Why President Obama Is Painful to Watch

If someone looked at your face while watching President Obama make a speech or hold a press conference, I’ll bet it would reflect pain and discomfort. Your facial expression might be described as a grimace. There are a number of reasons for that kind of reaction. It might not even matter whether you are liberal or conservative. There is much about Mr. Obama’s style and content that repels rather than attracts.

For example, the man is tiresomely repetitive. How many times has he used the terms “millionaires and billionaires,” “shared sacrifice,” and “corporate jet owners”? He gives new meaning to the term ad nauseam. Most of what he repeats wasn’t worth saying the first time. You’re left wondering, “Is that all you’ve got?”

Saying the same thing over and over makes you totally predictable and uninteresting. Mr. Obama has become tedious and boring.

How many times has he told us that creating jobs is going to be his number one priority? Has it ever happened? His “credibility gap” is growing wider than LBJ’s.

A particularly annoying aspect of Mr. Obama’s personality is that he has virtually no sense of humor. There are very good reasons why humor is categorized as a “sense.” Humor is akin to a sense of taste or sense of balance. Individuals vary widely in regard to these characteristics. Successful comedians have inherent and highly developed senses of what’s funny and what’s not. They are “naturals.” Of course, there are people on the other end of the spectrum, such as Mr. Obama.

It’s painful when people with no sense of humor attempt to be funny. Mr. Obama frequently makes lame attempts at being funny, and people in the room usually laugh, particularly members of the press. If you listen, however, what you hear is an uncomfortable, polite, and brief kind of laugh.

Mr. Obama makes use of awkward and unusual figures of speech. One glaring example that I’ve never figured out is the title of his second book, The Audacity of Hope. I realize it is a phrase he took from his mentor and long-time pastor, Jeremiah Wright. Wherever it came from, what in the world does it mean? It is typical of most of what Mr. Obama says. I suppose that it was meant to sound profound, but if you think about it, it’s anything but.

In the midst of the health care debate Mr. Obama said, “There’s something about August going into September where everybody in Washington get’s all wee-weed up. I don’t know what it is, but that’s what happens.” So far as anyone could determine, no one had ever used the term “all wee-weed up” previously. Later the White House explained that it meant wetting the bed. That still doesn’t make any sense. Let’s just say, the man is not a great communicator. Articulate he is not.

Recently in the debt limit negotiations Mr. Obama warned the Republicans, “don’t call my bluff.” That’s just weird. Anyone with half a brain knows that a basic requirement of a bluff is that you don’t let it be known that you’re bluffing. Admitting that you’re bluffing cancels its effect. If you admit that you’re bluffing, you are sure to be called on it.

Mr. Obama is often cloyingly folksy. One obvious example is his insincere and frequent use of the word “folks.” A similar lame attempt at sounding like a down-home good-old-boy is the dropping of the g in words like going, doing, etc. It just makes him sound phony. Mr. Obama is attempting to act a part, but he’s not a very good actor. Watching bad acting is no fun.

The odds are looking better all the time that Mr. Obama will be a one-term president. There’s a good chance we will only be burdened with his tiresome style for another eighteen months.

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◼ Why President Obama Is Painful to Watch August 12, 2011

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Fatal Flaws of Keynesian Economics

It’s now clear that the federal government’s massive stimulus spending has not achieved its objectives. Why hasn’t it? It’s important that we have answers to that question.

The stimulus was premised on the economic model known as Keynesianism: the intellectual legacy of the late English economist John Maynard Keynes. Keynesianism doesn’t work, never has worked, and never will work. Without a clear understanding of why Keynesianism cannot work we will be forever doomed to pursuing the impossible.

There’s no real mystery about why Keynesianism fails. There are numerous reasons why and they’ve been known for decades. Keynesians have an unrealistic and unsupportable view of how the economy works and how people make decisions.

