1.16.2005

WHAT W WOULD SAY IF HE WEREN'T SUCH A "COMPASSIONATE" CONSERVATIVE



If only PJ O'Rourke were Bush's speechwriter

MY FELLOW AMERICANS, I had intended to reach out to all of you and bring a divided nation together. But I changed my mind. America isn't divided by political ethos or ethnic origin. America isn't divided by region or religion. America is divided by jerks. Who wants to bring a bunch of jerks together with the rest of us? Let them stew in Berkeley, Boston, and Ann Arbor.

The media say that I won the election on the strength of moral values. If the other fellow had become president, would the media have said that he won the election on the strength of immoral values? For once the media would have been right.

We are all sinners. But jerks revel in their sins. You can tell by their reaction to the Ten Commandments. Post those Ten Commandments in a courthouse or a statehouse, in a public school or a public park, and the jerks go crazy. Why is that? Christians believe in the Ten Commandments. So do Muslims. Jews, too, obviously. Show the Ten Commandments to Hindus, Buddhists, Confucians, or to people with just good will and common sense and nobody says, "Whoa! That's all wrong!"

But jerks take issue with every one of the Ten Commandments. Jerks are particularly offended by the first two Commandments. Of course people of faith, decent people, differ on interpretations of the first two Commandments. For example, we don't all agree about the meaning of "Thou shalt not make unto thee any graven image." However, we do all agree about "Thou shalt not bow down thyself to them" when them is Freud, Marx, and Dan Rather.

"Thou shalt not take the name of the Lord thy God in vain." How many times, over the last few months, have we heard, "Ohmigod, ohmigod, ohmigod, I can't believe George Bush won"?

"Remember the Sabbath day, to keep it holy." Let's be fair about this. We did see a lot of white, non-Hispanic Democrats in churches in 2004. But they were all running for president. And the churches were inner-city black churches. I happen to know that there are churches in the white, non-Hispanic suburbs where these Democrats live. Apparently jerks can't find them.

"Honor thy father and thy mother." Are telling lies about a bankrupt Social Security system and trying to block its privatization reform ways to do this?

"Thou shalt not kill." Why, in the opinion of jerks, is it wrong to kill a baby but all right to kill a baby that's so little he hasn't been born yet? And why do the same jerks who favor abortion oppose the death penalty? We can imagine people so full of loving kindness that they can accept neither the abortionist nor the executioner. We can even imagine people so cold-hearted that they embrace them both. But it takes a real jerk to argue in favor of killing perfect innocents and letting Terry Nichols live.

"Thou shalt not commit adultery." The jerks have begun praising marriage lately. But only if the bride and groom each have a beard.

"Thou shalt not steal." In 2004 the United States government spent $2,318,800,000,000. Thus every American benefited from $7,919.37 worth of federal services. Let me ask the jerks something. Say you're average jerks, a "blended family" of four. Did you pay $31,677.48 in taxes last year? If you didn't, you took things from other Americans. What did you give in return?

"Thou shalt not bear false witness against thy neighbor." Especially not in return for vast wealth, abundant prizes, and lavish praise from fellow jerks. I'm talking to you, Michael Moore.

And then there is the Tenth Commandment. "Thou shalt not covet thy neighbor's house, thou shalt not covet thy neighbor's wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor anything that is thy neighbor's." The Ten Commandments are God's basic rules about how we should live--a brief list of sacred obligations and solemn moral precepts. The first nine Commandments concern theological principles and social law. But then, right at the end, is "Don't envy your buddy's cow." How did that make the top ten? What's it doing there? Why would God, with just ten things to tell Moses, choose as one of those things jealousy about the starter mansion with in-ground pool next door?

Yet think how important the Tenth Commandment is to a community, to a nation, indeed to a presidential election. If you want a mule, if you want a pot roast, if you want a cleaning lady, don't be a jerk and whine about what the people across the street have--go get your own.

The Tenth Commandment sends a message to all the jerks who want redistribution of wealth, higher taxes, more government programs, more government regulation, more government, less free enterprise, and less freedom. And the message is clear and concise: Go to hell.

