The Biggest Ponzi Scheme in the World

From this title you're probably assuming the recently discovered Ponzi scheme run by Bernard Madoff. However, that's not the case. Since family is visiting there really is only one topic of conversation in my house to bring about holiday cheer: Politics. So, as much as I desire a reprieve from all things political until Obama's inaugaration, I find myself lured into the political realm. I still enjoy reading about business happenings as well, so this is how my thought process evolved last night.

Me, "Wow, what a scam Madoff pulled. How did people not notice? Sure, he was one consistently deemed one of the top Wall Street investors, but someone (*cough* SEC *cough*) must have noticed something."

Me, "It's craziness I tell you, craziness... which is why I will always tightly manage any portfolio I have regardless of size."

Family, "So, government... blah blah blah... Obama is savior... blah blah blah... Palin is the biggest idiot every nominated/no she's not... blah blah blah... what do you think about the Caroline Kennedy pursuit of the New York Senate seat?... blah blah blah...there's on way civilized people will let stupid people starve to death... But there's no way Social Security is going to be fixed with this economic debacle..."

Husband, "You know that social security 'investments' only average a return rate of about 1-2%... whereas even the most conservative funds in the market over time average..."

Me, "Well, of course we can't manage our own social security money, that's not the point... Wait a minute - "

*Lightbulb flash*

"Social security is the biggest Ponzi scheme EVER!!!"

*Shake my head until I'm dizzy*

Husband, "You're right!"

Me, "Good grief... I'm just like those last investors... paying in to support those ahead of me only for the fund to go bust when it's my turn... thanks American government 'safety net'!"

"Does that mean I get to sue the government when there are no social security funds left and I reach retirement?"

If only...

The perks of being a member of Generation Y.

*Update* I realized after re-reading this post that it might look as if I don't actually understand fully what a Ponzi scheme is (as I related it to Social Security.) Therefore, I would like to clarify by saying that many working Americans view Social Security to be an investment of sorts for their future... you contribute now to support the generations above you, but believe likewise that the next generation will support you. Some people also don't understand that their Social Security contributions are not in fact put into an investment fund where a certain portion is set aside specifically for them. This is where the problem lies for the Gen Yers and maybe even some Gen Xers... we're paying in thousands of dollars over our lifetime and will most likely get nothing in return. At least with other taxes you can argue that we benefit from the public works, institutions of law and justice, etc. Not so much with Social Security. And it's mandotory... Your choice as a taxpayer: Ponzi Scheme where you're the loser or a hefty fine and potentially jail time. Even Madoff points out that people sought him out to manage their investments and he's looking to be one of the biggest crooks of our time.

All this to say, we need to reform Social Security [immediately] and unfortunately that's less likely to happen than the complete revitalization of Detroit in the first quarter of 2009.

What A Rant

I've been working up a rant (big surprise) about the election, American political thought (among the masses, not academics. There's an alarming gap between the two on both sides of the spectrum and they deserve different treatments), and what the hell happened to the conservatives in America? I happen to have a slightly different definition of conservatism than many who call themselves conservatives, but the discussion of that definition is for another day... or at least its own post.

However, my fellow contributor came across P.J. O'Rourke's rant that is featured in The Weekly Standard. After reading this rant, I feel speechless because I honestly am not sure if I'm capable of writing anything that is as angry and dripping with sarcasm as this article. For the most part, I think he's accurate, even if crude. I'm sure over the next 4 years that my frustration will rise to a point that many political/societal rants will be expressed in this blog, yet for this moment O'Rourke's is enough for me. And, I'm sure countless more people listen to him than will even listen to me, so I'll save it for now.

Part of the political idealism I continue to suppress in myself daily rises when I strategize on how to help reform the American political make-up that surely will occur in the coming decade. Then, reality strikes, and I remember that this is no superficial problem. If people's fundamental views of what government is, what its reasonable abilities are, and what they can reasonably expect to receive from a proper constitutional government do not change, then there is no point. And, frankly, I'm much more willing to spend my time improving my career and socking away money so that if the worst case scenario is ushered in with the help of the Dems in 2009, at least I won't have to worry about where my rent is coming from.

