December 9, 2016

In Defense of Henry Potter in It’s a Wonderful Life


lionel-barrymore-its-a-wonderful-lifeDecember is upon us and that means plentiful opportunities to watch the enduring classic, It’s a Wonderful Life. Unfortunately, the overwhelming majority of viewers completely misinterpret heroic Roosevelt-hater and anti-New Dealer Frank Capra’s dystopian nightmare as a heartwarming Christmas tale. And while this writer likely can’t overcome the emotional appeal of angels getting their wings and other fanciful tripe in the film that help convince audiences to accept absurd economic fallacies, perhaps I can at least disabuse them of the vicious slanders they have heretofore accepted regarding the film’s hero, Henry Potter.

We first hear of Potter from George Bailey’s father, Peter Bailey, who badmouths Potter with the usual left wing falsehoods about businessmen. But during Bailey’s envious rant, we learn something important: Henry Potter is a board member of the building and loan. We later learn Potter is, in fact, a stockholder.

That puts a somewhat different light on his subsequent motion to liquidate the business upon Peter Bailey’s death. Yes, we hear George Bailey repeating the familiar socialist tropes his father did: that Potter only wants to close the building and loan because he “can’t get his hands on it” and considers the little people cattle, etc. But Potter responds with some rather inconvenient facts: the building and loan has been making bad business decisions, providing what we’d now call subprime loans to people who can’t pay them back.

We don’t know how Potter became a stockholder, but the Bailey Building and Loan does not appear to be a publicly traded company. The most likely explanation is Peter Bailey asked Potter for capital, just as George Bailey does later in the film, in between rounds of disparaging Potter as a greedy capitalist. That would be perfectly consistent with today’s “progressives,” who rail against capitalists out of one side of their face while sucking up to them for money out of the other.

But regardless of how Potter became a stockholder, Peter Bailey has a fiduciary duty to him to run the business for maximum profit, providing Potter and the other stockholders a return on their investments, something George Bailey confirms they never intended to do. Instead, the Baileys squander their investors’ money on a do-gooder, subprime loan scheme to make everyone a homeowner. It worked out in fictional Bedford Falls about as well as it did in early 2000s America.

Meanwhile, the Baileys constantly slander Potter’s rental houses as “overpriced slums.” These are the same Baileys whose housing opportunities are more expensive than Potter’s.

Their accusations constantly beg the question: If Potter’s houses are so bad, why do so many people choose to live in them? It’s constantly implied Potter’s customers have no other choice, but what exactly does that mean? Why has no one else, including any of the businessmen on the board of the Bailey Building and Loan, developed rental properties that are higher in quality, lower in price, or both?

The inescapable truth is Potter is wealthy because he provides a product that most satisfies his customers’ preferences for quality and price. If there were an opportunity to provide a higher quality product at a lower price than Potter was charging, a competitor would do so and take market share away from Potter, until Potter either raised his quality, lowered his price, or both.

The Baileys burn with resentment that so many residents of Bedford Falls prudently choose to live in Potter’s less expensive housing than buy a house they can’t afford, financed by the Baileys’ Ponzi scheme. Thus, even after shirking their fiduciary duty to run the business properly, the Baileys spend decades assaulting Potter’s character in a transparent attempt to lure away his customers.

When the Depression hits and the Bailey Building and Loan is exposed for the fractional reserve fraud it is, Potter offers to come to the rescue with a generous offer to buy out its customers. It is noteworthy there is a run on the Bailey Building and Loan and the local bank, but Potter is financially secure enough to save them both, proving once again he is the only honorable businessman in the film.

But we must give the devil his due. George Bailey, the ultimate huckster, saves the building and loan without Potter’s help, convincing the yokel mob making a run on his business to keep their money tied up in his fundamentally insolvent confidence game.

That brings us to the one regrettable act Potter is guilty of, which is concealing the $8,000.00 the incompetent Billy Bailey inadvertently handed him while attempting to make a deposit. It’s true this was an underhanded act, although not unprovoked.

We don’t know how much Potter had invested in the Building and Loan to become a stockholder, but suspect it was a lot more than $8,000. One could make the case he was merely getting back some of the money the Baileys had previously defrauded him of, but there are courts for such matters and Potter should have sought their help if he had a case.

Nevertheless, two generations of Baileys had led a decades-long assault on Potter’s good name, resulting in most townspeople disliking him, even though he has quite literally saved their lives on numerous occasions. Without him, a large portion of Bedford Falls would be unemployed, have nowhere to live, or both. It is not an exaggeration to say that without Henry Potter, Bedford Falls would cease to exist. Yet, thanks to the Baileys, he is the most hated man in town.

Compare Potter’s vindictive reaction when George Bailey crawls to him for help after the $8,000.00 is lost to Potter’s reaction at the board meeting at the beginning of the movie. At the board meeting, Potter dismisses George’s unhinged attack upon him and redirects the discussion to the subject of the meeting: what is best for Bedford Falls. By the latter confrontation, Potter tries to have George arrested for embezzling.

