett.  He has this to say about the constitutionality of the federal government holding such a large portion of western land:

In light of the text and history of Article I, Section 8, Clause 17, there is a valid basis for questioning whether federal land should be exempt from taxation by the host State where, as is often the case, the host State’s legislature has not given Congress exclusive legislative jurisdiction over that land. While a broader power could be (and has been) inferred from Article IV, Section 3, Clause 2—which authorizes Congress to “dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States”—that provision says nothing about exclusive legislative jurisdiction. For that reason, in order to read Article IV, Section 3, Clause 2 as giving Congress boundless discretion over federal land (i.e., as authorizing Congress to act as a sovereign with respect to land acquired by the federal government within a State, but without the consent of that State’s legislature), one must essentially ignore the “legislative consent” language of Article I, Section 8, Clause 17. The best way to reconcile Article I, Section 8, Clause 17 with Article IV, Section 3, Clause 2 is to conclude that (1) the former authorizes Congress to control federal land as a sovereign—such that Congress may dictate that federal land is exempt from all taxation and regulation by the host State—but only if the host State’s legislature has consented to such an arrangement, while (2) the latter authorizes Congress to control federal land to the extent permitted by the generally applicable laws of the host State—such that Congress may not prohibit the host State from taxing and regulating federal land to the same degree that it taxes and regulates private property—but does not require Congress to obtain the consent of the host State’s legislature.

In many instances, the host State would gladly give the consent described in Article I, Section 8, Clause 17, authorizing Congress to exercise exclusive legislative jurisdiction over certain federal lands. In Utah, for example, I suspect that the legislature might freely give such consent with respect to the land comprising Hill Air Force Base, the Utah Testing and Training Range, and Zion’s National Park. But in other instances, Utah’s legislature would be reluctant to give such consent, recognizing that—because the federal government owns nearly 70% of the land in the State—the State would suffer (as it does now) if all federal lands were exempt from taxation. There are a number of factors that the legislature would want them to consider in deciding whether to relinquish control over the various parcels of federal land. But the important point is that this decision would belong—and consistent with the text and history of the Constitution, should belong—to the legislature of the host State, and not to Congress.

Unfortunately, the Supreme Court reached the opposite conclusion in Kleppe v. New Mexico, 426 U.S. 529 (1976), essentially ignoring (and effectively obliterating) the important textual distinction between the power granted by Article I, Section 8, Clause 17, and that granted by Article IV, Section 3, Clause 2. That decision needs to be revisited, given how severely it undermines the legitimate, sovereign, and constitutionally protected interests of States—especially those in which the federal government owns a significant amount of land. It may well be that Congress (rather than the Supreme Court) is in the best position to undo the injustice brought about by Kleppe v. New Mexico. Congress could do so by enacting a law providing that, absent the consent of the host State’s legislature, the federal government owns land within a State on the same footing as any other property owner within that State, and not as a sovereign exempt from taxation and regulation.

I know that it is a radical idea to be electing people to Congress that have knowledge of the Constitution.  I will close by quoting what Martin Gross thinks we should do:

Because Washington has shown that it cannot manage these lands in the best interests of either the states or the nation, citizens should demand the return of all mineral rights, including oil and gas, back from Washington to the states.  They can then develop them properly by calling on commercial leaseholds, which will bring the states enormous royalties.

This is only fair because the rights were taken away from the former territories years ago, when they were too weak to fight Washington.

As a result of such arrogant federal mismanagement, debate should start on the final objective.  We should return all federal land – except for national parks – to the states so that they, and the American people can reap the harvest of our own good earth.

feudalism [(fyoohd-l-iz-uhm)]

A system of obligations that bound lords and their subjects in Europe during much of the Middle Ages. In theory, the king owned all or most of the land and gave it to his leading nobles in return for their loyalty and military service. The nobles in turn held land that peasants, including serfs, were allowed to farm in return for the peasants’ labor and a portion of their produce. Under feudalism, people were born with a permanent position in society. (See fief and vassal.)

Note: Today, the word feudal is sometimes used as a general term for a set of social relationships that seems unprogressive or out of step with modern society.

Where it was tempting to write another post juxtaposing my thoughts with phrases from the musical, Les Miserables, I have decided against this.  Nevertheless, it is nice to see that Obama isn’t stopping at Great Depression economic policies when it comes to unprogressive solutions to our economic crisis.

Apparently he is mulling a modern reinvention of the feudal system.  This passage is from Reuters:

U.S. government officials are weighing a plan that would let borrowers who have fallen behind on their mortgage payments avoid eviction by renting their homes instead, sources familiar with the administration’s thinking said on Tuesday.