Short-Run Focus

Keynesian policy advocates focus primarily on the short run — with no regard for the future implications of current events — and they assume that all economic decision-makers do the same. Consider the following quote by John Maynard Keynes: “But the long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean will be flat again.” After passage of the stimulus package, Lawrence Summers, Obama’s chief economic advisor at the time, often said that the spending should be “timely, targeted, and temporary.” Although those sound like desirable objectives, they illustrate the Keynesian focus on the short term. Sure it would be convenient if you could just spend a bunch of money and make the economy get well, but it’s not that simple.

The implication of a Keynesian perspective is that you can hit the economy a few times with a cattle prod and get society back to full employment. Remember that so-called “cash-for-clunkers” program? Maybe it accelerated some new car sales by a month or two, but it had no lasting impact.

The “Chicago School” is the primary source of serious research and analysis related to the Keynesian model. Two Chicago School conclusions, in particular, make it clear where Keynesian policies run aground. The two theories are the “permanent income hypothesis” and the theory of “rational expectations.”

The “permanent income hypothesis” was how Milton Friedman termed the findings of his research on the spending behavior of consumers. The MIT Dictionary of Economics defines the permanent income hypothesis as “The hypothesis that the consumption of the individual (or household) depends on his (or its) permanent income. Permanent income may be thought of as the income an individual expects to derive from his work and holdings of wealth during his lifetime.”

Whether consumers and investors focus mostly on the short run or the long run is basically an “empirical question.” A convincing theoretical case can be made either way. To find out which focus actually conforms closer to reality, you have to gather evidence.

Not Evidence-Based

Much of the difference between the two schools of thought can be explained by differences in their methodologies. Keynes was not known for his research or empirical efforts. Keynesianism is definitely not an evidence-based model of how the economy works. So far as I know, Keynes did no empirical studies. Friedman was a far more diligent researcher and data collector than was Keynes. Friedman fit the theory to the data, rather than vice versa.

The Keynesian disregard for evidence is reflected in their advocacy for more stimulus spending even in the face of the obvious failure of the what’s already been spent. At a minimum, we are due an explanation of why it hasn’t worked. (Don’t expect that to be forthcoming, however).

Failure to Consider Incentives

Another of the Chicago School’s broadsides against Keynesianism is the theory of “rational expectations.” It’s a theory for which the 1995 Nobel Prize for Economics was awarded to Robert Lucas of the University of Chicago. As economic theories go, it is relatively straightforward. It essentially states that “individuals use all the available and relevant information when taking a view about the future.” (MIT Dictionary of Modern Economics) The rational expectations hypothesis is the simple assertion that individuals take into account their best guesses about the future when they make decisions. That seemingly simple concept has profound implications.

The Chicago School’s research led them to conclude that individuals are relatively deliberate and sophisticated in how they make economic choices. Keynesians and their liberal followers apparently think individuals are short-sighted and simple-minded.

An elemental but too often overlooked reality about our economy is that it is based on voluntary exchange. Voluntary exchange is an even more fundamental feature of our economy than is the market. A market is any arrangement that brings buyers and sellers together. In other words, the primary purpose of a market is to make voluntary exchange possible.

Voluntary exchange leaves large amounts of control in the hands of private individuals and businesses. The market relies on carrots rather than sticks, rewards rather than punishment. The actors, therefore, need to be induced to move in certain desired directions rather than simply commanded to do so. This is the basic reason why incentives are such an important part of economics. If not for voluntary exchange, incentives wouldn’t much matter.

In designing economic policy in the context of a market economy it becomes important to take into account what actually motivates people and how they make choices. If you want to change behavior in a voluntary exchange economy, you have to change incentives. Keynesian policies do not take that essential step.

The federal government’s share of GDP has gone from 19 percent to 24 percent during Obama’s time in the White House. A larger government share of GDP ultimately necessitates higher taxes or more debt. In and of themselves, higher taxes retard economic growth because of their impact on incentives. The disincentive effect of higher taxes illustrates why big government is far costlier than it first appears.