Potter’s dastardly act is totally out of character with the Potter of the earlier scene or any other event we know of in Potter’s life. As far as we know, he has always been a hard-nosed, unsentimental businessman, but has never committed a crime or held a grudge, as he does now. Everything we know about Potter up to this point tells us his vindictive attempt to have George Bailey prosecuted is precisely the kind of emotional decision-making Potter has avoided for most of his life. That is why he is so wealthy at the beginning of the film.

Everyone has a breaking point. Potter had evidently reached his. Had he been prosecuted for keeping the $8,000.00, which may have been tricky from a legal standpoint, given that Billy Bailey had handed the money to him, he could easily have plead temporary insanity caused by years of psychological warfare waged against him by the Baileys.

We’ll never know, because before Potter has any opportunity to allow his passion to cool and clear up the misunderstanding, George Bailey sets off on his suicide melodrama, followed by a long, self-aggrandizing hallucination about angels and how Bedford Falls would be worse without him. By the time he concludes his childish escape from reality, the same yokels he previously conned during the Depression are now bailing him out once again, foreshadowing so many future bailouts of dishonest financiers whose assets should have been turned over to better management in bankruptcy court.

In one of the darkest moments of the film, George Bailey’s Christmas tree is jostled and one of the bells adorning it rings. George Bailey, now confident he and his fraudulent real estate scheme are safe, suggests the bell signifies an angel has earned his wings, as if his dishonest business dealings and ruthless defamation of legitimate competitors had divine sanction.

Nothing more is heard of Henry Potter, the man without whom Bedford Falls would not exist. He is left friendless and without the one thing he could cling to before George Bailey, the Devil incarnate, wrested it from his grasp: his honor. As the credits roll, evil has triumphed. The economic fallacies inherent in Baileyism become accepted truth, resulting in disaster after disaster, including the most recent in 2008.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Dickens’ A Christmas Carol Has Too Sad An Ending for the Season

800px-charles_dickens-a_christmas_carol-title_page-first_edition_1843No Christmas season would be complete without plentiful opportunities to watch stage or television productions of Charles Dickens’ unfortunately immortal A Christmas Carol. The classic Reginald Owen and Alastair Sim movies will no doubt play several times on multiple cable channels. We have a live production showing at the Alleyway Theatre here in Buffalo, N.Y. Or, you could always go full-on retro and actually read the book.

I’m going to pass altogether this year on poor Scrooge’s story and hope for a sequel, even though Dickens is no longer with us. It just doesn’t get me into the Christmas spirit to watch a story with such a dark and foreboding ending. Christmas is supposed to celebrate the birth of new hope.

As Butler Shaffer demonstrated in his brilliant defense of poor Ebenezer, Scrooge was an invaluable benefactor to English society before the events of Dickens’ story. We are not given details of his business dealings other than they had something to do with finance. That Scrooge had been in business so many years and had amassed such wealth is enough for us to conclude he had made many more wise decisions on where to direct capital than unwise ones.

Who knows what housing, stores, railways or other benefits to society Scrooge had made possible through his wise judgment? How many thousands of jobs had he created? Dickens is unjustly silent on this. Whatever Scrooge had financed, we know it was something the public wanted or needed enough to pay for voluntarily. Thanks to Scrooge, however crusty his demeanor, the common people of London were far richer than they otherwise would have been without his services.

His only weakness seems to be sentimentality towards the whiny, presumably mediocre-at-best Bob Cratchett. We know Scrooge was paying Cratchett more than anyone else was willing to or Cratchett would surely have accepted a higher-paying job to put additional funds towards curing Tiny Tim. But we really don’t have any evidence anyone else was willing to employ Cratchett at all, at any salary level. Still, we must defer to Scrooge’s judgment on this and perhaps even laud him for finding a way to employ a substandard employee without jeopardizing the firm as a whole.

Thus, all was as well as it could have been on December 23. Scrooge’s customers were happy, Bob Cratchett was at least employed, thanks to Scrooge, and Scrooge himself was as happy as he could be, considering the ingratitude with which his genius had been rewarded and all the panhandlers constantly shaking him down.

Everything changed on Christmas Eve, when Scrooge was terrorized – there really is no other word for it – by three time-traveling, left wing apparitions. It wasn’t enough to frighten an elderly man with the mere appearance of ghosts. They took him on a trip through time, scolding him for supposed mistakes made in the past and blaming him for the misfortunes of others in the present and future. And let’s not forget the purpose of this psychological waterboarding. They are not, as Shaffer observes, pursuing Scrooge’s happiness, but his money. They are William Graham Sumner’s A & B conspiring to force C to relieve the suffering of X. Politicians A & B use the polite coercion of legislation; the spirits make use of more direct and honest threats of violence.

Their plot was successful. Scrooge awoke from his night of terror obviously out of his senses and began making one poor financial decision after another. Perhaps buying the largest turkey in the local shop could be excused on Christmas Day. But then, without any evidence of improvement in performance, he raised Bob Cratchett’s salary and promised to take on the Cratchett family’s medical expenses.