1.11.2005

Senator in the shadows as his agenda moves ahead


By Daniel Weintraub -- Bee Columnist
Sunday, January 9, 2005


Amid all the hoopla that went along with Gov. Arnold Schwarzenegger's second State of the State speech, and all the talk of the governor's bold plan to attack some of the Capitol's most sacred cows, state Sen. Tom McClintock went almost unnoticed.

But as the recall election that ousted former Gov. Gray Davis finally seems to be bearing serious fruit, maybe this is a good time to give McClintock his due.

The steely economic conservative from the northern San Fernando Valley was present at the creation of the recall. One of his longtime aides - John Stoos - helped nurture the idea, his friend Ted Costa was the official sponsor, and McClintock himself attended the recall group's first press conference, before anyone was taking the thing seriously.

Then, as the campaign unfolded in the summer of 2003, McClintock entered the fray as a candidate for governor, offering a pointed, no-nonsense appraisal of the state's condition, and strong medicine to cure it.

As other Republicans dropped out of the race, clearing the way for actor Arnold Schwarzenegger, some urged McClintock to do the same. Political consultants and pundits warned that he was risking his political future by endangering Schwarzenegger's candidacy, but McClintock simply said he trusted the voters to decide whether he was a viable candidate, and not to waste their votes on him if he was not.

At the one and only debate featuring all the candidates, McClintock shined. More than once, he almost seemed to be offering Schwarzenegger a lifeline, and his novice opponent grabbed it, echoing the senator's comments. McClintock emerged as a sentimental favorite, with Republicans and Democrats both saying they admired his principled stands.

But principles or not, he lacked Schwarzenegger's movie-star credentials, and he could not budge the leader's numbers among a mass audience. McClintock faded down the stretch, finishing third behind Schwarzenegger and Democrat Cruz Bustamante, with 13 percent of the vote.

For the next year, McClintock watched from the Senate as Schwarzenegger learned the ropes in the Capitol, compromised with Democrats, avoided confrontation and, in the end, made little progress on the fundamental problems that bedeviled the state. The senator offered muted criticism when appropriate, support where he could.

Then, Wednesday night, suddenly everything changed. It was if the flashy governor were channeling his straight-laced colleague. Schwarzenegger's speech sounded almost as if McClintock had written it.

"Maybe I should have copyrighted some of my ideas," McClintock said with a laugh when I asked him later about the resemblance.

McClintock, some might remember, was one of only a handful of lawmakers to vote against a pension bill in 1999 that boosted state retirement benefits and paved the way for a wave of local pension increases that have threatened the financial solvency of some cities and counties. Three years later, McClintock was the only legislator to vote against a lavish new contract for the state's correctional officers, or prison guards. And all along he warned that the state's spending growth could not be sustained.

Now Schwarzenegger was saying that pension bloat, the guards union and other ills McClintock has spotlighted over the years were the heart of the state's problems. And with no apparent bitterness, McClintock endorsed the Schwarzenegger agenda.

Merit pay for excellent teachers? "I've always maintained that the public schools would work a lot better if we paid the best and the brightest more than the dullest and the laziest."

Pension reform? "It has to be done." McClintock voted for a similar plan almost 15 years ago that was undone by the 1999 bill he opposed. "Had it been left alone I doubt we would be facing the spiraling costs we are now."

Removing from legislators the power to draw their own political boundaries? "People with a direct stake in a decision should not be the ones making that decision. It's not fair to them, and they make lousy decisions."

Budget reform? McClintock might go further than the standby, across-the-board cuts Schwarzenegger has proposed, but he says the governor's plan will do the job. "It's a helluva lot better than what we have now," he said.

McClintock predicts that Schwarzenegger, if he stays the course, will prevail. But it won't be easy.

"I don't think he is doing this because he wants to, but because he has to," McClintock said of the governor. "He made it very clear that this is going to be a nasty fight and he's probably going to emerge from it less popular than when he went in. But it has to be done. Because these problems can't be ignored, and time has run out. That's what leadership is all about."

