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Archive for December 22nd, 2009

The Goebbels Ministry Of Truth is at it again…

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — increased at an annual rate of 2.2 percent in the third quarter of
2009, (that is, from the second quarter to the third quarter), according to the “third” estimate released by the Bureau of Economic Analysis.  In the second quarter, real GDP decreased 0.7 percent.

Notice a few things here.  “Goods and Services produced by labor and property“?  Uh, property produces things?  Me thinks not.  But we’ll leave that alone for a minute…..

2.2% eh?  I thought it was 2.8%?  Or was it 3.5%?

Looks like close to 40% of the so-called “growth” disappeared!

Let us not forget that on the day the original “release” was made the market was up by 20ish SPX points, or about 2%.  Today, we discover that the “second revision” cuts 40% off the so-called “growth” and the market yawns.

But let us look inside, shall we?

Motor vehicle output added 1.45 percentage points to the third-quarter change in real GDP..

Cash for clunkers, remember?  What did they say back in October?

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP

Well some of the change was there… where’s most of the rest?

Real federal government consumption expenditures and gross investment increased 8.0 percent in the third quarter

Heh, that’s up a bit from the first look, yes?

Real federal government consumption expenditures and gross investment increased 7.9 percent in the third quarter..

Indeed.

So where’s the change?  Mostly inventories – remember the much-vaunted inventory build?  Well….

The change in real private inventories added 0.69 percentage point to the third-quarter change in real GDP

So they say now.  Then?

The change in real private inventories added 0.94 percentage point to the third-quarter change in real GDP

Well there’s part of it.

What else?

Real residential fixed investment increased 18.9 percent

It is, eh?  What did you say two months ago?

the “big change” in private domestic investment is all residential fixed – up 23.4%.

Uh….. that’s not a small change folks – off by 20%?  Hmmm….

Reality is that if you wanted to pump the market there would be few better ways than to “accidentally” make initial reports “better”, then revise it away later when “higher quality” numbers show up.

The ugly reality, however, is that with the government being 30% of the economy and up 8%, the government’s “pump” was responsible for 2.4% GDP “growth” – or more than the entire claimed increase.

That is, with this revision we now have proof that we’re exactly where I said we were in October: The economy is not expanding at all in the private sector, rather, other than explicitly government spending, even with so-called “rebates” and “special deals” – IT IS STILL CONTRACTING!

The funny part is that if you read inside the preliminary release you’ll find the confidence levels – that is, the revision boundaries.  One wonders – are these really “revisions to data” (when they hit the boundary exactly) or does the Goebbels Ministry of Truth live on, and they simply didn’t want the facts – as I believed to be the case in October – to be revealed?

Will market participants figure this out?  Probably not right away.  But you can bet on one thing with certainty: Cash flow always wins in the end, irrespective of whatever false light government (and their handmaidens in the media) would prefer to present to you.

By Edward Harrison of Credit Writedowns. As Yves is in light posting mode, I wanted to run these thoughts by you here at Naked Capitalism regarding stimulus and the role of government in a debt-deflationary environment.

As we approach the new year, I have decided to write a few thematic posts as a look back at some of the more important economic topics that this credit crisis has uncovered. The thinking is that tying posts together in a theme might give a better holistic view of a few themes than the posts do in isolation.

The first topic is this: does fiscal or monetary stimulus work? That has been a consistent theme at Credit Writedowns.  And given my recent post backing away from fiscal stimulus as a policy tool, I thought it an opportune moment to explore the subject a bit via a full scale review of previous posts at Credit Writedowns.

Broadly speaking, the policy choices in a deep downturn are the ones I outlined last month in “Stop the madness now!.”