After that, we are told Scrooge was “transformed” completely, which we can only interpret to mean he no longer made the kind of decisions that had previously benefited so many. We are told Scrooge’s subsequent behavior was so foolhardy that some people laughed at him. But even this wasn’t enough to snap him out of the permanent delirium with which the spirits had inflicted him.

The story ends on that foreboding note. We are told Scrooge never again returned to the prudent decision-making that had brought on the supernatural terror attack on Christmas Eve. We have to assume the “transformed” Scrooge eventually went out of business, perhaps solely due to overpaying Cratchett, who is 50% of his labor force, perhaps due to the cumulative effect of the many unwise decisions we are told continued afterwards.

Not only was Tiny Tim’s medical care cut off, but the whole Cratchett family was rendered destitute and starving. As Scrooge had already been paying Cratchett more than anyone else was willing to, even before the imprudent raise, we have to assume Cratchett made less after Scrooge went out of business than he did at the beginning of the story, if he convinced anyone to employ him at all.

Worse even than the misfortune that befell Scrooge, Cratchett and Tiny Tim was the misfortune visited upon society as a whole. How many profitable ventures were never financed, both before and after Scrooge went out of business from investing with his heart instead of his head? How many future jobs were destroyed and children of unemployed fathers left sick and hungry?

Certainly, this horror story would be better told on Halloween than Christmas. Christmas is a hopeful holiday, celebrating the birth of the savior of the world, whose parable of the three servants lauds wise capital investment and condemns unwise use of capital. We can only hope some ambitious writer will pen a sequel to Dickens’ dark tale, in which Scrooge regains his senses, fires Bob Cratchett and returns to making the kind of decisions that once raised the living standards of so many.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Trump’s Job-Killing Carrier Deal

trump-carrierDonald Trump has not taken office and already he is delivering on his promise to keep manufacturing jobs in the United States. Yesterday, he visited Indiana to celebrate his part in persuading Carrier to keep 1,100 jobs slated to move to Mexico at its Indiana facility. Speculation of bullying, tax-funded quid pro quo (Carrier’s parent company, United Technologies, holds large defense contracts) and corporate welfare were plentiful.

Today, Zero Hedge reports Carrier was persuaded by none of the above. Instead, the company received “$700,000 a year for a period of years in state tax incentives.” That means keeping the jobs cost the government about $636 per job annually in tax revenues.

It would seem a win-win. 1,100 Americans keep their jobs, Carrier gets lower taxes to avoid having to pass on the cost difference to its customers and all the local businesses in Indiana benefit from the purchasing power that remains there with the domestic Carrier employees instead of being exported to Mexico.

That, as 19th century political economist Frederic Bastiat would say, “is what is seen.” What is not seen is all the consequences of Carrier not moving those jobs to Mexico, where they could produce their products at a lower cost. When those consequences are considered and the ledger is balanced, the deal will have made the United States as a whole poorer and will have cost it jobs.

Let’s first consider the decision in a vacuum, without the tax incentive. Carrier was moving the jobs to Mexico because it could produce the same air conditioner there at a lower cost, which it could then pass on to its customers. Keeping the jobs in Indiana raises the cost of production above what it would be with the move. That forces Carrier to raise its prices.

And we must assume Carrier would have saved more than $636 per worker per year in tax breaks had they moved those jobs to Mexico, or the move wouldn’t have made financial sense. With each worker on average producing many air conditioners per year, saving $636 per worker works out to a negligible cost savings per unit. So, Carrier is likely absorbing some of the higher costs of keeping the jobs in Indiana, over and above what they are receiving from the government. Those costs must be passed on to customers or taken out of profits, the latter resulting in either lower dividends or less money reinvested in future improvements to production.

“Ah,” says the supporter of this move, “but many people are willing to pay a little more to keep those jobs in America!” Perhaps, but the economic consequences remain. Assuming the price of an air conditioner would be $5,000.00 if produced in Mexico and keeping the jobs in America only raises prices by the $500, Americans are now paying $5,500.00 for an air conditioner instead of $5000.00. They get no more for their money than they would have paying $5,000.00. All they have in exchange for the $5,500.00 is the same air conditioner.

Had the job moved to Mexico and that same air conditioner been available for $5,000.00, the customer would have been able to afford an air conditioner and a bicycle, or an air conditioner and a new carpet, or an air conditioner and a new suit, for the same $5,500.00 he now spends to get the air conditioner only. The consumer is poorer because of the deal. His standard of living is lower. And let’s not forget that for every one employee producing air conditioners, there are hundreds or thousands of people consuming what those employees produce.

At the end of the day, the ledger balances to this: the same number of air conditioners are being produced, but at a higher cost. That difference in the cost of production is lost. The standard of living of everyone who consumes air conditioners is lowered by however much more it costs to produce air conditioners in Indiana instead of Mexico. We assume it is $500, but the exact figure is not important. They are poorer by whatever amount the diminished efficiency increases production costs.

“But kind sir!” says the apologist, “you have missed something. You have forgotten the purchasing power of those 1,100 employees, which will help local businesses and keep that wealth in America. That creates jobs that otherwise would have been lost!”

