The Party's Just Beginning

Karl Marx has left the London library and is now residing in Washington D.C.

 “For thousands more years the mighty ships tore across the empty wastes of space and finally dived screaming on to the first planet they came across--which happened to be the Earth -- where due to a terrible miscalculation of scale the entire battle fleet was accidently swallowed by a small dog.”    - Douglas Adams, The Hitchhiker's Guide to the Galaxy

By Mark Grant

Still here. We are still here. It is true that we have many hours to go before today crosses across all of the time zones and becomes tomorrow and, in any event, the Chateau Petrus will not have been in vain. I am holding classes in deduction now in Nassau on my boat. Other boat owners have dropped by and are all inquiring about the fiscal cliff. “The plunge is at hand,” I tell them as Congress adjourns, the rank and file Republicans turn on the House Speaker and the Lords of Chaos are in charge once again. All of the stuff and nonsense about taxing the wealthy and gibberish about who and when and where to tax is like so much marshmallow spread on a peanut butter sandwich; it just doesn’t matter. The galling omission of not concentrating on what is truly important, the cost of entitlements and social programs and what the nation can and cannot afford shows the true worth of our nation’s leaders which is about equal to a wooden nickel or a three dollar bill. It is the Lost Boys living in Never-Never Land and Wendy nowhere in sight.

“In the first place God made idiots. He did this for practice. Then he made politicians. This was a mistake. Then he tried to correct His mistake by having the people elect the politicians of their own choosing. He then realized that he had made idiots twice and he pondered his miscalculation for seven days. Next he made dogs and finally being satisfied that he had done something correctly he went off on holiday. One day he may come back and finish the exercise.”     -The Wizard

The Auto Bailout Failure Is Now Complete

The Treasury Department has just revised its estimate upward to $25 billion in losses

By David Harsanyi 

You may recall that during the presidential election, the Treasury Department refused requests by General Motors to unload the government's stake in the giant automaker.

Taxpayers had sunk $50 billion into a union bailout in 2009 and were now proud owners of 26.5 percent of the struggling company. Reportedly, GM had growing concerns that the stigma of "Government Motors" was hurting sales in the United States. At the time, any transaction would have come at a steep loss to taxpayers and undermined the president's questionable campaign assertions that the auto union rescue had been a huge success.

Well, now that the election is over and the Treasury Department is freed of political considerations, it plans to sell its 500 million shares of stock over the next 12 to 15 months and ease its way out of the company. GM will buy around 200 million shares at $27.50 per share by the end of the year. GM's buy brings taxpayers back to around $5.5 billion of the $27 billion the company still owes. The special inspector general for TARP estimated in October that the Treasury would need to sell the remaining 500 million shares at $53.98 per share just to break even on its investment.

Spending Other People's Money Part 5

Highest-Paid California Trooper Is Chief Banking $484,000

By Alison Vekshin, Elise Young and Rodney Yap 

California Highway Patrol division chief Jeff Talbott retired last year as the best-paid officer in the 12 most-populous U.S. states, collecting $483,581 in salary, pension and other compensation.

Talbott, 53, received $280,259 for accrued leave and vacation time and took a new job running the public-safety department at a private university in Southern California. He also began collecting an annual pension of $174,888 from the state.

Union-negotiated benefits, coupled with overtime that can exceed regular pay and lax enforcement of limits on accumulating unused vacation, allow some troopers to double their annual earnings and retire as young as age 50. The payments they get are unmatched by those elsewhere, according to data compiled by Bloomberg on 1.4 million employees of the 12 states. Some, like Talbott, go on to second careers.

“I think some of our rules were negligent, and I think people were allowed to build up overtime pay who shouldn’t have been, who accumulated leave time and furlough time,” said Marty Morgenstern, a member of Governor Jerry Brown’s cabinet and secretary of the California Labor & Workforce Development Agency, which oversees labor relations, employment and unemployment.

‘Absolutely Inappropriate’

“Those kind of payments are absolutely inappropriate and we’re doing everything we can to see that does not recur,” Morgenstern said.

Spending Other People's Money Part 4

Texas Pension Manager Paid $1 Million Trails Peers Who Make Less

By Mark Niquette and Martin Z. Braun 

Britt Harris arrived at the Teacher Retirement System of Texas in 2006 from the world’s biggest hedge fund with a mandate to improve the pension’s performance. He also brought a Wall Street attitude about pay.