Under one idea being discussed, delinquent homeowners would surrender ownership of their homes but would continue to live in the property for several years, the sources told Reuters.

Landlord in Chief

This is a perfect example of liberal-feel-good policy.  How can we argue against a seemingly benign government putting the taxpayer’s neck on the line one more time to bail out improvident homeowners and their silly bankers?  I believe that we can safely assume that the feudaral government would be a benevolent landlord.  I am also pretty confident that Neo-Feudalism will have no negative unintended consequences.  It is very unlikely to incentivize people to quit their mortgages.  It is also unlikely to incentivize banks to continue to make bad loans.  It is also unlikely to artificially lower rental rates, thus wiping out whatever real estate investor class still exists in America.  It is also unlikely to perpetuate the downward spiral in housing prices that most economists agree needs to be reversed.  It certainly wouldn’t promote a greater sense of entitlement among average Americans.  It wouldn’t violate the 10th Amendment and further restrict state’s rights by replacing a local source of state revenue, property taxes, with a federal source of revenue, housing rental proceeds, to be divvied out to the states.  This policy will probably also help reduce the unemployment rate as delinquent homeowners are forced to live in their homes for years and are unable to uproot and find work elsewhere.  After all why go look for a job if your unemployment check now comes with a rent stipend that you can use to continue living in the house that used to be yours.

In previous posts, my friend Jake and I were arguing over whether the banks would repay TARP money.  A few weeks ago, the banks wanted to, but the Treasury wouldn’t let them.  It looks like yesterday the government gave the green light for some of the banks to pay back the money.  It also looks like the treasury made $4.8 billion on the deal from dividends – not a bad reason to hang onto an investment.  We’ll have to see if Barack Obama takes credit for this relatively good news, despite the fact that Bush is largely responsible for this part of the bailout.  I say this news is relatively good, because now we still have a few problems that are a result of this initial bailout.  

These banks were able to pay back the money because they were able to raise capital.  They were able to raise capital, because there is a lot of money right now sitting on the sidelines looking for safety.  Because of the moral hazard created by the government bailing out the banks, these banks now look like a safe investment even though the past behavior of the institutions indicates otherwise.  Also, it is increasingly becoming apparent that this bailout money was financed by future inflation.  So in defense of Chuckles and Jake, I guess I would have to say that I would rather deal with trivial things like economic moral hazards and inflation rather than the apocalyptic demise of our financial system.

However, that is if you limit to the bailout to the original one crafted by Bush and Paulson.  The system probably could have contained the inflationary effects of printing $700 billion.  This would have been like a nice dose of Viagra to an otherwise limpid economy.  The Obama administration is behaving like a bunch of teenagers who broke into Grampa Keynes medicine cabinet.

For example: 

Yet one more example of the viability of advanced computer modeling

This chart was used by Obama’s expert team of economist and their magical modeling computers to sell Obama’s stimulus plan.  Of course Obama was all over the news the other day promising that these jobs will come; after all, his experts with their magical computers are telling him so.  Meanwhile tax collection rates are plummeting because large numbers of people aren’t working, and Obama’s innocent little $1.75 trillion forcasted budget deficit will soon balloon to $2 trillion.  When most people’s incomes drop or disappear, they slow their spending.  Then again, most people haven’t reached the point of economic enlightenment that characterize democrats, where laws of economic scarcity can be mitigated with good intentions.

In conclusion, I am glad I was wrong and banks are paying back taxpayer money.  I just wish they were paying it back to someone else other than our prodigal political leaders.

I found a good blog that explores some of these ideas: Carter’s Second Term

Social Security is more bankrupt than we thought.  A few months ago I wrote a post, Weapon of Mass Wealth Destruction, where I explored how social security is a terrible investment.  The Social Security Trustees Report came out today, and we found that the condition of Social Security and Medicare is worse than expected.  Americans certainly didn’t need this reminder that government sponsored entitlement programs are disastrous failures at a time when Obama is trying to get things rolling with his plan for universal health care coverage.  In order to help Obama out, I am going to provide my best ideas for rescuing these toxic entitlements from failure.  I call this program to fix social security the Toxic Entitlement Relief Program, or TERP.