I just wish that they [our illustrious government representatives] didn't have so much power at their disposal to enact policies to promote "change." Maybe at the end of the day this is why I am a conservative - I certainly want a kind of change that is positive. For example, I would be incredibly happy if the Dow ceases fluctuating as much in a day as in the past is has in a year. I like change that is stabilizing. But, I don't want it to come from government initiatives that are likely to do more harm than good because the Dems have just been handed their Thanksgiving feast 3 weeks early. Cornucopias never run out, right? This abundance of power may not run out for at least 4 years either, but who knows what will lie in its wake. And, as much as I want to be optimistic, it's hard when I know that these representatives may genuinely care about "fixing America's problems," but do not fundamentally understand the role of American constitutional government or a free market economy. Or, even better, if they do understand them, they reject them. And, that is a philosophical view I will not ever accept.

If I'm ambitious enough, I will post a series of entries on FDR and his policies including the New Deal. These will illustrate my disdain for the impending political actions being discussed by the transition team, including executive orders being ushered out on Obama's inauguration day, and the historical basis that shapes my views. It may not be riveting stuff, but has profoundly affected my views and think it might do the same for others especially in light of the current economic and political shifts that have occurred in America this year.

Palin: Caribou Barbie or a Victim of the Right Wing Conspiracy?

This entry needs to be prefaced by saying that I am most likely WAY off base. However, in a discussion the other evening about Palin's candidacy, her previous political behavior (in Alaska), and her general character (not moral per se, but her typical demeanor, actions, etc.) I was thinking that her public portrayal has not aligned with her previous reputation - or even her initial appearances following her introduction as McCain's VP running mate. During those, she was poised, intelligent, and articulate. Sure, her accent and colloqialisms still appealed to working class values-voter America, but she appeared to equally appeal to the Republican cultural elite (which is strong, although not nearly as big as that of the Democrats) who were still bemoaning the choice of McCain.

So, how did Palin result in being portrayed as Caribou Barbie - as shallowly entertaining and demeaning as that lablel is? There are several things that contribute to this outside the accent and being from Alaska (as a native Wisconsinite, I fully understand the joy other people get from making fun of people with northern accents who grew up in the woods. We might as well be space aliens.) First, shame on the campaign for keeping her sequestered. It would be one thing if that caused her to come out blazing in debates and interviews. But, to then only emerge with variations of the same stump speech is not acceptable to an electorate eager to learn more about a candidate - especially a little known candidate (although I still would trust America's hands in Palin's over Obama's any day.) Of course the Media are going to pounce on such behavior...

The second is direct result of the sequestering - Katie Couric's interview was catastrophic. Palin couldn't name one periodical or book she was reading - despite claiming that she is a voriforous reader. How is that possible? Say Time, Newsweek, The Anchorage Daily News (or whatever that paper is), ANYTHING. This is what leads to my conspiracy theory...

Why would an intelligent, driven woman who is making history with her candidacy be willing to portray herself as an idiot on national television where her voters are scrutinizing her? Because her advisors told her to. The GOP isn't known for its upright campaign strategies to say the least, but they also are conniving if nothing else. To give McCain some credit, I think he tries to get above this at least a little, but politics is politics so there's only so much one can really do.

Why, might you ask, would the campaign approve such tactics? Because they are also afraid of what she might say... honest people that hit a cord with mainstream America are dangerous to the political machine and should be marginalized as much as possible so as to not destruct it too much. But, especially with the former Republican base, such a candidate is necessary. They don't care if McCain is a maverick, has some leanings toward Reagan conservatism, and will appoint Supreme Court Justices that would strike down Roe v. Wade. They want a candidate in ways like George Bush: Someone who doesn't sound like he (or she) is from Washington where everyone is rich and corrupt, is willing to protect all life, and will make sure that our nation upholds moral principles despite the opinion of the rest of the world. Palin fits the bill perfectly. So, despite being from Alaska, graduating from U of Idaho instead of Harvard, and having 5 children, if she presents herself as well-read in areas that conservatives deem unacceptable, she is finished. What true conservative reads the NY Times? So, some brilliant strategist decides to make her not give any specific answers... afterall, being vague and not saying anything of substance is better than having to refute a misstep of consequence especially with all the blunders McCain makes on a daily basis.