Harris, the Texas fund’s chief investment officer, made $1 million last year in salary and bonuses, the most of any public pension employee in the 12 most populous U.S. states, according to data compiled by Bloomberg. Four other employees made at least $500,000, and the fund paid $9.7 million in bonuses in 2011, more than any in those states.

Funds where executives made far less posted better investment results than those produced by Harris and his staff over three and five years. They included, respectively, the Ohio Police & Fire Pension Fund, where the top-paid executive last year was William J. Estabrook, at $231,614, and the New Jersey Division of Investment, where director Timothy Walsh made $185,000 plus $7,500 for moving expenses, data show.

“These guys may claim to be worth their weight in gold,” said Edward Siedle, a former U.S. Securities and Exchange Commission attorney and president of Benchmark Financial Services of Ocean Ridge, Florida. “They absolutely can’t justify it.”

Falling Behind

While Harris says public pension compensation must be competitive with the private sector to attract top talent, the Texas fund -- seventh-largest in the U.S. with $112.4 billion in assets -- is falling further behind in long-term obligations to more than 1.3 million education employees and retired teachers, including Harris’s mother. The pay-and-performance disparities at public pension funds are among the findings of a data review in which Bloomberg compiled payroll records for 1.4 million employees of the 12 largest states.

Of the highest-paid pension executives in those states last year, all but two worked at the Texas fund or the State Teachers Retirement System of Ohio, data show. Yet the Texas fund’s 2.12 percent return over five years as of June 30, 2012, net of fees, was less than five other state pensions, including the New Jersey pension plan, which returned 2.46 percent. The Texas fund’s three-year results of 13.17 percent trailed Ohio Police & Fire, which returned 13.25 percent.

Spending Other People's Money Part 3

Gee Takes Jets as $1.9 Million Payday Roils Ohio Students

By Jennifer Oldham and Rodney Yap

The Ohio State University President E. Gordon Gee lives in a 9,630-square-foot Tudor Revival mansion that was renovated for him, featuring a great hall, pool, elevator and tennis court.

Gee made $1.9 million last year as the highest-paid public university president in the U.S. He also logged $1.7 million in expenses in fiscal 2011, including trips in private jets, country club dues and fundraising parties at his residence.

“He’s overpaid,” said CJ Jones, 19, a junior public affairs major at Ohio State, whose tuition has risen 9.7 percent during her 2 1/2 years at the university, based in Columbus, the state capital. “You should want that job for a sense of Buckeye pride. Why do you have to suck so many resources from our budget? I know kids graduating from OSU with $90,000 in debt, and it’s a public university.”

Gee was among 47 administrators, athletic officials and hospital faculty who earned more than $1 million in 2011, according to payroll records compiled by Bloomberg for about 216,000 employees at flagship universities in the 12 most populous states. Much of the compensation came from non-public sources. Gee’s expenses and home renovations weren’t funded with taxpayer dollars, and his performance justifies his compensation, said Gayle Saunders, a university spokeswoman.

Salaries for the highest-paid public university employees from California to Virginia rose as state appropriations per student fell to the lowest in a quarter century, faculty pay stagnated and the default rate on student loans hit a 15-year high. Record expenses for higher education are prompting lawmakers to scrutinize how the institutions spend their money.

Pay ‘Mythology’

“There’s a mythology promulgated by people in administration that you have to pay competitive salaries to attract the best people,” saidBenjamin Ginsberg, political science professor at Baltimore-based Johns Hopkins University and author of a book detailing how universities are adding administrators even as state funding drops. “In point of fact, no one can show there is any relationship between what these people are paid and the quality of the work they do.”

Spending Other People's Money Part 2

California Psychiatrists Paid $400,000 Shows Bidding War

By Freeman Klopott, Rodney Yap and Terrence Dopp

Mohammad Safi, a graduate of a medical school in Afghanistan, began working as a psychiatrist at a California mental hospital in 2006, making $90,682 in his first six months. Last year, he took home $822,302, all of it paid by taxpayers.

Safi benefited from what amounted to a bidding war after a federal court forced the state to improve inmate care. The prisons raised pay to lure psychiatrists, the mental health department followed suit to keep employees, and costs soared. Last year, 16 California psychiatrists, including Safi, made more than $400,000, while only one did in the other 11 most populous states, according to data compiled by Bloomberg.