It’s no accident that Keynesianism is so popular with liberals. It blends well with their unquenchable thirst for expansive government. It doesn’t work for the economy but it works for them. The obvious failure of Keynesianism is further evidence of the bankruptcy of liberalism.

Keynesianism is essentially all the Democrats have. It’s a one-trick pony. That one trick hasn’t worked and now Dems are floundering with nothing more to offer.

All but one member of the president’s original economic team has exited. According to liberal columnist Ezra Klein, “Lawrence Summers and Christina Romer were two of the most influential Keynesians in the country. Obama didn’t just have a team of Keynesians. He had a Keynesian all-star team.”

Now the president has a Keynesian all-gone team. It will be a brighter day for the country when Keynesianism itself is gone for good.

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◼ Fatal Flaws of Keynesian Economics July 22, 2011

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Two Different Worlds: The Public and Private Sectors

Most everyone realizes there are differences between the economy’s public and private sectors. However, they may not appreciate just how great the difference is.

We have an ongoing debate about the size of government, and by implication the size of the private sector. When choices are made about what responsibilities and functions to assign to the government, a crucial consideration should be the relative competencies of the private vs. the public sectors.

Consider, for example, differences in how the two sectors take advantage of advances in technology. In the private sector old products become better and cheaper, and new products flow with increasing frequency.

My 2009 car is the same make and body style of a 1990 one I owned years ago. It is significantly better in every way — more powerful, 25 percent better gas mileage, better brakes, more safety features, better handling, and more fun. The application of numerous breakthroughs in technology would be too numerous to count. The inflation-adjusted sticker price has actually declined. I have seen similar improvements in virtually every consumer product I buy and use.

The private sector’s products all around us — food, shelter, clothing, automobiles, home appliances, entertainment, for example. The public sector’s products include defense, the justice system, roads and highways, public schools, income redistribution (welfare), laws, and regulations.

Many of the government sector’s outputs are more like anti-products than products. Regulations stifle innovation, decrease productivity, increase costs, and generally drive people crazy. Rather than wealth creation, regulations result in wealth prevention.

In the private sector virtually every product and every service has been profoundly affected by the technological revolution. The government sector, on the other hand, seems to have no learning mechanism. The private sector is responsive and dynamic; the public sector is almost catatonic. In the private sector new products are introduced at a dizzying rate of speed.

The private sector provides ideal growing conditions for creativity. A striking example of this is the explosion of “apps” (applications) for “smart phones.” (A smart phone is a cell phone that connects to the internet.) The two leading providers of apps are Apple and Google. The current population of available apps is over 350,000 and still growing. Many of the apps are free or cost only one or two dollars.

What these apps can do for you is absolutely mind boggling. The proliferation of the apps is a dramatic example of R.W. Emerson’s observation, “Invention breeds invention.” The apps’ universe has provided creative opportunities for thousands of widely dispersed innovators and entrepreneurs. Hundreds of thousands of innovative people are diligently “finding a need and filling it.”

The government sector is “so yesterday.” Is there any example of technology noticeably increasing the efficiency of government? Does government productivity ever increase? We have expended trillions of dollars on the “war on poverty” and the incidence of poverty is as basically unchanged. Public schools consume a large fraction of state and local budgets. Public schools have grown progressively more dysfunctional over the past several decades.

One of the public “products” most of us are forced to “consume” is the Internal Revenue Code. During the almost hundred years of its existence its efficiency has consistently grown worse. Its birth coincided with that of the Model T Ford. Automobiles are vastly superior to those of the early 20th century, the IRC has evolved backwards. In terms of resources consumed and the burden on the economy, the costs of collecting a dollar of revenue has increased dramatically over the life span of the Internal Revenue Service. The Model T is a museum piece. The IRC should be.

The relative shares and importance of the public and private sectors are only partially a political decision. It isn’t simply about spending money and passing new laws and regulations. The public sector is certainly doing enough of that.