1. Enact punitive taxes on those who have abortions.  Since Roe v. Wade passed in 1973, there have been 49,551,703 abortions in the United States.  This massive reduction in the labor force is certainly partially responsible for the projected shortfalls of social security.  Where legal maneuvering might have enabled women to have the ability to escape the moral consequences of their sex drives, like smoking and alcohol, we should punish this negative behavior with excessive taxation.  I propose a tax code where the mothers and fathers of each aborted baby must pay the equivalent of one wage earner’s contributions to social security and medicare split between the two of them for the rest of their lives.
2. Lottery Retirement System.  Many states run lotteries as a way to tax stupidity.  Anyone who has ever been to a casino knows that they are flooded with old people squandering away their nest eggs.  Since old people like gambling so much, let’s make gambling part of retirement.  Every year you can buy a social security lottery ticket for a fixed sum.  Every year a certain number of winners will be chosen to retire at different ages.  For example, 100 lucky winners can win the right to start claiming full social security benefits at age 40.  1,000 lucky winners can retire at age 45.  5,000 lucky winners at age 50.  10,000 lucky winners can retire at age 65.  If you never win one of these lotteries, then you don’t get to start claiming benefits until you are 77.  However, if you win a the age 40 lottery at age 70, you will receive a lump sum payment of 30 years worth of retirement benefits.  This would be a great way to get the majority of Americans to accept a later retirement age, and it would bring in a much needed infusion of cash to the trust fund.
3. Base benefit payments on the number of offspring that you have and also the income levels of your offspring.  In order for social security to work, you have to have a steadily increasing population.  Therefore, the people who replenish the system with new laborers should be duly rewarded.  If you have 5 kids that all fall into an income bracket level over $80,000 dollars, your benefits should be higher than someone with one kid earning $25,000.  If you have 6 kids that are all on welfare or in jail, you don’t get any social security, Sorry!
4. Punitively tax Warren Buffet.  He deserves to have his wealth confiscated by the government for supporting Obama in the last election.
5. Repeal child labor laws.  The problem with entitlement programs is that they produce generations of entitled brats.  Just as social security is a backwater idea from a different time, so are child labor laws.  Now that chimney sweep is a dead career, and coal mining will soon be an extinct profession, there are lots of jobs that kids can safely do.  Kids also tend to be pretty naive when it comes to taxes, so you could probably tax them at a higher rate for several years, and they would never know the difference.  We need to expand the taxable labor pool as quickly as possible, and enabling children to work could happen with the stroke of a pen.
6. Start gambling with the trust fund.  If I can expect to lose $.22 on the dollar for every dollar that I put into social security, then putting this money in a slot machine would actually be an investment.  Payout odds for most slot machines are in the mid 90% range.
7. Tax energy consumption more.  I think any excuse we can find to tax energy more is a good idea that ought to be pursued.

Warren Buffet once called derivatives weapons of mass wealth destruction.  Of course this didn’t stop him from piling money into them.  Whenever you go to a casino, it seems like there is an overabundance of retirees gambling away their nest eggs (or social security).  Who wouldn’t?  If it is likely that you might die in the next few years, why not try one last time to hit the big one.  Apparently Buffet’s lifelong history of investment acumen couldn’t prevent him from taking a few last chance gambles.  Old people  and their money will soon be parted.

While I am on the subject of old people being parted from their money, I received my annual update from the Social Security Administration.  The following is the exact text of an article that was printed right in the middle of the front page:

Will Social Security still be around when I retire?

Yes.  The Social Security taxes you now pay go into the Social Security Trust Funds and are used to pay benefits to current beneficiaries.  The Social Security Board of Trustees now estimates that based on current law, in 2041, the Trust Funds will be depleted.  Because people are living longer and the birth rate is low, the ratio of workers to beneficiaries is falling.  Therefore, the taxes that are paid by workers will not be enough to pay the full benefit amounts scheduled.

However, this does not mean that Social Security benefit payments would disappear.  Even if modifications to the program are not made, there would still be enough funds in 2041 from taxes paid by workers to pay about $780 for every $1,000 in benefits scheduled.

In other words, every dollar that I sink into social security will decrease at a value of -.77% for 32 consecutive years to be worth .78 cents on the dollar when I retire.  I know that nowadays this sounds like a pretty good investment.  I would argue, however, that speculative bouts of mass wealth destruction are far lest damaging than systemic ones.  It seems that the Social Security Administration believes this as well.  If you read the back of the newsletter, it is filled with drivel about how I need to start saving and if I can save just $5 a week then it will grow at 5% and be worth a ton of money when I retire.  There is even a chart showing me that if I save $25 a week with 5% annual growth, then it will be worth $165K when I retire.  Cool, where can I sign up for option B.