The jockeying between agencies for the same doctors demonstrates a payroll system run amok and chronic mismanagement, said Jeffrey Sonnenfeld, senior associate dean at the Yale University School of Management and founder of a training institute for chief executive officers.

“Even though this all took place in California, such apparent recklessness is almost too over the top for Hollywood,” Sonnenfeld said. “These irresponsible public officials have artificially constrained the market with an unnaturally limited supply pool, either due to laziness, incompetence, corruption or all of the above.”

17-Hour Days

Safi’s compensation was almost five times as much as Governor Jerry Brown’s last year. The psychiatrist was paid for an average of almost 17 hours each day, including on-call time, Saturdays and Sundays, although he did take time off, said David O’Brien, a spokesman for the Department of State Hospitals, formerly the Department of Mental Health. Safi is under investigation by the department, and he was placed on administrative leave July 12, O’Brien said in an e-mailed statement.

“I made so much because I work a lot,” Safi said in a brief interview at his Newark, California, home.

Spending Other People's Money Part 1

Californian’s $609,000 Check Shows True Retirement Cost

By Michael B. Marois and Rodney Yap 

When psychiatrist Gertrudis Agcaoili retired last year from a state mental hospital in Napa, California, she took with her a $608,821 check for unused leave banked in a career that spanned three decades.

She wasn’t alone. More than 111,000 people who left jobs as employees of the 12 most populous U.S. states collected $711 million last year for unused vacation and other paid time off, according to payroll data on 1.4 million public workers compiled by Bloomberg.

California employees accounted for 39 percent of that total. Since 2005, the state’s workers collected $1.4 billion for accumulated leave, calculated at their last pay rate, regardless of when the time was accrued. New Jersey Governor Chris Christie calls such payments “boat checks” because they can be large enough to buy yachts.

“The people making decisions are clearly letting this happen,” said Steven Frates, research director of Pepperdine University’s Davenport Institute on public policy, based in Malibu, California. “It starts with the governor and the legislature and wanders down the line. These people are playing with the taxpayers’ money.”

The lump-sum retirement payments, seldom granted in private industry, mirror a broader trend in which California’s public employees receive far more than comparable workers elsewhere in almost all job and wage categories, from public safety to health care, base salary to overtime. California, the world’s ninth- biggest economy, has set a pattern for lax management, inefficient operations and out-of-control costs, the Bloomberg data show.

Routine Accumulation

Managers and employees throughout California government routinely ignore a rule limiting accrued time off to 640 hours, or 16 weeks. The accumulation of vacation hours accelerated in California from 2005 through 2010, fueled by a state policy forcing workers to take unpaid time off, or furloughs, before using paid leave.

The Upside of the Fiscal Cliff

Facing reality is positive

By Charles Smith

That's the upside to the fiscal cliff.

There are two definite upsides to the fiscal cliff:

1. We are finally starting a national discussion of spending-taxation trade-offs

2. We are at last starting to (grudgingly) accept there is no free lunch, what I call the Free Lunch Fantasy of limitless borrowing at near-zero interest rates: taxes for upper-income wage-earners will revert to previous levels while those drawing Federal dollars must accept reductions in spending.

The last decade's fantasy that we could borrow our way to prosperity while lowering taxes on upper-income earners (because it's so cheap to borrow trillions at near-zero interest rates) is finally running into reality-based resistance: interest on all that debt is starting to squeeze the spending everyone wants, and long-term rates might rise despite the Federal Reserve's constant intervention.

That would eventually raise interest costs paid by the Federal government.

How can interest rates rise if the Fed is buying much of the Federal Debt?

The first part of the answer is to accept the fiscal consequences of the Baby Boom entering Social Security and Medicare at the rate of 10,000 retirees a day: Federal spending will rise far faster than tax revenues, dwarfing the relatively minor spending cuts being discussed.

Falling Towards Entropy

Stubborn Balkans Myths and Realities

by Nebojsa Malic

“The more things change, the more they stay the same,” wrote a French columnist back in 1849 – but the witticism applies just as well in 2012. Recall, for example, that Barack Obama became Emperor in 2008 by promising Hope and Change, only to embrace continuity instead. His challenger this year campaigned against Obama’s domestic policies, but on matters foreign he was strangely in sync with the incumbent.

Obama’s easy re-election has, predictably, been termed a mandate to continue the present policies – including, no doubt, the “humanitarian” interventions and social engineering (called “nation-building” when done abroad). The trouble with Empire, however, is that it’s not only bleeding the U.S. dry, but that it manifestly doesn’t work.