There is in effect an undeclared race between the public and private sectors in regard to satisfying human wants. Who’s winning that race? Which sector is doing a better job of affecting peoples’ lives in a positive way? In fulfilling human wants the private sector is leaving the public sector in the dust. People get more and more value from the private sector and the same or less value from government activity even though the cost of government has increased at an exponential rate.

Why is there so much difference in how the two sectors function? Two important reasons are incentives and competition.

The University of Rochester economist, Steven Landsburg, says, “Most of economics can be summarized in four words: ‘People respond to incentives.’ The rest is commentary.” Although I think that’s an exaggeration, there is much truth in it. The private sector is vastly more effective and efficient than the government mostly because of the differences in the incentive structures. In the private sector you can get rich filling needs and solving problems. The public sector’s incentive structure is totally dysfunctional.

In a competitive environment, innovation, efficiency, and product improvement become matters of survival. Apple and Microsoft spend billions of dollars annually on research and development. They spend those vast amounts more out of necessity than choice. If they did not they would fall behind and lose market share.

President Obama complained recently about the White House’s obsolete phone system. He said that the White House phones are “30 years behind,” and “we can’t get our phones to work.” He said that he was disappointed by the lack of “really cool phones and stuff.” Does he ever wonder why this happens? I doubt that he does. I’m pretty sure no major corporation has an obsolete phone system.

Mr. Obama’s campaign themes were “hope and change.” Ironically, he is intent on increasing the role of government, the entity most resistant to and even incapable of change and innovation, and there is little reason to hope that will change any time soon.

In light of the stark difference in the effectiveness and competence between the private and public sectors, it totally mystifies me that any sentient person would want to transfer more power and money to the government.

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◼ Two Different Worlds: The Public and Private Sectors June 1, 2011

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Debt Limit Fear Mongering

“The debt limit is coming! The sky is falling!” Or maybe a more apropos parable is the boy who cried wolf.

Much of what we’re being told about having to increase the debt limit doesn’t make sense. Here are some rather obvious questions that need to be considered regarding the debt limit:

• If you can raise the limit whenever it becomes a limit, what’s the point?

• If not raising the limit would be catastrophic, is it possible to have a limit? If adhering to the limit creates havoc, is it even an option?

• How will not raising the limit result in default? Doesn’t it simply mean that from that point on, your current expenditures cannot exceed your current revenue?

The limit doesn’t even mean you cannot issue new bonds to replace maturing ones. It just means you can’t increase the total amount of outstanding indebtedness. It does not mean that all federal government payments of any kind must stop immediately, as former treasury secretary Alice Rivlin has claimed. There might well be some explanation for the debt limit-default connection, but it is anything but obvious.

When you reach the limit, you basically have three choices — decrease spending, raise taxes, or raise the limit. Have we already reached the point where there are zero discretionary expenditures? Are there no purchases that can be canceled or at least postponed? Are there no positions that can be eliminated or at least left unfilled?

The first federal debt limit was imposed in 1917. It has been raised an average of every fifteen months since then, including eleven times in the past fourteen years.

If the limit can be raised more or less at will, is it a complete joke? No, it’s only a 90 percent joke. In the current iteration of the dance, for example, Republicans hope to use it as leverage to extract spending limitations from the Democrats.

According to H.L. Mencken, “The whole aim of practical politics is to keep the populace alarmed — and hence clamorous to be led to safety — by menacing it with a series of hobgoblins, all of them imaginary.” Fear mongering is part of a politician’s DNA, but lately it has been resorted to in unprecedented levels.

We were told in 2008 that the Troubled Asset Relief Program (TARP) had to be passed in a matter of hours or days or financial Armageddon would surely follow. In retrospect, that is very much in doubt, to put it mildly. TARP probably caused more damage than it prevented.