Basically the geniuses who run Social Security are telling me that I must pay them and lose $.22 on every dollar after 32 years, but if I save money and invest it to where it grows at a 5% annual rate than the same dollar will be worth $4.78 in 32 years.  How is this any less fraudulent than anything Bernie Madoff did?  At least his investors willingly chose to contribute money to his scam.  I guess the difference is that at least the Social Security Administration is telling us that their operation is just a big scam, but since they are letting us know then it is o.k.

Can someone who supported Barack Obama tell me how his plan to correct our economy is any better the George Bush’s plan?  It seems like the only answer that either of them can come up with is to spend trillions of dollars to nationalize failing businesses.  

The following quote from an article by Peter Wehner and Paul Ryan in the Wall Street Journal illustrates where we could be headed as Tweedle Dum leaves office and Tweedle Dumber is inaugurated:

The last several months are a foreshadowing of a new era of government activism, rather than an unfortunate but necessary (and anomalous) emergency action. We will soon shift from a market-based economy to a political one in which the government picks winners and losers and extends its reach and power in unprecedented ways.

If you didn’t read the article that I linked above, you probably ought to.  Especially if you are someone who is frightened by the government’s recent desire to get involved in some of our most important industries. 

Doesn’t anyone else seem to be a little worried that the government is bailing out financial institutions, auto companies, and if you got enough hope, maybe the health care industry.  The government is targeting only the industries that will create the most dependence.  You don’t see the government targeting retail stores and restaurants with their bailout measures, because people don’t rely on these industries like they do the financial and healthcare industries.  The government only wants to play in the industries where it can create dependent citizens out of us.

I would prefer that the government get out of the picture, and the market can sort things out.  When centralized economic systems fail, it is proof that they don’t work.  When a capitalistic economic system fails, it is proof that the system is working.  When a centralized economic system fails, you end up with an insolvent government unable to provide entitlements to its dependent population (See bankrupt California for an example of the latest failure on socialism’s long list of failures).  When a capitalistic system fails, you end up with a new generation of entrepreneurs and innovators who discover how to create wealth again out of the failed assets of previously existing enterprises.  This process is painful, but in the long run it is very rewarding.

The big story this weekend is that Circuit City is going out of business and going to liquidate its assets.  Read this article for a great rundown of why this happened.  I especially like the graph at the bottom of the article that explains why Circuit City failed.  Would it be better for the government to get involved here, or would it be better for Costco and Best Buy and Walmart to reap the rewards for better running their businesses?

It would be nice to see our government, which is no stranger to failure, recognize that failure happens, and that failure is an option in a capitalistic economy.

From New Mexico, to Colorado, to Maryland, my google news alert for school lunch flooded my inbox with stories this week about various schools across the country that have enacted policies that disqualify students from receiving school lunch if their accounts are unpaid.  As you would expect, most of these articles are mostly about the public outcry that these schools would even consider to stop giving lunches away that haven’t been paid for.  Of course, the schools are still giving these kids a cheese sandwich and a drink, but this isn’t fair.  These poor students are only getting a sandwich where their peers get a nice hot meal.

Some of the schools in these reports are in the hole $140,000 because of delinquent school lunch accounts.  Yet there is no outcry against the thievery of the parents who are sending their children to school with no lunch and stiffing the school with the bill.  If you ask me, I think that parents who steal school lunches should be thrown in jail for stealing instead of whining about their children being given a free lunch.

Since the national school lunch program is funded by import tariffs, you can expect this program to completely collapse over the next year.  With the economic recession decreasing demand for imported crap from China and the 60% drop in the price of oil, I would imagine that the available funds for the school lunch program will dwindle.  Of course this is coming at a time when record numbers of people are signing up for the free and reduced lunches.

Ultimately this all goes to show that even if your entitlement program has the best intentions, it is doomed to failure because there ain’t no such thing as a free lunch.  Even though millions of children receive free lunch every day, the cost of these lunches are built into everything you purchase that wasn’t manufactured or produced in America.  However, when you put economic costs aside, we also find that entitlement programs lead to an even larger moral cost.  The entitlement culture created by the school lunch program has created a moral environment where stealing is tolerated if not encouraged.  

I could solve this problem pretty quickly.  I know from experience that a private school lunch service can offer better food at a lower price than the government and still make a decent profit.  I say increase the child tax credit and completely privatize school lunches and get the federal government out of the picture.  

Read Tanstaafl and The Parable of the Broken Window if you want to learn more about how the unintended consequences of well-intentioned entitlement programs are far more dangerous then the problems that they solve.