Consider, as Gordon Bardos did earlier this week, the situation in the Balkans. Twenty-odd years of Imperial meddling later, and the region has come back to where it was in the early 1990s – though some roles may have been reshuffled in the process:

“…some of the most well-funded international efforts in nation- and state-building in history have in many ways gotten us right back to where we started from two decades ago. Perhaps even further back.”

Ramush Returns

Take, for example, the ICTY, an ad hoc “tribunal” allegedly established – under dubious circumstances – to foster reconciliation by prosecuting those responsible for wartime atrocities. It has manifestly done nothing of the sort, instead serving as a tool of the Empire to eliminate inconvenient politicians, bolster favorites, and rewrite the region’s history, both recent and distant.

Apocalypse now for free speech?

Mayan End Times may not have materialised, but if we’re not careful free speech could be consumed by hellfires

by Patrick Hayes 

We will no doubt survive the Mayan apocalypse this Christmas. But will freedom of speech survive into 2013? This year, the boundaries of what can be said contracted to an unprecedented degree. Here’s a Top 10 countdown of some of the worst erosions of freedom of speech in Britain in 2012.

10) Defamation Bill

In 2012, many of the activists in Britain’s free-speech lobby unwittingly cheered on censoriousness. Consider their response to the government’s Defamation Bill, which is supposed to make England’s ridiculous libel laws ‘fairer’. Index on Censorship excitedly exclaimed ‘We did it!’ when the bill was unveiled. But the bill proposes expanding the remit of the libel laws to cover the internet, and removing the right to trial by jury in defamation cases, which would give judges even greater authority over the question of what is acceptable speech. Fundamentally, the bill enshrines the idea that the state is best placed to decide what should and shouldn’t be uttered.

9) Protest bans

‘Fuck your free speech!’, shouted an anti-fascist campaigner at the far-right English Defence League (EDL) during a march in Walthamstow, London in September. It typified the illiberal outlook of some on the radical left. When the EDL announced it would march through Walthamstow again in October, anti-fascists gave up on the idea of holding a counter-protest and instead successfully campaigned to have the march banned. Home secretary Theresa May also banned every other group, both right- and left-wing, from marching in Walthamstow, to be on the safe side. Which only shows how foolish it is to imbue the authorities with the right to decree who may march and who may not.

8) Plain cigarette packs

This year, it became compulsory in Australia to sell cigarettes in mucus-coloured ‘plain packs’ covered in pictures of dead babies or rotting organs. All company branding is outlawed. Other countries, including Britain, plan to follow suit. But isn’t this an affront to freedom of expression, effectively preventing companies from expressing themselves on their own products? Even worse, such anti-ciggie censoriousness implies that the public at large is incapable of making rational decisions about health and is easily swayed by flashy, colourful packaging. So the state opts to cover our eyes and protect our fragile sensibilities.

End Game in Argentina

Looting: Border Guards deployed to Bariloche

By Buenos Aires Herald

Cabinet Chief Juan Manuel Abal Medina announced yesterday that four hundred Border Guards were deployed to Bariloche, in Río Negro province, following the violent looting that took place in several local supermarkets on Thursday afternoon.

At least 50 masked people showing long sticks broke into two supermarkets in San Carlos de Bariloche, Río Negro province claiming food and goods for Christmas unleashing a morning of riots and looting as police forces arrived to the scene.

Río Negro province Governor Weretilneck assured that the looting are part of a plan to create upheaval. “We are not seeing incidents related to social conflicts or with survival. Breaking shop windows, Sterling TVs and burning cars is sending another message out,” he said, and added that the vans that carried the people who took part of the looting have been identified.

Reports stated that the thieves, who could have arrived from a neighbouring slum, turned the places over taking mostly appliances and LED TVs.

Police has arrived to the place to be welcomed by a rain of stones. The municipality informed they have not enough personnel to control the situation.

San Carlos de Bariloche Town Hall’s Secretary Oscar Borchici told reporters “We always hear rumours indicating lootings could happen, but this is totally insane. Plus, I don’t understand why they need to take LCD TVs.”

All supermarkets in the area have been closed for the rest of the day. 