You have four options:

1. No stimulus. Let the chips fall where they may. Yves Smith calls this the ‘Mellonite liquidationist mode.’ The thinking here is that trying to avoid the inevitable bust only makes it that much larger. And the economic policies during recessions in 1991 and 2001 seem to bear that out. The Harding Recession of 1921 is commonly seen as gold standard response.
2. Monetary stimulus only. Quantitative easing mania. My understanding is this is what Ambrose Evans-Pritchard has been advocating.   The thinking here is that the flood of money and the low rates will eventually jump start the economy. No deficit spending needed.
3. Monetary and fiscal stimulus.  Full tilt Keynesian. This is the Krugman view. The thinking here is that one needs to credibly commit to higher inflation and close the output gap to avoid a deflationary spiral. If that is insufficient, then one needs to go full bore on fiscal stimulus aka deficit spending. And if that doesn’t work, subsidize jobs. The New Deal is commonly seen as the gold standard response.
4. Fiscal stimulus only. Deficit spending. I have been talking up this view. The thinking here is that we need to both close the output gap to prevent a deflationary spiral and revive private sector savings in order to promote deleveraging.

There is no magic bullet here.  We are living through a situation unique in time with few historical precedents. And there are a lot of competing ideas being tossed about. So policy makers are groping around, desperately seeking the holy grail of depression-busting economic policy.  In that regard, I don’t envy them. They are certainly going to make a lot of mistakes. It may seem at times that I don’t realize this given the harshness of my critiques, but I do.

When I started writing about the financial crisis, I took the first view, best exemplified in my pre-Lehman posts on the origins of the credit crisis and precedents in Japan and the Great Depression. My thinking at the time was that if policy makers recognized the full extent of the crisis and stayed ahead of the curve, we could get through this with a short but very sharp downturn.

• The US Economy 2008 – Mar 2008
• Credit deflation and the Japanese problem – Jun 2008
• The Japanese Problem is now ours – Jun 2008

However, policy makers were woefully behind the curve.  A recent article in the Washington Post highlights how Ben Bernanke and the Federal Reserve were blindsided by the crisis. So, when the panic that resulted from the Lehman crisis struck, I felt that the jig was up. We had been catapulted overnight into a seriously debt-deflationary economic environment in which monetary policy was ineffective. Option number two was out as a policy tool. Quantitative easing was not going to work.

The following posts outlining our thinking on these topics.

• Quantitative easing: printing money like mad to ward off deflation – Nov 2008
• Nouriel Roubini: Will massive stimulus ward off stag-deflation?  — Dec 2008
• Quantitative easing and inflation expectations – Dec 2009

As I saw it, the Lehman failure marked a clear change in possible policy paths. As I outlined yesterday:

when Lehman Brothers collapsed in a heap, it was clear to me that we faced a stark choice.  One choice was a deflationary spiral and the associated economic dead weight loss of a non-equilibrating global economy in Depression.  The other choice was a soft depression cushioned by fiscal (and monetary stimulus). About a year ago I wrote an ode to Keynesian economics called Confessions of an Austrian economist in which I said that I choose fiscal stimulus to cushion the downturn and prevent a depressionary spiral.

And this is the line I stuck to. I think the real debate about whether or not to try fiscal stimulus revolves around the role of government and its limitations. Ideologues on one side see government as a parasite which interferes with the free market.  On the other side, ideologues see government as the only way out of a crisis of this magnitude.  The key sticking point is not just the size of government, but also its effectiveness – the political will to effect change rather than to favor constituents as recent research suggests bailout money was used.

I have tried to outline this debate with a few posts that point to both sides of the issue.

• What does Mises say about trying to stimulate the economy out of recession – Dec 2008
• A brief philosophical argument about the role of government, stimulus and recession – Dec 2008
• Peter Schiff: “Government is a burden on the economy” – Jan 2009
• Marc Faber: The economic crisis is a consequence of U.S. government intervention – Feb 2009
• The choice is between increasing or decreasing aggregate demand – Oct 2009
• A few thoughts about the limitations of government – Nov 2009

The majority of Americans fall in neither of the two ideological camps.  I would argue that the reason Barack Obama was elected was his message of hope and the promise of “change you can believe in". That had many of us – including me – thinking government can add stimulus while simultaneously encouraging saving and deleveraging, reducing dependence on asset prices, and allowing zombie companies to fail.  This is government dispensing with crony capitalism. The posts below are an ode to that reasoning. You can see Buffett, Kasriel, Gross and Galbraith all taking this line.