No, it is not forgotten. It is merely balanced against purchasing power lost by all those consumers of air conditioners and against all the jobs they would have created with the $500.00 they would have spent with local businesses, had they saved it in purchasing the air conditioner. The air conditioner customer who also bought a bicycle, a new carpet or a new suit also created jobs or supported existing jobs, which are now lost. And not one in a million knows where they went. The unseen killer of those jobs is the decision to make the same air conditioner at a higher cost in Indiana than at a lower cost in Mexico.

It doesn’t end there. Let us not forget the 1,100 jobs lost in Mexico, the third largest importer of U.S. exports. Because of the lost purchasing power of Mexican consumers, U.S. companies who export to Mexico lose revenue and must lay off workers.

When the whole ledger is balanced, the jobs lost in the U.S. at least equals those 1,100 retained and likely far exceeds them, as inefficiency grows exponentially as its effects ripple throughout the economy.

Finally, the apologist for the deal makes his last stand. “Yes, good sir, you make many fine points. But this deal involved lowering taxes for Carrier, which bestows upon them the same savings they would have realized by moving the jobs to Mexico. And even you must agree that lowering taxes and paying productive workers is better than allowing the government to use it less efficiently!”

Well, there is the rub. The government is doing with those lost taxes precisely what the apologist said. It is using them less efficiently than the market would have. The market would have moved those jobs to Mexico and lowered the cost of air conditioners. The government has used its taxing power to keep the jobs in Indiana and raise the cost of air conditioners above what it would otherwise be if the jobs moved to Mexico, with or without the tax incentive.

But even on the tax incentive there is more that is not seen. It is not as if the $700,000.00 in tax revenues were left in the hands of the taxpayers, who might use it productively. 100% of it went to subsidize the higher cost of producing an air conditioner in Indiana instead of Mexico. And the government went on spending the same amount as before, simply collecting the $700,000.00 Carrier doesn’t pay from others, now or in the future.

So, while the cost of the tax break is not added to the sticker cost of the air conditioner, the public is still paying that additional $636 per worker per year in the additional taxes collected to make up the government’s loss on Carrier. The public is also poorer by whatever price increase or profit reduction is necessary to offset the additional costs the company agreed to absorb to make the deal work.

No matter what defense the apologist offers, there is no escaping this. By keeping those jobs in Indiana instead of letting them move where the market is directing them, the net effect is the United States as a whole is at least $636 poorer per year for every employee kept in Indiana by the deal. It also loses jobs due to the higher prices it still pays for air conditioners, over and above what the tax break could alleviate, or the wealth lost in dividends or reinvestment Carrier sacrificed to absorb whatever additional cost savings it had to forego to keep the jobs in Indiana.  And this is one little company and just 1,100 jobs. Imagine if Trump delivers on his promise to keep or bring back millions?

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Diana Kastenbaum’s support of Obamacare more outlandish than anything Trump or Clinton has said

kastenbaumJames Madison warned New Yorkers that in a representative republic, Congress posed a much greater threat to liberty than the presidency. Proving his point, here is a jewel from Diana Kastenbaum’s website. She’s the Democratic Party Nominee to represent New York’s 27th District in the U.S. House of Representatives.

“For Diana, health care reform is about giving American families and small businesses — not insurance companies — control over their health care. For far too long, America’s health insurance system has made health care more costly, less accessible, and less efficient for families and small businesses. No one in America should have to declare bankruptcy because they can’t afford to pay their medical bills. Premiums should not be increasing at a rate of six times the rate of our GDP. That is why Diana is a supporter of the Affordable Care Act.”

Statements like this have a way of washing over most people without making more than a vague, emotional impact. Let’s unpack what she’s said here.

First, she says health care reform is about giving American families and small businesses – not insurance companies – control over their health care. This in support of a law requiring every soul in America to purchase health insurance, whether they want it or not. Not only does the ACA mandate insurance, but it mandates the services insurances will cover, meaning a smaller portion of total healthcare is left outside the purview of insurance companies.

Does this give insurance companies more or less control over health care?

She claims insurance companies have “made health care more costly, less accessible, and less efficient for families and small businesses.” Even if that were true, the ACA would only make things worse. But have insurance companies made health care more expensive? No.

Insurance companies reflect rising healthcare costs; they don’t drive them. Health insurers have all the same self-interested motivations of home insurers, automobile insurers and liability insurers.  But we don’t see the premium rates of those other insurers outpacing inflation like health insurance premiums. Why?

Kastenbaum isn’t at all curious about this. But clearly, something besides the profit motives of health insurers is increasing the cost of healthcare disproportionately. Assuming the same laws of supply and demand apply to the price of healthcare as to other products, could it be the artificial limitation of supply caused by medical licensing laws, the FDA and other disproportionate regulatory burdens on healthcare? Could it be the gross artificial stimulation of demand by huge entitlement programs like Medicare and Medicaid?

If the government gave a trillion dollars to clothing shoppers next year, would you expect the price of blue jeans to go down, remain the same or go up?