Much Worse than Greece

IMF Demands Partial Default for Cyprus

by Spiegel

Euro-zone member state Cyprus badly needs a bailout, but the International Monetary Fund is demanding a debt haircut first, according to media reports. The resulting standoff with Europe has delayed the country's badly needed aid package. To ward off insolvency, Nicosia has raided the pension funds of state-owned companies.

Cyprus did its part on Wednesday night. The country's parliament approved a 2013 budget which included far-reaching austerity measures so as to satisfy the conditions for the impending bailout of the debt-stricken country. While aimed at significantly reducing the country's budget deficit, the spending cuts and tax hikes are likely to result in a 3.5 percent shrinkage of the economy in 2013 along with an uptick in unemployment.

Yet despite the measures, Nicosia's would-be creditors remain at odds over the emergency aid deal, even as the country teeters on the brink of insolvency. According to a report in the Thursday issue of the influential German daily Süddeutsche Zeitung, the International Monetary Fund is demanding a partial Cypriot default involving private creditors before it joins the bailout deal.

Citing anonymous sources familiar with the negotiations, the Süddeutsche writes that the IMF is concerned that, despite the austerity measures the country has now adopted, it still wouldn't be able to shoulder the interest payments due on its debt. Several European countries agree with the IMF. Others, however, believe that such a default could be dangerous. After all, when private creditors were pressured to write down a portion of their Greek debt holdings, the euro zone went to great lengths to present the move as one that would not be repeated. Should such a default now be applied to Cyprus, it could severely undermine investor trust in the euro zone.

"The situation in Cyprus is much worse than it is in Greece," one high-ranking EU official told the paper.

In 2013, can we call off the Culture Wars?

The wrong side is winning, in the wrong war

by Brendan O’Neill 

2012 could be characterised as the year when the wrong side, the illiberal liberals, were victorious in the wrong war, the Culture War. In America and much of Western Europe, the cultural values of the so-called ‘left’ came firmly to the fore in this war of attitudes that has been waged for 30-odd years. This is a big problem as we head into 2013 - not only because the ascendant values are elitist, censorious and profoundly cavalier about the traditions and belief systems through which many people live their lives, but also because the Culture War itself is not a useful way to understand the clash of interests and moral divisions in twenty-first-century society.

On numerous fronts, from gay marriage to tabloid culture to gun control, the side in the Culture War that disingenuously defines itself as progressive scored big hits in 2012. President Obama’s ‘coming out’ in support of gay marriage, or his ‘evolution’ as his cheerleaders tellingly put it, signaled a shift not only in one man’s attitude towards homosexuals getting hitched but in the Democratic Party leadership’s attitude towards its support base. The upper echelons of the party were really confirming that the constituency they care most about these days is not the traditionalist or rural blue-collar world, but the apparently more enlightened urban and creative cliques of the new cultural elite. In Britain, too, gay marriage was used as a tool for redrawing the political map, being fervently promoted by Tory PM David Cameron as a means of purging his party of its ‘nasty’ image, and its nasty people, and making real his claims to represent New Conservatism. In Britain, the rise of gay marriage explicitly signals the acceptance by the right of the values of their one-time opponents in the Culture War.

The Geopolitics of Shale

The coming of shale gas era will magnify the importance of geography

By Robert Kaplan

According to the elite newspapers and journals of opinion, the future of foreign affairs mainly rests on ideas: the moral impetus for humanitarian intervention, the various theories governing exchange rates and debt rebalancing necessary to fix Europe, the rise of cosmopolitanism alongside the stubborn vibrancy of nationalism in East Asia and so on. In other words, the world of the future can be engineered and defined based on doctoral theses. And to a certain extent this may be true. As the 20th century showed us, ideologies -- whether communism, fascism or humanism -- matter and matter greatly.

But there is another truth: The reality of large, impersonal forces like geography and the environment that also help to determine the future of human events. Africa has historically been poor largely because of few good natural harbors and few navigable rivers from the interior to the coast. Russia is paranoid because its land mass is exposed to invasion with few natural barriers. The Persian Gulf sheikhdoms are fabulously wealthy not because of ideas but because of large energy deposits underground. You get the point. Intellectuals concentrate on what they can change, but we are helpless to change much of what happens.

Enter shale, a sedimentary rock within which natural gas can be trapped. Shale gas constitutes a new source of extractable energy for the post-industrial world. Countries that have considerable shale deposits will be better placed in the 21st century competition between states, and those without such deposits will be worse off. Ideas will matter little in this regard.

So let's look at who has shale and how that may change geopolitics. For the future will be heavily influenced by what lies underground.