• Congress ready with second stimulus package – Sep 2008
• Bill Gross: This economy requires a check from the government – Feb 2009
• Some tidbits about stimulus, recovery, and the Great Depression – Feb 2009
• Jamie Galbraith: Stimulus not enough – Feb 2009
• Galbraith and Buffett think a second stimulus is necessary – Jul 2009
• Does the US need a second stimulus package? – Jul 2009
• Japan does not demonstrate the failure of stimulus – Nov 2009
• Are we pushing on a string or crowding out? – Dec 2009

So, how has this worked out in practice? Not so well. From the very start, Obama’s lead by negotiating with oneself approach led to a weak and poorly crafted stimulus package.  My comments in “Obama takes middle road on stimulus and taxes that leads nowhere” from February sum up what was likely to happen (emphasis added):

In my view, it has become ever more apparent that the Obama administration is caught in some sort of muddle, trying to fudge between the calls for fiscal discipline from conservatives and the calls for stimulus from liberals.  Obviously, it is in Obama’s nature to lead by consensus, and he has looked for an inclusive political and economic strategy since he came to office.  However admirable these intentions may be, this middle path is unfortunate because it will leave no one satisfied.  Moreover, taking this middle path on the economic front — some stimulus but not massive stimulus, some tax cuts but also some increased spending, increased spending now but tax increases or budget cuts in a few years – is the worst of all outcomes; the economy will not gain enough traction to get the desired ‘jump-start’ and stimulus will ultimately be seen as ineffective.  If the Obama Administration later attempts to return to Congress for more of the same after a failed stimulus bill, it will find a more skeptical response…

My view here is that Obama is forging a middle path that leads to a dead-end. The stimulus is not nearly enough by half to get the job done. The proposed deficit reduction measures for 2013 are outright scary as they risk repeating a mistake from the 1930s. And the banking sector and mortgage plans, both of which I failed to mention, are dubious half-measures as well. One needs to act aggressively and proactively or not at all.

This is exactly what has transpired.  To make matters worse, his team’s lack of accurate economic forecasting has led to an Armageddon scenario at the state and local level, where even unemployment benefits are not adequately funded. All of this was predictable as evidenced by these two posts from early in the year.

• Obama’s stimulus bill is a tough sell so far – Jan 2009
• Will federal largesse be countered by state and local cutbacks? – Jan 2009

The President has effectively discredited fiscal stimulus as a policy tool. What’s more is the bailout of the too-big-to-fail institutions without strings, the apparent cronyism in how these bailouts were done, and the gutting of financial reforms by the financial lobby has also discredited government as an agent to level the playing field for struggling households and taxpayers. See Blodget: Obama suffers because “taxpayer always finishes last” for now, but I will take this subject up in another thematic post.

I certainly underestimated the degree to which cronyism and special interests ruled the roost in Washington. I no longer believe government can be an effective agent of change in the U.S any more than it has been in Japan (see “Japan: stimulus without reform leads to a policy cul de sac”).   As I wrote in “Stop the madness now!

If you are going to deficit spend you need to do it in a big way. You need to stop the deflationary spiral.  That means hitting the reset button by promoting private sector savings and deleveraging and purging all built-up malinvestments. The risk in addressing the situation this way, of course, is replacing the imperfect invisible hand of markets with the imperfect hand of politicians and legislative fiat.

This is a risk I no longer see as worth taking. I have bailout and deficit fatigue just like most Americans. It is abundantly clear that this Administration has absolutely zero intention of purging any malinvestment or promoting any deleveraging. All they want to do is continue business as usual and go back to the asset-based economy that caused this mess. This is why we have seen bailout after bailout coupled with easy money. It makes for record profits on Wall Street but it does nothing for the unemployed.

Moreover, the political process in the U.S. is such that any stimulus money will be diverted to pet projects and used to pay off political constituents. While this may increase aggregate demand, it does so at the risk of serious social unrest as the outrage will certainly spill over into populism.

So, I have developed a case of big government revulsion as I suspect many Americans have done. I will let Marshall Auerback argue the case for fiscal stimulus and its role leading to a sustainable recovery.  I am moving away from stimulus happy talk to focus on malinvestment.

Comments are appreciated.