The stimulus package was rushed though in the first two weeks of the Obama presidency, again under the guise that we had little choice and no time to debate. We were told that passing the stimulus bill would be the only way to prevent the unemployment rate from exceeding 8 percent. The stimulus bill passed, government spending exploded, and the deficit shot up. Nevertheless, the unemployment rate went well above 8 percent and has remained there.

The stimulus has definitely not lived up to its official title — the American Recovery and Reinvestment Act. Two and half years after it was passed, there is no “American Recovery” in sight. We are living through what is by far the longest recession in the nation’s history.

Once again we’re hearing the same calamitous warnings of impending disaster if we don’t put aside our skepticism and just put our trust in the authorities in Washington, D.C. and on Wall Street. Have they earned our trust? What has been their track record?

There are indications that the scare tactics aren’t working like they used to. A New York Times poll last week asked, “Do you favor or oppose raising the debt limit?” Only 27 percent said they were in favor versus 63 percent who were opposed. The results did not change much when the question was followed up with the possibility that a limit might increase interest rates.

Having a debt limit is not the problem. It is only a symptom, or even a symptom of a symptom. Spending beyond our means is the problem.

A budget is one of the most basic and widely used tools of human action. It is a highly useful method for dealing with reality. Failing to face facts about a budget is the same as running away from reality. The simplest and most common budget rule is to balance income with spending. There’s nothing wrong with temporary imbalances, but any serious observer knows that permanent deficits are an invitation to disaster.

Those who argue it’s too soon for the government to live within its means are like a drunk who says he couldn’t possibly sober up unless he first gets another drink. The debt limit is a little bit like an “intervention.”

Everyone admits that the debt limit will once again be raised. Nevertheless, the fact that it has become such a hot issue this time is a good omen. The public, at least, appears ready to get serious.

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◼ Debt Limit Fear Mongering April 28, 2011

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

California Descends Deeper Into Self-Destruction

California — it’s the best place to live and it’s the worst place to live. The physical climate is almost ideal and the political climate, if you’re a conservative, is surreal. Through their politicians and bureaucrats Californians seem hell bent on destroying the state’s vast potential. It’s a painful sight to witness.

The latest, all too typical, example is a law signed by Governor Jerry Brown last week mandating new renewable energy requirements for electric utilities in the state. The new law requires that 33 percent of electricity generated be done with “renewable” sources, essentially wind mills and solar panels, by the end of the year 2020. What’s the objective of this “ambitious” new regulation?

To answer that question you first need to understand that California has a wildly inflated sense of self-importance. Californians actually believe they have the ability and duty to save the planet. Humility is clearly not their strong suit.

California has a population of roughly 37 million. That is barely half of one percent of the world’s population. If Californians reduce their “carbon footprint” by a third (a very tall order), that will reduce humanity’s carbon footprint by one sixth of one percent. I hate to tell my fellow Californians, but there is no way on earth that will make an iota’s worth of difference.

Some Californians will point out, however, that that misses the point. Because they think California is the center of the universe, what happens here will change behavior and attitudes throughout the world. California is a place where self-esteem has run amok.

At the signing ceremony Governor Brown said, “It’s about California leading the country. It’s America leading the world. There are people who think we can drill our way to happiness and prosperity. Instead of taking oil from thousands of miles away, we’re taking the sun and converting it.” Brown went on to say quite proudly, “I didn’t get my name ‘Governor Moonbeam’ for nothing.”

A recent Public Utilities Commission study found that previously imposed renewable energy regulations have added $6 billion to what utilities have had to spend generating electricity since 2002. Has there been any measurable or identifiable benefit for spending that unnecessary $6 billion? The benefit-cost ratio of those expenditures is a close to zero as it’s possible to get. This has been absolute folly and we are about to multiply it by who knows how much.

Such costs are even worse than increasing taxes. Taxes at least have the potential to create value when spent on, for example, teachers’ salaries. Taxes redistribute wealth, mandates destroy wealth.