McClintock ought to know.

1.10.2005

IS ARNIE CHANGING HIS (LIBERAL) TUNE???






“You can judge a man by the quality of his enemies,” a wise political mentor of mine once told me – the theory being that an even better barometer of someone’s worth than if the good guy’s like him, is if the bad guys are after him…because if the bad guys are in hot pursuit, that means they’re really doing something right.

If judged by that and that alone – my tune about our fair Stalinist Governor might be changing a bit.

*****


Last week, Arnie delivered his State of the State address. I expected to hear a few nuggets of mild-conservatism out of his mouth, laced heavily with things so wacky they’d make Ted Kennedy blush.

Much to my surprise though, the Governator declared war on union-thuggery up and down the state. He pissed off the CSEA by announcing pension reform. He irritated the CCPOA by announcing reform of the prison system. He infuriated the CTA by using the two little magic words, “merit pay,” and announcing his distaste with the tenure system. He didn’t get any applause from a good number of Assembly and Senate Democrats by coming out in favor of a mid-decade redistricting plan, and while he verbally placaded them, he upset some tree huggers by talking about the need to build more power plants and transmission lines throughout the state.

If you really can judge someone by the quality of their enemies – well, Arnold’s looking better all the time.

*****


But that’s not it. In his speech, he “borrowed” text from some great conservative heroes, as well.

He “borrowed” language from Reagan, announcing that California’s fiscal crossroads was “a time for choosing,” echoing Reagan’s legendary Goldwater speech.

He “borrowed” language from Tom McClintock, making it clear that “we don’t have a revenue problem. We have a spending problem.”

This even brought someone, and I’m guessing it was Tom, to shout “Here! Here!” from the back of the Assembly chambers.

*****


Arnold’s speech was also a stroke in political savvy. Figuring presumably that some voters may be tiring of his broken-record pleas that if the Legislature won’t pass his bills, he’ll take them to the people, instead he turned that concept on its head. In announcing a Special Session of the Legislature, Arnold basically said that instead of taking his ideas to the people, if the Legislature (ie, the Democrats) fail to act on his ideas…THE PEOPLE will rise up to put those ideas on the ballot, and he’ll be there standing right beside them…cute imagery, smart politics. I’m sure Frommer and Perata were thrilled!

*****


After hearing his speech, it’s not like I’m saying Arnold is all of a sudden one of us. Far from it. Socially, he’s still a commie. But, if the saying is true and you can judge a man by the quality of his enemies, then I might be willing to move Arnold from the “Bolshevik” column to the “Jacobin” column…he’s getting better, day by day!

1.02.2005

Tomorrow's MUST READ: The WSJ Editorial Page


Tomorrow’s WSJ Editorial Page has two great pieces – an editorial on the immiediate impact Proposition 64 is having, and the other by the “Father of Supply-Side Economics,” Dr. Art Laffer on the unseen strength of the US economy.

Ive said before, and will never tire of saying that the WSJ Ed page is the one-stop shop for keeping abreast of politics, providing the most consistent source of quality opinions.

Not a bad start for a new year!


So Long to Shakedowns
January 3, 2005

What policy wonks call "tort reform" can sometimes seem to be a mere abstraction, but the difference it makes in the real world can be remarkable. Consider the experience of California, where an initiative voters passed on November 2 is already yielding benefits to consumers, businesses and the broader economy.

Much of California's tort problem stemmed from its Unfair Competition Law, enacted in the 1930s to curb allegedly unfair business practices. Over the years the law morphed into an income redistribution tool for lawyers, who filed shakedown lawsuits against companies for anything they claimed was unfair to consumers. Most crazy was that the law allowed any party to sue, regardless of whether the plaintiff had been directly affected.

Lawyers were actually able to file lawsuits "on behalf" of the entire citizenry of California, for example. Yet since there were very few genuine plaintiffs, average Californians never really stood to gain anything. The plaintiffs bar, however, could win huge legal fees ordered by judges who decided their cases. Many defendent businesses settled out of court to avoid the cost of going to trial. Consumers ultimately financed this extortion via higher prices for goods and services.