There are 9 of these over at Doug Ross’ blog: Top Nine Health Care Charts You’ve Never Seen Before. But here is a key one that does not bode well for ObamaCare:

Tort and malpractice reform, of course, are not addressed in the ObamaCare bill (either version). Thus, healthcare costs will continue to soar. Why not go after tort reform?  Here’s what John Dingell had to say about that (John Dingell (D-MI): “Healthcare Bill Won’t Fund Abortions.” Associated Press: “Oh Yes It Will!”):

But the truth is this:

And this:
To actually reduce the cost, not just the price, Congress should go after one element that has grown disproportionately faster than any other expense – malpratice cost. Thus malpractice/tort reform out to be front and center in any debate. Of course, that goes against the trial lawyers that fill campaign coffers of Democrats. The other thing that could be done is to increase competition. That is a Democrat talking point, but their follow-through is odd. They want to add a single competitor to the mix, one that by the way also makes the rules for how to compete, much like having referees in a football game actually be part of the competition. Instead, with a simple stroke of the pen, the wall of separation between insurance companies competing across state lines can be dismantled and all of a sudden consumers would have some 1,500 choices nationwide. Neither of these 2 is even being considered by Obama or Congressional Democrats. Here’s Obama adviser Axelrod making that quite clear:

In addition to the above, the government has quashed innovative methods in reducing healthcare costs (Proof #21,349 That The Government Makes Health Care Expensive). Also, here’s Howard Dean: Video: Howard Dean On Healthcare: Tort Reform Not In Healthcare Bill Because We’re Afraid Of Trial Lawyers

Nice, eh? More telling graphics at the above link.

This was going to be a “quick” post on the pending bankruptcy of YRC, the nation’s largest trucking company.

Instead, I have been digging around for several hours as the story morphed into a spiderweb of pension obligations culminating in a Ponzi scheme sponsored by representative Pomeroy to bailout private pension plans at taxpayer expense.

Let’s kick this off with the headline that first grabbed my attention.

Bloomberg reports YRC Has Until Yearend to Corral Bondholders, Avert Bankruptcy.

YRC Worldwide Inc. has less than two weeks to persuade bondholders to accept a debt exchange and prevent a bankruptcy filing that its employees’ union says may force the biggest U.S. trucking company to liquidate.

YRC, which has pushed back the deadline for the swap three times this month, must complete the tender by Dec. 31 to avoid a $19 million payment of interest and fees that would leave the trucker in an “unsustainable” position, the Overland Park, Kansas-based company said yesterday in a regulatory filing.

“Bondholders are in the driver’s seat,” said David Ross, a Baltimore-based analyst at Stifel Nicolaus & Co. who has a “sell” rating on the stock. “They could force the company to file if they don’t tender enough notes, and then there is a high chance the business is liquidated.”

YRC took on debt when Yellow Corp. acquired Roadway Corp. in 2003 for $1.07 billion and then bought USF Corp. in 2005 for $1.37 billion. The company has $1.6 billion of loans and bonds, according to data compiled by Bloomberg.

Concern is growing that the company wouldn’t survive a bankruptcy filing because customers would defect, said Iain Gold, a director in the strategic research department of the International Brotherhood of Teamsters, which represented about 40,000 YRC employees as of January.

YRC’s $150 million of 8.5 percent notes due in April fell 1.25 cents on the dollar to 59.75 cents yesterday, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The shares declined 7 cents, or 6.8 percent, to 94 cents, after earlier rising as much as 15 percent, on the Nasdaq Stock Market.

The trucker must complete the exchange as part of agreements with its banks, the Teamsters and multi-employer pension funds, according to a Nov. 24 regulatory filing.

Goldman Sachs Group Inc. was creating derivatives trades that would profit from a bankruptcy, Teamsters President James Hoffa wrote in a Dec. 16 letter to Lloyd Blankfein, chief executive officer of the New York-based bank.

Goldman Sachs spokesman Michael DuVally confirmed the bank received the letter and said in an interview “Goldman does not have a position in the company, nor are we making markets in the company’s bonds or credit-default swaps.”