When the utilities are forced to buy several times more power generated by windmills and solar panels, the price is bound to go through the roof. Not to worry, however. The new law further requires the utilities commission to place limits on how much can be spent on renewable power. When one kind of coercion isn’t enough, follow up with another kind of coercion. Of course, the only real result of a price ceiling is to create shortages. Shortages do even more economic damage than rising prices. Keep passing laws until the entire economy is in a straightjacket. One interference with the market always necessitates another, as Fredrich Hayek demonstrated long ago in The Road to Serfdom.

As is usually the case (Obamacare, for example), the spineless lawmakers left the ugly details to the bureaucrats. According to public utilities commissioner Mike Florio, “Our staff is already figuring out what we’ll need to do. It’s clearly a priority for the state, so we’ll get it done as fast as possible.” The politicians and the bureaucrats have not the vaguest idea what they’re doing. They know nothing about what’s involved in providing electricity to the state’s residents and businesses, and they don’t really see why they need to.

The legislation demonstrates the liberal faith in and willingness to use force. The assumption is that solar panels and windmills can suddenly increase their output just because a law has been passed. It’s not that simple. The politicians have no more understanding about how technology works than they do about how the economy works.

If it’s California’s responsibility to save the world, and if force works, why such a modest target? Why not, for example, a 100 percent renewable requirement by 2015? The 33 percent mandate by the end of 2020 is totally arbitrary. How was it arrived at? When you’re operating in a realm where costs don’t matter and objectives are utopian, numbers are a mere afterthought. The targets are unlikely to be achieved even after billions of dollars have been squandered. According to Gino DiCaro, spokesman for the California Manufacturers and Technology Association, industry in California already pays electricity rates about 50 percent higher than the rest of the country. That, of course, is one of the reasons for the exodus of businesses from the state.

Although California politicians fail utterly in their basic responsibilities—balancing a budget, for example—they arrogantly believe they can save the planet. Their attitude is, “We can’t possibly focus on the state’s economy. We’re too busy stopping global warming!” Just as they recklessly overpromise on government-employee pensions, they overpromise on their ability to cure the world’s maladies.

In a spot-on Wall Street Journal column last year entitled “California: The Lindsay Lohan of States,” Allysia Finley (a former resident of California) pointed out that our government here is being “run by a brothel of environmentalists, lawyers, public-sector unions and legislative bums.” Her article followed the November elections that made California a one-party state. She said the state is like “a prima donna who once showed some talent but is now too wasted to do anything with it.” I fervently wish her words weren’t so true. As a resident of California, it breaks my heart to see the state’s vast potential being squandered. As an economist it pains me to see resources so grossly misallocated and wasted on such a massive scale.

I wish this self-destructive behavior were confined to California. Ominously, the renewable mandate signing ceremony was attended by U.S. Energy Secretary Steven Chu. It isn’t often a state-level bill signing is attended by a U.S. cabinet officer. The Obama administration obviously believes California’s lunacy is just what the rest of the country needs. God help us.

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◼ California Descends Deeper Into Self-Destruction April 21, 2011

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Make Way for Mini-Labor

The Democrat party is an amalgam of special interest groups — environmentalists, trial lawyers, minorities, college professors, and labor unions, for example. All of these groups, however, are not equally crucial to the survival of the party. Far and away the most important, of course, is organized labor.

The British equivalent to our Democrat party is the Labour party. If there were truth in labeling, that would be the name of the Democrat party. Only the spelling would change.

The Democrat party has numerous reasons to be worried. Possibly the biggest is the degree to which it is dependent on organized labor for its continued success and possibly even its existence. Where would Democrats be without unions, and vice versa? As much as they trumpet the value of diversity, Democrats are dangerously under-diversified.

Only labor unions have the ability to automatically and involuntarily extract campaign funds from their members. Unions have become the equivalent to a guaranteed income for the Democrat party.

Automatic payroll deduction makes unions qualitatively different from any other Democrat support group. Republican governors are currently making great progress in rescinding automatic payroll deduction for public employees in several states.