The United States, it turns out, has vast deposits of shale gas: in Texas, Louisiana, North Dakota, Pennsylvania, Ohio, New York and elsewhere. America, regardless of many of the political choices it makes, is poised to be an energy giant of the 21st century. In particular, the Gulf Coast, centered on Texas and Louisiana, has embarked upon a shale gas and tight oil boom. That development will make the Caribbean an economic focal point of the Western Hemisphere, encouraged further by the 2014 widening of the Panama Canal. At the same time, cooperation between Texas and adjacent Mexico will intensify, as Mexico increasingly becomes a market for shale gas, with its own exploited shale basins near its northern border.

This is, in part, troubling news for Russia. Russia is currently the energy giant of Europe, exporting natural gas westward in great quantities, providing Moscow with political leverage all over Central and particularly Eastern Europe. However, Russia's reserves are often in parts of Siberia that are hard and expensive to exploit -- though Russia's extraction technology, once old, has been considerably modernized. And Russia for the moment may face relatively little competition in Europe. But what if in the future the United States were able to export shale gas to Europe at a competitive price?

Modern Wisdom from Ancient Minds

With intellectual progress can come moral regress

by Victor Davis Hanson

The Tragic View

Of course we can acquire a sense of man’s predictable fragilities from religion, the Judeo-Christian view in particular, or from the school of hard knocks. Losing a grape crop to rain a day before harvest, or seeing a warehouse full of goods go up in smoke the week before their sale, or being diagnosed with leukemia on the day of a long-awaited promotion convinces even the most naïve optimist that the world sort of works in tragic ways that we must accept, but do not fully understand. Yet classical literature is the one of the oldest and most abstract guides to us that there are certain parameters that we may seek to overcome, but must also accept that we ultimately cannot.

You Can’t Stop Aging, Nancy

Take the modern obsession with beauty and aging, two human facts that all the Viagra and surgery in the world cannot change. I expect few readers have endured something like the Joe Biden makeover or the Nancy Pelosi facial fix (I thought those on the Left were more inclined to the natural way? Something is not very green and egalitarian about spending gads of money for something so unnatural). Most of you accept wrinkles, creaky joints, and thinning hair. Oh, we exercise and try to keep in shape and youthful, but a Clint Eastwood seems preferable looking to us than a stretched and stitched Sylvester Stallone.

The Greek lyric poets, from Solon to Mimnermus, taught that there is nothing really “golden” about old age. That did not mean that at about age 50-70 one is not both wiser than at 20 and less susceptible to the destructive appetites and passions — only that such mental and emotional maturity come at the terrible price of a decline in energy and physicality. When I now mow the lawn or chain saw, in about 10 minutes a knee is sore, an elbow swollen, a back strained — and from nothing more than a silly wrong pivot. Biking 100 miles a week seems to make the joints more, not less, painful. At 30 going up a 30-foot ladder was fun; at near 60 it is a high-wire act. There is some cruel rule that the more it is necessary at 60 to build muscle mass, the more the joints and tendons seem to rebel at the necessary regimen.

The arc of history bends toward socialism and insolvency

How Leviathan Ate the GOP

By PATRICK J. BUCHANAN

“God put the Republican Party on earth to cut taxes. If they don’t do that, they have no useful function.”

Columnist Robert Novak was speaking of the party that embraced the revolution of Ronald Reagan, who had hung a portrait of Calvin Coolidge in his Cabinet Room and set about cutting income tax rates to 28 percent.

But, to be historically precise, the GOP was not put here to cut taxes. From infancy in the 1850s, its mission was to halt the spread of slavery. From 1865 to 1929, it was the party of high tariffs. Mission: Build the nation and protect U.S. industry and the wages of American workers.

And if the Deity commanded the GOP to cut taxes, the party has had an uneven record. Warren Harding and Coolidge cut Woodrow Wilson’s wartime tax rates by two-thirds, but Herbert Hoover nearly tripled the top rate.

Under Dwight Eisenhower, when the top tax rate was 91 percent, the GOP ratified the New Deal and provided the tax revenue to balance the budget at the elevated levels of spending 20 years of Democratic rule had established.

Richard Nixon followed suit. Medicare, Medicaid, food stamps, aid to education, the Peace Corps, the arts and humanities endowments, all of the Great Society programs grew — with Nixon adding OSHA, EPA, the Consumer Product Safety Commission and Cancer Institute.