If you’re like me, you are probably counting down the days to when Barack Obama takes over.  It is a common myth that many trends start in California then spread across the country.  For example subprime lending was rampant in California first, and it fell apart there first.  Well while everyone was enjoying the holidays, California’s bankrupt political leaders pushed forward their plan for addressing their state’s massive budget shortfall.  Basically the answer was to raise taxes…a lot. Hopefully this trend of rising taxes is one that doesn’t spread across the country.

Students of the Great Depression know that the depression was prolonged by a massive expansion of taxation.  Because of this stigma, I don’t expect Obama to “raise taxes.”  However, I do expect him to encourage government confiscation of wealth through whatever means possible.  This confiscation of wealth won’t be called a tax.  It will be described through terms like tarrifs, duties, fees, carbon exchange credits, or speeding tickets.

If you are like me, you have probably noticed more cops out on their beats keeping our streets safe from those negligent criminals who drive 9 miles per hour too fast.  I am therefore encouraging all of the readers of the Independent Bloghorn to register on speedtrap.org.  This is a site where you can register to see where the traffic enforcement government funding program is having their fundraisers so you can avoid them.  I also recommend this article to help you know what you can do if there is a speed trap in your community.

We should also become acquainted with the Motorists Bill of Rights:

1. The right to traffic regulation based on sound engineering principles and public consensus.
2. Clear guarantees that revenue collected from highway users for highway purposes be used for such purposes, and that all streets, roads, and highways be properly maintained, signed and regulated in a manner that expedites travel.
3. Freedom from unreasonable search and seizure and the guarantee that all traffic stops will be based on probable cause.
4. The right to choose the type of vehicle and related equipment that best meets an individual’s needs and preferences.
5. Protection from discourteous and reckless drivers including those who deliberately impede traffic, who threaten other motorists with their actions, or who are impaired or incompetent.
6. Freedom from unreasonable surcharges, fees, taxes, and fines.
7. Complete access to all public streets, roads, and highways, free of arbitrary restrictions, exorbitant fees, or governmental attempts to dictate personal travel choices.
8. Freedom from driver license suspensions or revocations for non-driving violations or matters of personal conduct.
9. Protection from arbitrary and exploitative insurance industry practices.
10. The right to a fair and impartial trial for traffic offenses, including a trial by jury if requested by the defendant.

Anyway, when it all comes down to it if our bankrupt governments really want to monetize our driving habits then they should sell exclusive rights to speed.  For example if you drive a car that meets a special, more rigorous safety inspection that determines that your car can drive safely at higher speeds, then you should be able to pay for the right to drive fast.

Okies from the Great Depression

Where the first Great Depression was epitomized by the migration of Dustbowl ihabitants to California, the not-so-great depression that is unfolding before our eyes will probably be characterized by bankrupt Californians relocating to states that haven’t been so improvident.  I am tempted to go buy an orchard, so that I can have some work for the previous real-estate flippers to do as they arrive to my state en masse with their BMWs and bindle staffs.

I think a bright young literary mind will probably document the travails of the participants of this great migration of “Fornies” into the heartland in the form of a novel, or perhaps a reality TV show.  The Grapes of Wrath, starts with Tom Joad being released from jail from a manslaughter conviction.  Where much of the Californian population that hasn’t left yet is incarcerated, it would be easy to imagine an echo protagonist of Tom Joad who is released from the current California penitentiary system early because of overcrowding.  Where the okies in The Grapes of Wrath typically did agricultural work and pretty much all starved to death, Fornies will migrate across the land in search of solvent states with government entitlement programs.  The Fornies that aren’t anorexic will complain that there are no In n’ Out Burgers in their new home states.

Where the Grapes of Wrath is a narrative that explores the explosion and consolidation of the extended family, the modern day sequel will consist of Fornies fleeing the familial and marital bonds that they see as financial liabilities.  The Grapes of Wrath ends with Rose of Sharon nursing a dying old man after giving birth to a still-born baby.  The sequel will end with a female character with breast implants aborting a fetus somewhere in the heartland of America.

I know that there are some gaps to fill in, but I think the overall premise of a novel such as this would lead to a classic. I was speaking with an acquaintance in Callfornia the other day who is trying to start a business. To start an LLC in California costs $800 a year on top of the registration costs. I think the same thing costs like $50 in Utah. This seems like a pretty stifling barrier to entrepreneurship.  No wonder businesses are fleeing California in droves. It is also no surprise that the state is clunking like an old jalopy towards bankruptcy.  As California drives its business tax base to states with less prohibitive taxes, the state’s budget problems will only become worse.  We can expect to see the great migration of bankrupt Californians accelerate in the coming months.

If you are a Californian, you should get some help.