Kastenbaum says health insurers have made health care less accessible and efficient. But the ACA hasn’t increased the supply of doctors and hospitals; it’s decreasing supply. And major insurers are dropping out of the program en masse, specifically because of the burdens imposed upon them by the ACA. In many states, there will be only one insurance option for consumers next year. All this in exchange for subsidizing coverage for a tiny portion of previously uninsured consumers, some of whom were uninsured by choice.

As for efficiency, the law imposes a one size fits all plan on everyone in the country, prohibiting efficiency-enhancing discrimination on the basis of gender, medical history and local risks. Is it really more efficient to force men without dependents to purchase OB/GYN coverage? Wouldn’t healthcare be less expensive for society as a whole if they weren’t?

Kastenbaum then makes the emotional appeal, “No one in America should have to declare bankruptcy because they can’t afford to pay their medical bills.” Agreed. How is this an argument for the ACA?

Finally, Kastenbaum says, “Premiums should not be increasing at a rate of six times the rate of our GDP. That is why Diana is a supporter of the Affordable Care Act,” which is driving premiums up faster than ever before our very eyes. Media everywhere are reporting premiums increasing as much as 25% for many next year, also specifically because of the ACA.

While Kastenbaum’s ideas on healthcare markets might be particularly obtuse, electing her less delusional Republican opponent is by no means a silver bullet. If Americans truly want to make healthcare affordable again, they’ll have to change their expectations. As long as massive entitlements like Medicare and Medicaid make demand virtually unlimited and massive regulatory burdens severely limit supply, the price of healthcare is going to continue to skyrocket. And as long as we keep sending people like Kastenbaum to Washington, Congress will remain the greatest threat to our liberty.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Buffalo Billion Indictees: Scapegoats of the Empire State?

cnse-solarcity-grnd-level-render-08sep14-copyToday’s Buffalo News print edition devotes its entire front page to the indictment of prominent Buffalo businessman Louis Ciminelli and eight others on federal charges of bribery and fraud in relation to their participation in Gov. Andrew Cuomo’s “Buffalo Billion” program. The news story is accompanied by the usual “perp walk” photograph, showing Ciminelli following his attorney past the metal detector and conveniently under the “Probation and Pretrial Services” sign at the federal building downtown.

It all seems just a little too convenient for those of us who have long predicted a disastrous end for the governor’s billion-dollar boondoggle. Since the plan was first rolled out in February 2013, Solar City’s stock has skyrocketed from around $15 per share to a peak of $84 a year later (just as Cuomo’s subsidies kicked in) and then plummeted to back to Earth after several quarters of dismal earnings reports.

Solar City is the recipient of 75% of the Buffalo Billion’s largesse and its failure to produce products people buy voluntarily, without government incentives, has it looking like another Solyndra before its state-subsidized Buffalo factory is even built. Should it blow up soon after the governor handed it $750 million in taxpayer funds, the peasants just might get out their pitch forks. At that point, heads will have to roll and nothing satisfies a mob like the fall of a successful businessman.

But let’s not forget the real cause of this disaster, whenever it finally occurs: central economic planning by the government (whether federal, state or local). That’s what killed Buffalo during the post-WWII era and that’s what could kill it again, despite the organic revival happening outside Cuomo’s crony capitalist debacle.

When the government directs capital, whether towards “green energy,” manufacturing or “infrastructure,” it is overriding the choices of millions of people who have already decided not to spend their dollars on those projects. It should come as no surprise, then, that when the government finally stops intervening and allows people to spend money as they wish, the government’s “investment” turns sour.

Not only has society lost the money wasted on the government’s unsustainable project, but it has lost the viable projects consumers would otherwise have funded had their money not been taxed and spent by the government. That’s called “opportunity cost,” something college freshman learn on about their third day in Economics 101.

Lest anyone remember those lessons when the Buffalo Billion goes up in flames, we now have an alternate narrative the perpetrators can promote to avert attention from themselves. “It was all those greedy businessmen and a few bad apples in the government who ruined everything,” they’ll say. “Otherwise, it would have worked.”

Sure. For the first time ever.

This writer is reminded of Martin Sheen’s immortal quip from the classic Apocalypse Now, “charging a man with murder in this place was like handing out speeding tickets in the Indy 500.” So, too, is charging businessmen with bribery when the government starts handing out hundreds of millions of dollars in taxpayer funds.

Businessmen, like everyone else, respond to incentives. In a free market, they innovate and improve because pleasing customers is the only way for them to make profits. But in a government-directed economy, it’s not customers they have to please, but politicians. And politicians don’t need innovation or improvement. They need campaign contributions, kickbacks and other kinds of political support.

An even closer Hollywood analogy might be A Few Good Men, where a high-ranking colonel orders two enlisted men to carry out unofficial discipline on a fellow marine and then cuts them loose to face charges alone when the marine is unintentionally killed.

That movie loosely follows the story of the real-life British soldiers charged with murder in an earlier film, Breaker Morant. There, it is a high-ranking British commander, Lord Kitchener, who orders his troops to take no prisoners and then turns his back on them for political reasons when they are brought up on charges.

The latter film was based on a book written by Edward Witton, one of the defendants, called Scapegoats of the Empire.