Californians put a stop to all this in the recent election, with 59% voting to amend the law. Citizens can still file lawsuits, only now the plaintiffs must show they personally suffered physical harm or property damage. Credit for this bit of sanity goes to the Civil Justice Association of California, a nonprofit group that's been urging change for nearly a decade, as well as to Governor Arnold Schwarzenegger, who gave vocal support to the initiative as part of his strategy to make California more hospitable to job creation.

And in only a few weeks the difference has been tangible. The trial bar is still waging a last-ditch battle to have the suits (potentially hundreds) filed before the election remain in court. But a number of judges have already decided the new law applies retroactively and are throwing out the sillier suits.

In the past few weeks alone, a judge dismissed a suit against Bayer for including certain products in its "One a Day" vitamin brand that called for more than one tablet a day. The suing lawyers admitted that their "plaintiff" had never bought or used any of the products in question. Another judge dismissed a lawsuit against AT&T filed by one Daniel Banales, in which he claimed the company charged a "hidden" fee when upgrading to a new phone. Mr. Banales was not an AT&T customer.

The disputed cases also offer a window into just how much cash lawyers were siphoning under the old law. A California appellate court will soon decide whether to dismiss a suit originally brought by such infamous tort lawyers as Bill Lerach against Black & Decker and Target, Wal-Mart and other retailers. Their crime? Selling Kwikset locks advertised as "Made in U.S.A." when the lock contained six screws made in Taiwan. The lower court awarded the sole "plaintiff" in the case costs plus legal fees -- or $3 million that went straight to the attorneys.

Our hope is that these courts and others abide by the will of the people, who made it clear in November they want a stop to all of this. Meanwhile, everyone can take satisfaction in knowing that future shakedowns have been outlawed. California businesses, taxpayers and consumers are the better for it.

* * * * * * *


Destination U.S.A.
By ARTHUR B. LAFFER
January 3, 2005


Just because the United States has its largest trade deficit ever doesn't mean that we're living beyond our means. Far from it. In fact, the characterization of the U.S. as a land of chronic overspenders, hellbent on selling themselves into global servitude doesn't make sense at all. And once the over-consumption model is put into question every policy remedy based on the presumption of squander looks pretty weak.

In an era of floating exchange rates the trade deficit (or more appropriately, the current account deficit) is one and the same as the capital surplus. The only way the U.S. can have a trade deficit amounting to 5.6% of GDP is if foreigners invest that amount of their capital in the U.S. It's a matter of simple accounting. But once you realize that the trade deficit is, in fact, the capital surplus you would clearly rather have capital lined up on our borders trying to get into our country than trying to get out. Growth countries, like growth companies, borrow money, and the U.S. is the only growth country of all the developed countries. As a result, we're a capital magnet.

Take a look around. Germany hasn't had a growth spurt since the 1960s when Ludwig Erhard was Bundeskanzler. France still has a mandated maximum workweek of 35 hours, a maximum income tax rate of 58%, a 1.8% annual wealth tax and government spending as a share of GDP greater than 50%. Finland, for goodness sakes, fines speeders a percentage of the speeder's income. Sweden, Denmark and Germany also fine speeders a percentage of their income, only with caps. Japan has had a stock market down by over 70% from its high in 1989 and both company and government unfunded liabilities in Japan are out of sight. Canada's economic policies are kooky and investments in Latin America, the Middle East, Russia, Southeast Asia and Africa are about as safe as running drunk blindfolded across the "I-5" freeway at rush hour.

So what's not to like about the U.S.? Whether you're an American or a foreigner the U.S. is the choice destination for capital. That's why we have such a large trade deficit.

The only way foreigners can guarantee a dollar cash flow to invest in the U.S. is if they sell more goods to the U.S. and buy less goods from the U.S. Our trade deficit is not a sign of a structural flaw in the fabric of the U.S. economy but is instead a stark reminder of our privileged status as the most pro-growth, free market, rule of law economy the world has ever known. Why on earth any American would want to change our policies to emulate foreign policies is beyond me.