YRC Seeks $1 Billion Pension Bailout From TARP

Flashback May 15, 2009: Troubled trucker YRC to seek $1 billion pension bailout.

Struggling No. 1 U.S. trucking company YRC Worldwide Inc plans to seek $1 billion in bailout money from the Troubled Asset Relief Program to help it cover pension obligations, a move analysts say is unlikely to succeed as the company has no financial charter.

YRC, which has been shedding jobs and closing facilities to cut costs in the face of the U.S. recession, faces an estimated $2 billion in pension obligations over the next four years.

YRC will submit an application to the Treasury as early as Friday, a move that was first reported by the Wall Street Journal.

Pension Fund Problems

Company Chief Executive Bill Zollars complained in the WSJ article that the Central States multi-employer pension fund that it pays into is unfair because YRC ends up paying for truckers who never worked for the company.

Multi-employer pension funds were set up decades ago prior to the deregulation of the trucking industry to ensure that workers’ pensions were protected even if they changed companies. Over the past 20 years, thousands of trucking companies have collapsed, leaving their pension obligations to be funded by those left in the fund.

The Central States fund has been in trouble for years as a result of this problem. The world’s largest package delivery company United Parcel Service Inc (UPS), which had more than 40,000 employees in Central States, paid a $6.1 billion fee to withdraw from the fund in 2007 and have those employees covered by a single-employer fund jointly managed by UPS and the Teamsters union.

UPS’ move was widely regarded by analysts as a smart one, given the poor condition of the Central States fund.

YRC Terminates Pension Contributions

Flashback Jul 21, 2009: Central States Pension Fund Drops YRC Worldwide

Trustees ‘terminate’ carrier’s participation; Move won’t affect accrued benefits

The largest Teamsters pension fund dropped YRC Worldwide, the largest unionized trucking company, as its Teamster employees prepare to vote on whether to accept a 15 percent wage cut and a suspension of company pension contributions.

The Central States Southeast and Southwest Areas Pension Fund notified the principal officers of Teamster union locals last week that its trustees had decided to “terminate the participation” of YRC and USF Holland in the fund, effective July 9.

The move won’t affect employee pension benefits accrued before July 9, but there will be no additional accruals “unless and until YRCW resumes participation,” Central States Executive Director Thomas C. Nyhan said in a letter attached to the notice.

Central States is one of the nation’s largest multiemployer pension plans, providing monthly benefits to over 210,000 retirees and their surviving spouses. Since 1955 it has provided more than $40 billion in retirement benefits to Teamsters and their families.

Lethal Mix

• Poor Management Decisions
• High Corporate Debt
• Untenable Pension Obligations

Given the above set of problems it was only a matter of time before YRC went under. The exact same mix sunk GM.

There is plenty of blame to go around including a very poor management decision to acquire Roadway and USF, saddling YRC with too much debt.

However, pension issues alone would have eventually sunk YRC.

Central States Pension Fund – A Guaranteed Train Wreck

Inquiring minds are digging deeper into the YRC story by investigating in more detail the Central States Fund. The big issue is a shrinking number of employees supporting a growing number of retirees, the same critical issue that sunk GM.

Please consider Central States Fund Assets at $17.5 Billion.

As of June 30, CSPF assets stood at $17.5 billion, almost exactly the same as the $17.4 billion in assets at the start of 2009. The fund made 15.0 percent on its investments in the second quarter, thanks to the big run-up in the stock market. Central States now holds 69 percent of its assets in stocks and 28 percent in bonds.

The number of active participants (full-time equivalents) is down to 80,000, while the number of retirees holds steady at 212,000.

The new problem for the fund is Yellow Roadway Corp. YRC was allowed to defer six months of past-due payments, amounting to about $125 million that it owes the fund. The fund, along with some other Teamster funds, now holds a lien on 150 terminal properties of YRC as collateral. YRC is required to start paying back the deferred amount in January 2010, over a three year payment period. Even worse, YRC is now terminated from the fund for 18 months, and thus not liable to make pension contributions until January 2011.

Graphical Plight Of Central States Fund

click on chart for sharper image

Beware The Taxpayer Bailout

The deeper inquiring minds dig, the messier and messier this gets.