Ciminelli and his fellow defendants just might be Scapegoats of the Empire State, fall guys for yet another in a long line of politicians who visited economic destruction on Western New York.

We don’t know if the defendants are guilty or not. They’re indicted, not convicted. But whatever the facts of the case turn out to be, one thing is certain. We’ll never see a picture of the architect of this disaster walking under a “Probation and Pre-trial Services” sign.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Brexit: Hated by All the Right People

1200px-Flag_of_the_United_Kingdom.svgAs global equities markets tumble and gold soars, the world outside the United Kingdom tries to make sense of just what our British cousins did last night. There are many narratives. UKIP Leader Nigel Farage is calling it “our independence day.” U.S. presidential candidate Donald Trump says it’s a precursor to his own election in November. Many opponents are dismissing it as a racist backlash against immigrants and refugees.

Maybe it is a little bit of all those things. Maybe it is something else completely. Whatever else it may represent, one thing is undeniable for opponents of central economic planning, giant international bureaucracies and global crony capitalism: Brexit is hated by all the right people.

One doesn’t have to be an expert on European politics to instinctively understand that if the governments, the central banks and all their connected crony capitalists are howling there will be Armageddon if you do X, it is virtually always in your best interest to do X.

And howl is just what they have been doing, with a nonstop campaign to scare the daylights out of British voters should they consider withdrawing their consent to Brussels. As MEP Daniel Hannan pointed out, they haven’t been unwilling to just make things up in their desperation to intimidate the people into a Remain vote.

As an American, I can’t help thinking about George W. Bush’s scare-tactic speech to convince Americans to support TARP back in 2008. Public outrage had sufficiently worried Congress to vote against the bill the first time around. Bush’s speech, littered with many of the same pseudo-economic canards thrown at British voters today, convinced enough Americans to relent that Congress eventually felt safe ramming it through.

This time, it didn’t work.

For those dismissing the vote as the kind of “nativist” bigotry they say inspires the Trump movement in America, there is that inconvenient other little fact that the UK is the second largest net payer in the EU, next to Germany. Critics of the EU predicted, long before the rise of Nigel Farage, Donald Trump or Marine Le Pen, that the EU would fail when the net payers grew tired of subsidizing the net payees. British citizens just confirmed their prescience.

Ironically, the “nationalist” movements sweeping across the West are the precise opposite of nationalist movements in the 20th century. Then, nationalism was a centralizing force, antagonistic towards local government. Now, it’s a decentralizing force, taking economic and political power away from larger political units and returning it to relatively more local ones.

What it is not is necessarily a conservative, liberal or libertarian movement. Individual nations and even the local cultures within them have myriad visions for what they believe society should look like. The Trump movement longs for traditional conservatism, with its protectionist tariffs, government-funded infrastructure and restrictive borders. The secessionists movements in Vermont and Quebec, Canada sought to create socialist societies. And the “Texit” movement, well, they just want to be Texans.

Neither will Brexit be a panacea for all British ills. It is likely they will make mistakes in the short term, like most secessionist movements have in the past, including the Americans in 1783. But it will be Britons making their own mistakes and living with the consequences, something they have now demanded their right to do.

Whatever Brexit ends up looking like in the short and long terms, one can’t help remembering a night 27 years ago, when the people in a city in Germany decided they’d obey their masters no longer and knocked over a wall. Oh brave new world, that has such people in’t!

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Trump confirms he’s a Hamiltonian; invokes Lincoln’s protectionist fallacies

GOP-2016-Trump_sham1-725x483Is Donald Trump reading this blog? If so, he’s not grasping that Trump Isn’t Hitler; He’s Hamilton and Reality Check: Trump’s Platform is Identical to Lincoln’s weren’t meant to be supportive of his mercantilist economic ideas. Maybe that’s on me, the writer.

Regardless, Trump invoked both Hamilton and Lincoln, starting at about the 10:30 mark, during a speech yesterday. He quotes Lincoln saying, “The abandonment of the protective policy by the American government will produce want and ruin among our people.”

Like all protectionists, Trump seems to have no idea about the concept of opportunity cost. He posits that tariffs on foreign imports will bring back manufacturing jobs, which he says “the nation” desperately needs. But it never occurs to him that when millions of Americans buy sneakers made in China for $100 instead of sneakers made in America for $200.00, they create other jobs with the $100 they save.

Trump’s speech confirms several of the arguments I make in my latest book. One can draw a virtually straight line from the Federalists, through the Whigs, to the Republicans. Obviously, there are nuances over such a long period, but the core tenets of protectionism, crony capitalism and central banking never cease to be the foundation this house is built on.

More importantly, these are the core tenets of true conservatism in the British-American tradition, since  before the dawn of the industrial revolution. You can call Trump a lot of things, but “not a real conservative” just doesn’t hold water. Free markets, individual liberty and limited government are classical liberal ideas that have only resided within the conservative movement recently and have never been very welcome. That’s because they are all anathema to the conservative worldview that any change, from within or without, threatens to break the barriers between society and man’s dark nature.