Reagan cut tax rates to 50-year lows, but also accepted new gasoline and payroll taxes. George H.W. Bush then raised the top rate back to 35 percent.

George W. cut tax rates, but put two wars, prescription drug benefits for seniors and No Child Left Behind on the Visa card. Speaker Boehner is about to sign on to higher tax rates.

Government Bloat is Not Growth

Real Gross Domestic Private Product, 2000–2011

by Robert Higgs

In the 1930s and 1940s, when the modern system of national income and product accounts (NIPA) was being developed, the scope of national product was a hotly debated issue. No issue stirred more debate than the question, Should government product be included in gross product? Simon Kuznets (Nobel laureate in economic sciences, 1971), the most important American contributor to the development of the accounts, had major reservations about including all government purchases in national product. Over the years, others have elaborated on these reasons and adduced others.

Why should government product be excluded? First, the government’s activities may be viewed as giving rise to intermediate, rather than final products, even if the government provides such valuable services as enforcement of private property rights and settlement of disputes. Second, because most government services are not sold in markets, they have no market-determined prices to be used in calculating their total value to those who benefit from them. Third, because many government services arise from political, rather than economic motives and institutions, some of them may have little or no value. Indeed, some commentators—including the present writer—ultimately went so far as to assert that some government services have negative value: given a choice, the people victimized by these “services” would be willing to pay to be rid of them.

When the government attained massive proportions during World War II, this debate was set aside for the duration of the war, and the accounts were put into a form that best accommodated the government’s attempt to plan and control the economy for the primary purpose of winning the war. This situation of course dictated that the government’s spending, which grew to constitute almost half of the official GDP during the peak years of the war, be included in GDP, and the War Production Board, the Commerce Department, and other government agencies involved in calculating the NIPA recruited a large corps of clerks, accountants, economists, and others to carry out the work.

The Politics of the Millenium

Kingdom Come

by Murray N. Rothbard

Christianity has played a central role in Western civilization and contributed an important influence on the development of classical-liberal thought. Not surprisingly, Christian beliefs about the "end times" are very important for us right now.

Christian Reconstructionism is one of the fastest growing and most influential currents in American religious and political life. Though the fascinating discussions by Jeffrey Tucker and Gary North (in the July and September issues of Liberty) have called libertarian attention to, and helped explain, this movement, to clarify Christian Reconstructionism fully we have to understand the role and problem of millennialism in Christian thought.

The problem centers around on the discipline of eschatology, or the Last Days, and on the question, How is the world destined to come to an end? The view that nearly all Christians accept is that at a certain time in the future Jesus will return to earth in a Second Advent, and preside over the Last Judgment, at which all those then alive and all the bodily resurrected dead will be assigned to their final places — and human history, and the world as we know it, will have come to an end.

So far, so good. A troublesome problem, however, comes in various passages in the Bible, in the Book of Daniel, and especially in the final book of Revelation, in which mention is made of a millennium, of a thousand-year reign of Christ on earth — the Kingdom of God on earth (KGE) — before the final Day of Judgment. Who is to establish that kingdom, and what is it supposed to look like?

The orthodox answer to this problem was set forth by the great Saint Augustine, in the early 5th century; this Augustinian line has been accepted by all the orthodox and liturgical Christian Churches: the Roman Catholic, the Greek and Russian Orthodox, high-church Lutheran, and Anglican, as well as by the Dutch wing of the Calvinist church (where Calvin himself stood is a matter of dispute). The Augustinian line is that the millennium, or thousand-year reign, is solely a metaphor for the creation of the Christian Church; the millennium is not something to be taken literally, as ever to take place, temporally, on earth. This orthodox position has the great virtue of disposing of the millennium problem. The answer — forget it. At some unknown time in the future, Jesus will return, and that's that.

Silvio Berlusconi's Masterplan for Power

Europe's Next Crisis?

By Hans-Jürgen Schlamp

Silvio Berlusconi is a man driven by fear, but also one whose political war coffers are flush with cash. He's in control of three TV stations and has hundreds of experts at shaping public opinion at his disposal. That's the starting point for Berlusconi's election campaign. Already, his campaign machine is running at full steam. And although this campaign can at times come across as imbecilic or insane, is actually the product of savvy media professionals. Pollsters measure the mood of the people every day and track what is and isn't working for the Berlusconi camp.