China has realized the pre-eminence of the U.S. model and since 1979 has reduced the percentage of GDP flowing through its government from about 82% to today's level of about 30%. That is a supply-side tax cut par excellence. China also realizes that the U.S. has the best monetary policy ever. By fixing the value of its currency, the yuan, to the U.S. dollar, it has literally imported Alan Greenspan to China. Talk about outsourcing!

To guarantee the dollar value of the yuan requires that China hold over $500 billion of liquid dollar assets. China doesn't hold those dollars as a favor to us: it holds those dollars to benefit itself. One needs only glance at the financial disaster that ensued when former Argentine President Fernando De la Rúa broke the peso currency bond to the U.S. dollar to understand why China won't break its currency's link to the dollar. It's elementary, my dear Watson.

Now, within this framework of global capital mobility and U.S. pre-eminence there are significant variations in the relative capital attractiveness of the various nations of this world. When foreign economic policies improve, and the foreign attractiveness to capital increases as a result, the first impact is a weakening of the U.S. terms-of-trade (the real exchange rate) followed much later by a fall in the U.S. capital surplus, i.e., trade deficit.

As of late, foreign economic policies have improved. France is a lot better today than it was three years ago. And -- shock of shocks! -- Germany is even considering a real tax cut. Jean- Claude Trichet has shown himself to be a world-class governor of the European Central Bank, following on the heels of the incompetent Wim Duisenberg. Five new entrants to the EU -- Estonia, Latvia, Lithuania, Malta and Slovakia -- have low-rate flat taxes. Junichiro Koizumi of Japan is a lot better than the former prime minister, Yoshiro Mori. Investors on the margin should look more favorably to investments abroad.

But even changes in exchange rates have limits. The dollar under current circumstances can't go to zero or infinity. Without a corresponding rise in domestic dollar prices, U.S. goods and assets become relatively more attractive to foreigners and Americans alike when there is a fall in the foreign-exchange value of the dollar. Sooner or later the dollar would be such a bargain that there would be more buyers than sellers, therefore limiting the dollar's fall. Today, the dollar's value in the foreign exchanges fits nicely within its historical range.

On Jan. 1, 1999, the euro was born and was worth $1.17. In fact, if we look at the synthetic euro prior to 1999, the dollar's low was in 1992 when each euro could buy $1.47. The large dollar appreciation from 1992 to early 2002 saw the dollar peak at 83 cents per euro and our capital surplus (the trade deficit) go from less than 1% of GDP to almost 4% of GDP (and continue on to today's 5.6%). Well, the global economic environment is changing once again as are investors' perceptions of relative attractiveness.

There have been times in the past when the dollar depreciation of the magnitude we've experienced over the last two-plus years would have been a clear harbinger of much higher inflation and interest rates. But such is not the case today. It is true that products which are freely traded in global markets will experience dollar price increases relative to foreign prices by the percentage depreciation of the dollar. But to have these exchange-rate induced price increases lead to higher U.S. inflation would require the Fed to accommodate the higher inflation with faster monetary-base growth. The Fed has not accommodated any higher inflation and as a result markets do not anticipate higher inflation. Nor should they.

* * *

Back in the late 1960s and '70s, currency depreciation was associated with domestic monetary creation and a horrendous bout of global inflation. Then, as opposed to now, currency depreciation was directly responsible for inflation, high interest rates, and low growth. We even coined a new word for low growth and high inflation -- stagflation. Aren't you glad we've had an epiphany of Fed policies under the leadership of both Paul Volcker and Alan Greenspan?

The most natural, proper, and economically correct response of the foreign exchange markets is for the U.S. terms of trade to have declined and that's exactly what has happened. As far as I can tell, the decline in the dollar is about over; soon we will see the U.S. capital surplus falling back to more normal levels. When a global economic system works as well as ours does, we should just leave it alone.