There is little or no difference between the goals of labor unions and the Democrat party. Their political philosophies are indistinguishable. Both, for example, view people not as individuals but rather as members of groups, all of whom are to have equal incomes, regardless of effort or merit. Although both Democrats and unions would vigorously deny being socialists, both are strongly sympathetic to socialistic ideals.

Much of the most destructive legislation of the past eighty years has been the products of the unholy alliance between the Democrat party and organized labor. Besides being far and away the greatest source of campaign funds, unions have provided a dependable army of disciplined foot soldiers for the Democrat party.

Their alliance has been a major factor in the success of both. The unions rely on the Democrats to bend the rules in their favor — being exempted from anti-trust and restraint of trade regulations, for example. Everyone else and the economy end up worse off. Unions are rarely prosecuted for widespread corruption, threats of violence, and blatant intimidation. They have been allowed to play by a different set of rules.

Democrats need unions to deliver money and votes, unions need Democrats to deliver legislation that works in their interest. As both organized labor and the Democrat party decline in power, what each can deliver for the other will diminish. Each side of the symbiotic relationship must have power and vitality in order to keep the relationship working.

If the Democrat party finds itself in the minority for an extended period of time, it will be unable to deliver the legislation. The energy necessary to propel the system will peter out. In fact, it’s already begun. Democrats were unsuccessful in passing “card check” even when they had majorities in both the House and Senate. Unions are not happy about that.

Organized labor is 100 percent devoted to the Democrat party. Neither should be at all surprised that Republicans are now working to diminish the power of unions. It is only natural for Republicans to be seeking to weaken their opponents’ basic support apparatus. Someone should remind Democrats, “Live by the sword, die by the sword.”

Less than seven percent of private-sector workers now belong to unions. That is a number that probably scares the hell out of Democrats. Thirty-six percent of government workers are unionized. If public-sector history repeats private-sector trends, the implications are profound. As Washington Post columnist, Robert Samuelson, put it, “Big Labor became Little Labor. If public-sector unions fail, Little Labor could become Mini-Labor.” I would only add — and the once powerful Democrat party will become the Mini-Democrat party. It’s way too soon to know for sure, but for Democrats it could be that the party’s over.

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◼ Make Way for Mini-Labor March 4, 2011

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.

Prerequisites to True Freedom in the Middle East

There are several profound lessons in the specific event that is thought to be what triggered the spreading unrest in the Middle East. Much can be learned from the particulars of what happened and the fact that they have resonated so widely. The event and its ramifications were the subject of a recent 60 Minutes segment.

The following is how Wikipedia summarized what happened:

Twenty-six year old Mohamed Bouazizi had been the sole income earner in his extended family of eight. He operated a purportedly unlicensed vegetable cart for seven years in Sidi Bouzid 190 miles south of Tunis. On December 17, 2010 a policewoman confiscated his cart and produce. Bouazizi, who had such an event happen to him before, tried to pay the 10-dinar fine (a day’s wages or about 10 USD). In response the policewoman slapped him, spat in his face, and insulted his deceased father. A humiliated Bouazizi then went to the provincial headquarters in an attempt to complain to the local municipality officials. He was refused an audience. Without alerting his family, at 11:30 a.m. and within an hour of the initial confrontation, Bouazizi returned to the headquarters, doused himself with a flammable liquid and set himself on fire. Public outrage quickly grew over the incident, leading to protests. Bouazizi died on January 4, 2011.

Apparently a lot of people in the region identified with Mr. Bouazizi’s frustrations. Anti-government demonstrations in Tunisia inspired similar demonstrations in Egypt, Libya, and Yemen. Dictators who have ruled for decades are wondering who’s next.

It would not be possible to generalize about the various objectives of hundreds of thousands of demonstrators in a number of different countries. Replacing dictators with democratically elected governments seems to be one goal. Political freedoms such as freedom of speech and assembly are another likely objective.