That's my conspiracy theory in a nutshell. I hope I'm wrong in some ways, but not in others because I really don't want to believe that John McCain was that careless in choosing a potential leader of America (Palin will be the leading force in the GOP for years to come regardless of this election outcome.) I also need to point out the things that incited my curiousity other than my general disbelief that a woman that made me tear up with joy and excitement when she accepted the nomination could become Caribou Barbie. Those are Lorne Michaels' comments about her SNL appearance and Daniel Henninger's Wonderland Column this week.

If I am right, a message to Sarah Palin: Show America what you're truly capable of these last two weeks before the election! Impress us with intelligence, pragmatism, leadership, and poise. That will hit home more than simple language and attack politics.

Great Description of Politicians

Thanks Don Boudreaux for continuing to share your astute opinions. From Cafe Hayek on Tuesday:

"...The general lesson here is that politicians are akin to faith-healers. Both pose as wizards; they use enchanting words to push crackpot potions. The faith-healer dupes his customers into believing that he will suspend medical reality; the politician dupes voters into believing that he will suspend economic reality. Both are frauds."

Glad to see as always that I'm not the only one who doesn't believe in the magical powers of the government. Too bad, unlike the average Obama supporter, I can't dupe myself into feeling good about my reality - the reality one where my husband and I would be better off financially if I quit my job (under Obama's tax plan of course.) I think Adam Lerrick addresses that issue well today in a Journal editorial.

I heard people calling for another "Boston Tea Party" when the bailout was passed... imagine what might truly happen if household making between $75,000-$150,000 begin being taxed at the "rich people" rates. I'm just guessing that socialist policies, i.e, "spreading the wealth around," won't sound so appealing then.

The Third Commandement and the Alliance Defense Fund

Not to overtly endorse Fox News, but this article refers to a new initiative purposed by the Alliance Defense Fund, an organization that claims to be the “Christian” version of the ACLU, which calls on pastors to endorse candidates from the pulpit in an attempt to challenge IRS rules that prohibit non-profits from endorsing political candidates under the auspices of the free exercise clause of the first Amendment. They claim that “The Internal Revenue Service, in conjunction with radical organizations like Americans United for Separation of Church and State, have used the Johnson amendment {the IRS code in question} to create an atmosphere of intimidation and fear for any church that dares to speak Scriptural truth about candidates for office or issues”.

With this new initiative, The Alliance Defense Fund might possibly have swept aside moveon.org as my least favorite quasi–political/legal organization working in the US. They apparently missed that whole 3^rd commandment thing from that esoteric, outdated Old Testament. To wrap one’s secular political and public policy viewpoint in the holy cloth of God’s sanction by suggesting an implicit Biblical endorsement of a particular viewpoint through a specious line of moral extrapolation is I suspect the kind of thing that commandment suggests avoiding. Perhaps, I am wrong and it doesn’t go any further than to suggest one is only sinning when they put the word “God” in front of a choice expletive. Who can know?

So back to the point: Why should we as Christians stand up against this new initiative and appeal to our pastors not to get involved? I will release a point by point explanation over the next few days\weeks as time permits. The points will include risks to the financial health of churches, basic theological problems with such approaches, the very secular worldly reasons this issue is being pushed, and, if time permits, a review of why this is bad constitutional law in addition to some philosophical thoughts on why we have the Establishment Clause.

1. The Risk to the Financial Health of Individual Congregations.

The first prudent issue a congregation member should examine before endorsing the ADF plan is what is the risk with and what might be gained from joining with the ADF in this cause. The risk is the loss of non-profit status. The potential gain is the ability for a religious organization to endorse (in every sense of the word) political candidates and remain a non-profit. We will begin by exploring more fully what loosing non-profit status would mean for a church and the probability of realizing such a risk.