Please consider H.R.3936 – Preserve Benefits and Jobs Act of 2009

Official Summary

10/27/2009–Introduced.Preserve Benefits and Jobs Act of 2009 – Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to:
(1) allow a sponsor of a single-employer defined benefit pension plan to elect in 2009 or 2010 extended amortization periods (9 or 15 years) for investment losses incurred in prior years;
(2) allow an increase in the valuation range of plan assets;
(3) use the funded status of a plan in 2008 to determine benefit restrictions in 2009 and 2010 and prohibit the use of credit balances by pension plans that are under 80% funded in the prior year;
(4) exclude plan-related administrative expenses (including investment expenses) from normal cost targets;
(5) delay until 2012 the application of certain benefit restrictions to collectively bargained plans; and
(6) require a 120% funding target for plans adopting ad hoc amendments that allow lump sum benefits payments and increased plan liabilities. Revises rules relating to information reporting and reportable events. Calculates the amount of any pension plan guarantee by the Pension Benefit Guaranty Corporation (PBGC) using the date of plan termination rather than the date of a plan bankruptcy filing. Amends ERISA provisions relating to multiemployer pension plans to:
(1) allow such plans to elect alternative amortization plans and valuation methods in 2009 and 2010 for investment losses;
(2) extend by five years the funding improvement period for plans in endangered or critical status;
(3) permit multiemployer plans to merge or form alliances with other plans; and
(4) increase PBGC guarantees for insolvent plans to increase participant benefits.

Replenishing Pension Funds From Taxpayer Pockets

It should be no surprise that the Teamsters (or any union) would want taxpayer handouts, or that Congress would buy votes giving away handouts.

Please consider Pomeroy’s Lucre For Labor.

Rep. Earl Pomeroy, North Dakota Democrat, is drafting legislation that would amount to a massive, employer-crippling bailout for struggling union pensions. The congressman is trying to spin this as a cheap, proactive way to shore up said pensions. He claims that his bill is a response to an “urgent plea [from employers] for manageable and predictable pension funding rules as the nation works [its] way back to recovery.”

In reality, the bill as currently drafted would be a costly sop to unions, which have done so much to get Mr. Pomeroy elected. (Twelve out of his top 21 donors are unions, according to opensecrets.org.) It would allow the unions, which have badly mismanaged pension funds in the past, to make new companies liable for the pension obligations of workers at other companies, in other industries. It also would create an explicit taxpayer guarantee if it all comes crashing down.

The devil is in the details of the draft, the text of which can be found on the congressman’s Web site. The changes it introduces are chilling.

The draft would allow union-controlled multiemployer pension plans to form alliances with one another. It also would create something known as a fifth fund that the Pension Benefit Guarantee Corp., with taxpayer help, would use to prop up failing union pension plans.

Multiemployer union pension alliances might sound innocent enough, but consider what that actually means. Moody’s Investors Service recently warned of a vast underfunding problem with multiemployer pensions. Many employers fear being shackled into them. Even though the funds are controlled by unions, employers are liable not just for their own employees, but for every worker in the plan regardless of how the plan is managed or mismanaged.

The so-called last-man-standing rule holds that if every other company in a multiemployer pension plan goes bankrupt, closes or pulls out of the plan, the one survivor is responsible for every single employee covered by the plan, even those who never worked for him. UPS paid $6.1 billion in withdrawal fees just to escape the Teamsters Central States pension fund.

Earlier this year the Teamsters were required to send out a letter to participants of the Central States pension alerting them that the plan was in “critical status” – funded at 65 percent or less.

Not wanting to wait for a PBGC bailout, Mr. Pomeroy proposes putting the taxpayer on the hook now. In a stark departure from the traditional role of PBGC, the draft bill states that “obligations of the corporation that are financed by the [fifth fund] shall be obligations of the United States.” For the first time, PBGC liabilities will be borne by taxpayers. The fifth fund could make available billions of dollars to prop up union pensions. The bill does not include a statutory limit for how much taxpayer money could be shoveled into failing funds.