However, it was not specifically political freedom that drove Mohamed Bouazizi to his desperate act. Rather, it was the absence of economic freedom. His last words before setting himself aflame were, “How do you expect me to make a living?”

Economic freedom is at least as important as political freedom, particularly in practical, day-to-day terms. Your freedoms to earn a living and freely engage in voluntary exchange are at least as important as your freedom to vote or freedom of speech.

The government took from Mr. Bouazizi his ability to earn a living. It arbitrarily took from him, and his customers as well, the freedom to engage in voluntary exchange. That is obnoxious interference with a most fundamental human endeavor. What could be a more basic economic activity than operating a vegetable cart in a village market?

It has been reported that the unemployment rate among college graduates in Tunisia and Egypt is 50 percent. Dictatorships smother the human spirit in numerous ways. Millions of people who want to be gainfully employed cannot find jobs. Centrally controlled economies are functionally incapable of delivering authentic full employment.

Human rights are inextricably connected with property rights. As Ayn Rand observed many years ago, “Just as man can’t exist without his body, so no rights can exist without the right to translate one’s rights into reality–to think, to work and keep the results–which means the rights to property…. Without property rights, no other rights are possible. The man who has no right to the product of his effort has no means to sustain his life.” Rand could well have had in mind someone like Mohamed Bouazizi when she wrote those words.

Each year the Heritage Foundation computes a “property rights index”:

A subcomponent of the Index of Economic Freedom, the property rights index measures the degree to which a country’s laws protect private property rights, and the degree to which its government enforces those laws. The index also assesses the likelihood that private property will be expropriated and analyzes the independence of the judiciary, the existence of corruption within the judiciary, and the ability of individuals and businesses to enforce contracts.

In the Mideast, Israel has a property rights index of 70, the highest in the region. Egypt’s index is 50, and Libya’s is 10. (The U.S. has an index of 85.) Raising their property rights index should be a top priority for the revolutionaries in the region. What drove Mr. Bouazizi over the edge was the confiscation of his property.

Lack of dependable property rights is a major deterrent to investing. An investment is a current expenditure for a future benefit. Reliable property rights are one of the best ways to create a predictable future.

Whether or not economic freedom is important is one of the dividing lines between liberals and conservatives. Liberals never met a regulation they didn’t like. They’re strong advocates of rent control, minimum-wage laws, and oil and gas drilling bans, for example. They believe our problems result from too few regulations rather than too many. They generally see nothing wrong with countless diminutions of property rights.

In the Middle East, as well as other parts of the world, an absolute prerequisite to true progress is the reduction of government power. The dead hand of government regulation and control is smothering human potential. If books such as The Wealth of Nations, Capitalism and Freedom, and The Road to Serfdom became widely read in the Mideast, it would greatly improve the chances for meaningful and lasting progress.

I sincerely hope that people there as well as elsewhere achieve their goal of democratically elected governments. However, even if they do, it will not assure economic freedom. The U.S. and other Western countries enjoy a high degree of democracy, but there are still far too many limitations on economic freedom and property rights.

Constrictions of economic freedom are destructive wherever they occur. Petty tyrants like the policewoman and city officials in Sidi Bouzid, Tunisia exist almost everywhere in the world. They maliciously and gleefully destroy wealth creation and the human spirit.

Almost any significant endeavor you attempt in the U.S. will necessitate having to deal with mindless regulations, interminable delays, and brain-dead bureaucrats. An oil worker who has no job because of the Obama administration’s illegal drilling moratorium could well ask, “How do you expect me to make a living?”

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◼ Prerequisites to True Freedom in the Middle East February 25, 2011

Ron Ross Ph.D. is a former economics professor and author of The Unbeatable Market. Ron resides in Arcata, California and is a founder of Premier Financial Group, a wealth management firm located in Eureka, California. He is a native of Tulsa, Oklahoma and can be reached at rossecon@gmail.com.