The creative destruction of the market, the free movement of labor, capital and goods, and Jefferson’s libertarian principle that the government should be limited to “restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement” is the opposite of conservatism. That’s why Hamilton feared and loathed Jefferson; that’s why Trump fears and loathes the free market. He’s a true conservative, like Hamilton, Lincoln, Coolidge, Hoover and the rest.

 

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Reality Check: Trump’s Platform is Identical to Lincoln’s

Publication1Donald Trump’s criticism of Judge Gonzalo P. Curiel is only the latest of his positions decried by the Republican Party establishment. They’ve opposed him throughout his campaign for his protectionist stance on trade, his immigration policies and his hostility towards the First Amendment, among other things.

All of this has been decried as “not conservative” and contrary to the party’s principles. Ironically, the so-called “Party of Lincoln” doesn’t recognize in Trump’s platform all the basic elements of Lincoln’s.

American’s tend to see history as a struggle between heroes and villains. Lincoln has been placed firmly in the hero category because of his widely misunderstood Emancipation Proclamation and for winning the Civil War. But when you get past the slavery issue, what’s left of Lincoln’s politics sounds a lot like Trump’s. They didn’t change significantly from the time of Lincoln’s first political speech:

“Fellow-Citizens: I presume you all know who I am. I am humble Abraham Lincoln. I have been solicited by many friends to become a candidate for the Legislature. My politics are short and sweet, like the old woman’s dance. I am in favor of a national bank. I am in favor of the internal improvement system, and a high protective tariff. These are my sentiments and political principles. If elected, I shall be thankful; if not it will be all the same.”

Lincoln was then a member of the Whig Party and it was a coalition of former Whigs and abolitionists that formed the Republican Party in 1854. And while there is no reason to doubt Lincoln’s personal opposition to slavery, it was Henry Clay’s “American System,” a repackaging of Alexander Hamilton’s platform, that defined Lincoln’s politics for most of his life.

Politically, the alliance with abolitionists allowed proponents of protectionism, internal improvements and a national bank to achieve the electoral success that had eluded them since 1800, when Jefferson’s victory rang the death knell of the Federalist Party.

“Internal improvements” was the language of the time for what we now call “infrastructure.” Prior to Lincoln’s administration, most roads and other infrastructure were privately funded and built. Both the Federalists and the Whigs had lost elections for sixty years largely for promoting government infrastructure and high tariffs. With Lincoln’s victory and the subsequent fifty-year dominance of the Republican Party, that trend completely reversed.

Lincoln ran on and executed his plans to subsidize railroads and other infrastructure. Trump wants to do likewise. Lincoln ran on and executed his plans to raise tariffs significantly in order to protect domestic manufacturers from foreign competition. Trump also wants to do likewise.

Trump has been criticized as dangerous to the First Amendment because of his continual attack on the press and threats to “open up our libel laws” as president and sue reporters who criticize him. Lincoln had him beat; he threw reporters in jail, just as the Federalists did under the Sedition Act during the 1790s.

While the issue of a central bank has been settled since 1913, it is noteworthy that Trump has lined up with libertarians in supporting an audit of the Federal Reserve. But he has given no indication he opposes its existence.

But what of Trump’s most controversial position, to deport 11 million illegal aliens? Certainly, Lincoln never supported anything like that, right?

Wrong. Until the day he died, Lincoln supported and actively sought to execute a rather bizarre plan by today’s standards, but widely supported at the time, called “colonization.” Promoted since the early 18th century, the idea was to free the slaves and then subsidize their emigration to Liberia (created for expressly that purpose), the West Indies or South America. Colonization was yet another Whig plank Lincoln inherited from his political idol, Henry Clay. In Lincoln’s own words,

”I can hardly believe that the South and North can live in peace unless we get rid of the Negroes. Certainly they cannot, if we don’t get rid of the Negroes whom we have armed and disciplined and who have fought with us, to the amount, I believe, of some 150,000 men. I believe that it would be better to export them all to some fertile country with a good climate, which they could have to themselves.”

In fairness, Lincoln was a supporter of foreign immigrants, opposing the anti-immigrant Know Nothings. But on the charge of racism, Lincoln has far more to answer for than Trump. Trump has repeatedly separated his professed admiration for people of other races with his staunch opposition to illegal immigration. Lincoln made no bones about his view that black people were inferior.

The media and Republican Party leadership has characterized Trump’s campaign as a departure from both the Republican Party’s principles and conservatism itself. In reality, it’s exactly the opposite. Trump’s platform not only represents a return to the founding principles of the Republican Party, but to the long held positions of conservatives in the British-American tradition.

Laissez faire markets and open borders have always been positions traditional conservatives staunchly opposed as a threat to the order and stability their entire philosophy is centered around. The Republican Party was born advocating tariffs and higher government spending. It has never changed those policies in practice, despite free market rhetoric in recent decades.