First, the realistic chances of this issue being overturned by the Supreme Court of the United States. This particular IRS code is about as clear cut and settled of a law that one will find. It is important to understand that the Supreme Courts loves precedent. The Supreme Court expects incredibly compelling new reasons to upturn established law because of their preference towards the status quo. If you think I am wrong please read O’Connor’s decision in Planned Parenthood v. Casey. She wants to overturn Roe v. Wade but does not out of respect for precedent. This reveals a great deal about what goes on in the mind of a Justice deliberating a decision.

So the question becomes: Can the ADF provide a compelling reason under the Constitution that this should be overturned? The details of the IRS code were constructed carefully in an attempt to strike a proper balance between the free exercise [of religion] clause and the establishment clause (which prohibits the state establishment, i.e., support, of any church or religion) in the First Amendment. For example, under the current code, pastors, in their individual person, can endorse political candidates as well as preach from the pulpit moral and religious precepts that should guide parishioners’ electoral decision making up to the point of an explicit endorsement of a candidate. It is disingenuous of the ADF to suggest that the current law would have prevented churches from speaking out from the pulpit against an issue such as slavery or to broadly condemn, as a Church, those in Washington who supported such sinful policies.

It is of a high probability that the court will hold with the IRS code because the code does not overtly infringe on the free exercise clause and any further liberality in the law would run a dangerous course smack into the Establishment Clause (will explain more in the next post). Most experts agree the ADF case is one of long odds to even be heard, let alone won.

So when the Supreme Court effectively upholds the Johnson Amendment, the church body, not the pastors or the ADF lawyers, will be bear the tax burden the IRS will lay at there door. The church will be subject to for-profit entity taxes and will be assessed certain steep penalties as well. Having seen much in the way of church finances I suspect this change in legal status would bankrupt many churches. Further, if the church remains solvent it will lose valuable resources given for the holy purpose of ministry. If a congregation or church leader believes this extra bit of freedom expression is truly necessary to fulfill God’s commands they should, through their individual governing laws, change the church’s legal structure to accommodate such speech. Bob Jones University is a good example of an organization that did just that. This way the individuals who have to bear the financial burden of such decisions are the ones involved in the process of making it. It is abhorrent for lawyers who know the real probability of victory, or worse are too incompetent understand it, are promoting such irresponsibility. Engaging in the promotion or execution of risky behavior without bearing any material risk is what one could call “Moral Hazard” and it is what the ADF, like Washington and Wall Street before, are peddling. It is wrong. For the sake of your church’s divinely appointed responsibility to meet the ministry needs of the church body and to serve the specific missions into the community and the wider world, stand up against any further “Pulpit Freedom Sunday” or its like.

Oh, Congress... Why the Bailout Mattered

The Wall Street Journal astutely captured the importance of what is now the failed bailout. Here are my thoughts on the debacle:

Well, the Dow didn't drop the critical 10% level and thankfully is on the rise after opening this morning. HOWEVER, we are now virtually certain to sink into a recession. There is no credit in the market... making a substantive, rapid rebound incredibly difficult. The Asian markets only lost about 4% and Europe is recovering slightly. I hope this means a true crisis was averted.

Yet, in what has escalated to be a legitimate financial crisis - which does affect everyone in the country (and the world) not just rich wall streeters and greedy politicians (greed being substantially different from wealth in my opinion... at least wall streeters produce something of value... or lose something of value not merely political power, approval, and a stream of endless favors based in worthlessness) - politicians couldn't get over their own political interests (even if supported by their constituents) to solve a problem. Not that the bailout would have been a permanent solution, or even a good piece of legislation. But, it would have served the immediate purpose of calming the critically unstable global markets. And, as many people pointed out this morning, the drop in the markets yesterday cost over $1 trillion to the U.S. economy instead of being bailed out with $700 billion. Personally, I would gladly have taken the $700 billion cash infusion that possibly could have prevented another $300 billion in losses and stopped the impending recession. Recessions are when losses become even more sickening to calculate.

As a proponent of extremely limited government and fiscal responsbility, this bailout is by no means a perfect or even desirable solution. But, sometimes in life we have to do things not for "the greater good" as so many people believe, but for overall [economic] sustainability. The Congress had its chance to restore market confidence and it failed because representatives are afraid they will lose re-election in November. By all means, I hope they ALL do.