These days, the news they have to share is positive. Berlusconi's People of Freedom Party (PdL) has gained three percentage points in the polls in recent days. Of course, so far only 17 percent of Italians say they are actually prepared to elect the former prime minister again. But that number could grow once the Berlusconi Show gets into full swing.

He will have to act fast though. Italian law limits the exposure of politicians on television during the 45 days leading up to an election, so Berlusconi only has until early January to convince Italians that he can deliver the brave new world he has promised. The big media push has to come now -- and Berlusconi is already hard at work.

Berlusconi 'Successes'

For days now, the news shows on his TV stations have been filled with reporting on the "successes" of the former prime minister and the mistakes and unfinished business of current Italian leader Mario Monti. On the popular Sunday afternoon show on the Berlusconi-owned Canale 5, Silvio appeared for close to 90 minutes. The female host dubbed the tête-à-tête an "interview," but she focused on catchwords that seemed to be tailor-made for her studio guest. "People on the streets are complaining about the burden of the property tax," she said, prompting the former prime minister to nod in agreement. Berlusconi then added that the complaints are justified because the tax has pushed many families into bitter poverty. He said he would abolish the tax immediately.

Indivisible Liberty: Personal, Political, and Economic

Strands of the same braid: liberty

by DOUG BANDOW

Almost everyone is for freedom.  At least they say they’re for freedom. Politicians wax eloquent when talking about America’s liberties in general. Advocates for free speech and civil liberties aren’t hard to find. Champions quickly rise up to battle threats against privacy. And most people intuitively understand that intimate personal and family decisions don’t belong to government.

But when it comes to economic liberty, a lot of people suddenly change their tune. It’s as if economic liberty doesn’t count. Indeed, this facet of freedom seems to stand alone, vulnerable to state regulation and control. Some of those who fervently declare their devotion to freedom disappear when property rights, entrepreneurship, or freedom of contract is under attack.

Running Your Life Through Your Wallet

Today Congress and state legislatures are far too busy dreaming up new ways to run our lives. Some of those democratic diktats are directed at both our personal and economic affairs. For instance, healthcare “reform” empowered the national government to control many more of our medical decisions, as well as how we must fund those decisions. 

So the bulk of what legislators do is manipulate the economy. They offer high-minded excuses for doing so: to create jobs, to ensure fairness, to alleviate poverty. The bottom line is that nearly everything they do requires government to violate economic liberty.

Technology: A Threat to Liberty?

Technology gives ordinary people unprecedented power

by LUCA GATTONI-CELLI

Joseph Kennedy told his boys John, Robert, and Edward not to write down anything they would not want to see on the front page of The New York Times the next morning. Even if the Times may be going out of style, Joe Kennedy’s advice is not.

David Petraeus—director of the CIA and one of the most powerful men in the world—was recently undone by Gmail. Threatening e-screeds led the FBI from a Florida socialite to General David Petraeus’ biographer.

Its monitoring easily connected the biographer to the CIA director. And if he was vulnerable, we certainly are.

Our real concern is not with the technology itself, but how its novel uses might make us more vulnerable. Most people can’t resist using cheap, powerful computing devices that channel nearly all the world’s information. Can we count on those people to use these tools in the service of truth, justice, and freedom?

The Fiscal Cliff Is A Diversion

The Derivatives Tsunami and the Dollar Bubble

By Paul Craig Roberts

The “fiscal cliff” is another hoax designed to shift the attention of policymakers, the media, and the attentive public, if any, from huge problems to small ones.

The fiscal cliff is automatic spending cuts and tax increases in order to reduce the deficit by an insignificant amount over ten years if Congress takes no action itself to cut spending and to raise taxes. In other words, the “fiscal cliff” is going to happen either way.

The problem from the standpoint of conventional economics with the fiscal cliff is that it amounts to a double-barrel dose of austerity delivered to a faltering and recessionary economy. Ever since John Maynard Keynes, most economists have understood that austerity is not the answer to recession or depression.

Regardless, the fiscal cliff is about small numbers compared to the Derivatives Tsunami or to bond market and dollar market bubbles.

The fiscal cliff requires that the federal government cut spending by $1.3 trillion over ten years. The Guardian reports that means the federal deficit has to be reduced about $109 billion per year or 3 percent of the current budget. More simply, just divide $1.3 trillion by ten and it comes to $130 billion per year. This can be done by simply taking a three month vacation each year from Washington’s wars.