Trump’s success should come as no surprise. His economic ideas have had the support of truly conservative voters since the days of Alexander Hamilton. That’s why it is a somewhat futile exercise to look for a “true Republican” or a “true conservative” who departs significantly from Trump and can win. Voters seeking free markets, small government and individual liberty should look to Gary Johnson and the Libertarian Party instead.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Thought for the day March 30, 2016 Free Trade, the New Deal and the Federal Reserve

NewDealThought for the day: Free trade agreements haven’t hurt Americans; they’ve helped. They just aren’t enough to overcome the combined economic destruction wrought by the Federal Reserve System and the New Deal, both of which must be abolished root and branch before there is anything resembling a free market in the USA.

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.

Trump Isn’t Hitler; He’s Hamilton

trump hamiltonAs Donald Trump closes in on the Republican nomination for President, comparisons to Hitler continue. And while references to the dictator are never absent from political hyperbole, one can’t help but wonder if there isn’t a bit more legitimacy to them when it comes to the Donald. Even the creator of Godwin’s law won’t dismiss the comparison out of hand.

Superficially, there is something there. Trump appeals to the same kind of nationalist worldview that inspired Hitler’s supporters. Trump’s campaign slogan, “Make America Great Again,” isn’t substantively different than Hitler’s. Neither are his arguments for what has caused the decline: corrupt politicians who have sold out the nation, the presence of subversive or merely unwanted elements (Jews and communists for Hitler; illegal immigrants and Muslim refugees for Trump), and inept economic policy, meaning not enough of or the wrong kind of state intervention.

Like Hitler, Trump touts himself as the only hope to save his country, a strongman-type leader who will run a command economy, rid the country of subversive elements, and restore lost international respect. His disdain for civil liberties like free speech and open support of torture are an even more chilling similarity. For Trump, government isn’t the problem, it’s the solution, as long as the right leader is running it.

But for all the similarities, there are important differences. He certainly can’t be accused of sharing Hitler’s racial beliefs. Trump’s wall to keep out illegal immigrants from Mexico will have a yuuuuge door in the middle to admit legal immigrants of the same ethnicity. He has repeatedly voiced his admiration and respect for the Chinese, because “you can still respect someone who’s knocking the hell out of you.”

Most striking is Trump’s foreign policy differences with the Fuhrer. While Trump does advocate some sort of military action against ISIS, he’s strikingly noninterventionist in general. His willingness to come out and admit the Iraq War was a mistake – in South Carolina no less – and his general view that America should start questioning its ongoing military posture everywhere, including NATO, are the opposite of the aggressive military component integral to Hitler’s plan from the beginning.

So what do you call Trump’s brand of nationalism, if not outright fascism? If you take away the boorishness of Trump’s personality and insert more thoughtful, elegant rhetoric, you’d call it traditional American conservatism, before it was infiltrated by more libertarian ideas. American conservatism was always about creating an American version of the mercantilist British Empire and it really never changed.

Since the founding of the republic, American conservatives have argued for a strong central government that subsidized domestic corporations to build roads and infrastructure, levied high protectionist tariffs and ran a central bank. This was Alexander Hamilton’s domestic platform, championed by his Federalist Party. Henry Clay and the Whigs adopted it after the Federalist Party died. From the ashes of the Whigs emerged Lincoln and the Republicans, who were finally able to install Clay’s “American System” after decades of electoral failure.

The Republican Party has remained startlingly consistent in its economic principles, despite incorporating free market rhetoric in the 20th century. Republicans from Lincoln to McKinley to Coolidge to George W. Bush have been protectionists. Hoover reacted to the Depression by signing the Smoot-Hawley tariff, for all the same reasons Trump threatens tariffs now. And what was the first thing Republicans did in the 1950s, after two decades of Democratic Party domination? A huge government roads project that had Hamilton smiling in his grave.

Trump promises more of the same, justifying his stance against nation-building by saying, “I just think we have to rebuild our country.” Make no mistake, Trump isn’t suggesting cutting military spending and allowing the private sector to build what it chooses to build. “We” is the government, with Trump as its intellectually superior leader.

Trump isn’t Hitler; he’s Hamilton, advocating the kind of centralist government Hamilton spoke about in secret at the Constitutional Convention and attempted to achieve surreptitiously throughout the rest of his political life by eroding the same limits on federal government power he had trumpeted to sell the Constitution in the Federalist Papers. Trump wants to be Hamilton’s elected king, running a crony-capitalist, mercantilist economy just as Hamilton envisioned. Even Trump’s campaign slogan is Hamiltonian. Hamilton’s stated goal was “national greatness,” something he referred to again and again in his writing.

And while Hamilton was certainly a more eloquent and well-mannered spokesman for conservatism, Trump is actually superior to him in at least one way: Hamilton was a military interventionist, whose ambition to conquer the colonial possessions of Spain was much more like Hitler’s desire to seize the Ukraine for Germany than anything Trump wants to do internationally.

One has to wonder: Is that the real reason neoconservatives like Bill Kristol, John McCain and Lindsey Graham are so anti-Trump?

Tom Mullen is the author of Where Do Conservatives and Liberals Come From? And What Ever Happened to Life, Liberty and the Pursuit of Happiness? Part One and A Return to Common Sense: Reawakening Liberty in the Inhabitants of America.