Taxpayers: The Last Man Standing

Pomeroy’s Ponzi scheme, should it pass, would ultimately result in taxpayers being the last-man-standing in yet another massive, unwarranted bailout.

Stop the bailouts. Enough is enough!

Please call your representative and oppose H.R.3936, especially the PBGC provisions that mandate taxpayer bailouts of private pensions.

Click here for the Online Directory for the 111th Congress

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

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Mike “Mish” Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Visit http://www.sitkapacific.com/account_management.html  to learn more about wealth management and capital preservation strategies of Sitka Pacific.

From The Daily Capitalist.

Dear Santa:

Since you give away stuff for free, I hope you aren’t a socialist and ignore my wish list during the annual potlach. By the way, it seems that the Obama Administration is way ahead of you in giving out free stuff to everyone. I hope you can catch up.

I think I’ve been a pretty good boy this year. I have regularly bitten my tongue in my commentary so as not to be accused of being a flamer. I don’t think I’ve defamed anyone. And I try to write as much original material as possible to avoid being labeled a “scraper” (lifting stuff off the Net and publishing it under my own name). And, I haven’t sold out my opinions for mere money. For a blogger, that’s a pretty good record.

Here’s my wish list. I couldn’t find where to post it on Amazon, so here goes:

1. Kill The Bill

No, not the Uma Thurman thing. I’m talking about the health care “reform” bill going through Congress right now. If your magical powers extend that far, please put economic sense into our politicians’ collective heads that government control over the system is not a way to “save money” or create “efficiency.”

2. Put in the Fix

Instead of eliminating market forces in health care, please convince Congress to fix it by peeling back the convoluted rules and regulations that have screwed it up in the first place. Suggest these four little things we could try first that actually would work, save billions, and cover more people:

Give Medicare enrollees a voucher and the freedom to choose any health plan on the market;

Give workers control over their health care dollars with “large” health savings accounts which would allow them to purchase secure health coverage from any source;

Break up state monopolies on insurance and allow insurance companies to compete across state lines; and

Block-grant Medicaid and the State Children’s Health Insurance Program to prevent massive waste and encourage states to target resources to the truly needy.

3. Turn the Sausage Makers into Sausage

I understand it’s Christmas and it would be kind of negative to wish political ill fortune on someone, but, there’s this especially despicable sentator, Ben Nelson, that I would like for you to arrange to catch him with a hooker or taking a bribe. Whatever you think would work, Santa. Make sure there are tapes. I have lots more names, but I’d be happy with Ben.

4. Firing Suggestions

Please arrange for Obama to fire Ben Bernanke, Larry Summers, Timmy Geithner, and Christina Romer.

5. Hiring Suggestions

To replace the above, how about Ron Paul at the Fed, and the following economic advisers: Walter Block, Russ Roberts, and Joseph Salerno. They are all fine economic scholars and would steer our President in the right direction.

6. Freeze Congress

Don’t let Congress pass any more bills until they’ve all read, and discussed with the No. 5 guys, Economics in One Lesson by Henry Hazlitt, the best little book on economics, ever. Televise it.

7. Bring Back the Real Constitution

Please have Obama appoint strict constructionists to the Supreme Court. Nominees who understand natural law, and that the Ninth and Tenth Amendments actually mean something. Maybe we’d get our individual sovereignty back.

8. Make Work is No Work

Let Mrs. Pelosi and Mr. Reid see the folly of the American American Recovery and Reinvestment Act of 2009, a useless $787 billion bill that is nothing other than intergenerational theft. Someone has to pay for it and I’m afraid it will be my children, grandchildren, and ten generations of my great-grandchildren.

9. Beautiful Sunsets

Require Congress to sunset every spending law they pass. You know how they promise that a program will be very effective and that it will only cost so much? Make them prove it, say every two years. If the bill fails to cure the perceived ill, get rid of it. If the program exceeds its budget, get rid of it. It will also provide us with a handy voting guide at election time.

10. Let a Thousand Flowers Bloom

Sprinkle some free market magic dust on the economics departments of our major universities. Maybe that will help the sheep break from Keynesian orthodoxy and actually begin to think.

Thank you, Dear Santa. I’m forever hopeful.

Econophile