The Public Policy
Nationalization Review
The magazine Bill Buckley founded supports expanding Obama’s power to seize firms.
Given the Obama administration’s rapid takeovers of General Motors and Chrysler, it shouldn’t come as much of a surprise to conservatives that, in the name of “financial reform,” President Obama is arguing that government should get vast new powers to seize private firms. What may surprise members of the center-Right coalition, however, is that the venerable conservative publication National Review is backing Obama’s bid to have the government do so.
The 85-page white paper the administration unveiled last week proposing a grab-bag of new financial regulations contains a prominent section on what it calls a “resolution regime” for “nonbank financial firms.” In this “regime,” the government would have, in the words of the Obama paper, “broad powers to take action with respect to the financial firm,” including “the authority to take control of the operations of the firm or to sell or transfer all or any part of the assets of the firm.”
One would think these would be fighting words for a conservative journal that for almost 55 years has vigorously opposed nationalization of industries in countries such as Cuba and Venezuela and has championed privatization efforts in Great Britain and attempts in the U.S. But an unsigned editorial posted last week on the magazine’s website actually says of the Obama plan, “The administration’s approach gets at least one big thing right.” The editorial tries to make the case that “a resolution authority giving the federal government the power to seize financial holding companies … is actually not as scary as it sounds.”
Obama and NR use roughly the same reasoning to justify these new powers. Without the government having this authority, they argue, the only choices are bankruptcies disruptive to the financial system or costly taxpayer bailouts of failing firms. In his June 17 speech announcing the proposals, Obama said, “We should not be forced to choose between allowing a company to fall into a rapid and chaotic dissolution, or to support the company with taxpayer money. That’s an unacceptable choice.”
Similarly, the NR editorial, also issued on the 17th, states, “The bailouts have set the precedent that once a firm grows ‘too big to fail,’ its secured creditors will be protected, regarless of cost to taxpayer in order to prevent systemic spillover effects.” The ability for the government to seize firms it deems as failing, NR opines, “would remove a layer of moral hazard by making failure a possibility, even for the largest firms.”
In part, what the NR editors might be expressing is a form of “buyers remorse” on the original Bush-Paulson financial bailout they forcefully supported last fall. And not only did they strongly back that bailout, they berated GOP members of Congress who dared oppose it. In a September 29 Corner entry entitled “I’m Stunned” posted immediately after GOP conservatives and populist Democrats combined to vote down the bailout in the House (before a second package was approved there four days later), NR editor Rich Lowry exclaimed, “House Republicans will get blamed, and the likes of Mike Pence [R-Ind.] indeed played an extremely irresponsible role.”
Now, National Review tells us that Obama’s resolution authority, “done right, would at least put us back on the road to a rule-based system.” Its editorialists lecture sanctimoniously that “in post-bailout America, we have bad and less-bad options to choose from and we’ve seen the alternative: a series of ad hoc and largely lawless bailouts jerry-rigged by the Treasury and the Fed.”
But there is every reason to believe that nationalization, or resolution, or whatever NR and the Obama administration wish to call this new authority, would be just as “ad hoc” and “lawless” as the previous bailouts and nationalizations.
Both NR and Obama justify the ability to seize firms based on the fact that the government already has similar powers regarding commercial banks. A government takeover “is essentially what the Federal Deposit Insurance Corporation does when it determines that a depository bank is on the brink of failing,” NR intones in its editorial. Similarly, Obama argued in his speech: “If a bank fails, we have a process through the FDIC that protects depositors and maintains confidence in the banking system. … And it works. Yet we don’t have any effective system in place to contain the failure of an AIG [American International Group].”
It should be noted that contrary to Obama and NR’s assertions, the FDIC process of seizing banks is far from perfect. FDIC Chairwoman Sheila Bair, whom Obama held over because of the liberal policies she pursued in the latter half of the Bush administration (such as strong backing of the Community Reinvestment Act, as Matt Vadum reported in TAS yesterday), disregarded taxpayer interests upon seizing the large thrift Indymac and other banks and created a “model” mortgage modifcation program for thousands of borrowers that wrote off principlal on the loans and reduced interest payments to well below market rates. Initial results show a redefault rate in programs like these of more than 50 percent, but Bair and Obama show no signs of stopping this flawed experiment with taxpayer dollars.
But at the very least, the government’s ability to seize a bank is a condition of its service of providing deposit insurance. Bank owners and investors can forsee this possibility when the firm signs up to receive this insurance. There is no such nexus with nonbank buisnesses. And though Obama uses the example of AIG, his white paper puts no limits on the type of firm the government could seize. On page 19, the paper defines a “Tier I financial holding company” that woud be subject to seizure as “any firm whose combination of size, leverage, and interconnectedness could pose a threat to financial stability if it failed.”
What type of business could that be under such an expansive definition? Well, it didn’t take long before the bailout intended for commercial and investment banks was applied to auto companies. And federal statutes governing banks, including the Patriot Act’s money laundering provisions, have already adopted a broad definition of “financial instiution” to include auto dealers, jewelry stores and travel agencies. It doesn’t take much imagination to see that a firm that the government deemed as a threat to “financial stability” could conceivably be just about any firm the government wanted to nationalize.
It’s also too bad that, in putting together the editorial, National Review didn’t avail itself of mainstrea conservative experts who argue that both that the financial fallout of the bankruptcy of Lehman Brothers was overblown, and that the financial system was put more in danger by the government’s bailout and nationalization to “save” AIG a couple days later that September.
In a Wall Street Journal op-ed last week, Peter Wallison of the American Enterprise Institute, who was general counsel to the Reagan administration Treasury Department, wrote: “The turmoil following Lehman’s failure occurred because market participants expected, after the rescue of Bear Stearns, that any larger firm would also be rescued. … Lehman’s failure itself did not cause any substantial losses, and within two weeks of its bankruptcy filing Lehman’s trustee sold its brokerage, investment banking, and investment management businesses to four different buyers.”
Similarly, Stanford economist and Hoover Institution fellow John Taylor noted in another WSJ op-ed (and in his excellent new book on the crisis, Getting Off Track) that in the week after Lehman’s Sept. 15 bankruptcy announcement, “interest rate spreads increased slightly on Monday, Sept. 15, [but] stayed in the range observed during the previous year, and remained in that range through the rest of the week.” It was only in the next week, according to Taylor, after Paulson and Fed Chief Ben Bernanke put together the bailout package and screamed economic Armageddon in testimony before Congress, “that one really begins to see the crisis deepening and interest rate spreads widening.”
About the Author
John Berlau is Senior Fellow for Finance and Access to Capital at the Competitive Enterprise Institute and blogs at OpenMarket.org.
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Rocco| 6.23.09 @ 6:36AM
That's why, since before W. Buckley passed away, I quit subscribing to it and don't ever consult its web edition. The mag has become increasingly less relevant under the current crop of editors. Sad.
Robert Rosencrans| 6.23.09 @ 6:43AM
There's a huge group of Republicans who are simply liberals who mistakenly believe they are conservatives, thus the Neocon.
They are the ones you see on TV stating the Republicans better "get with it" and start coming up with their own plans to nationalize health care. Colin Powell is a good example of this type of political changeling.
Here is a great article on the subject.
http://www.theobjectivestandard.com/issues/2006-fall/decline-fall-american-conservatism.asp
Fall 2006 Vol. 1, No. 3
This article is from TOS Vol. 1, No. 3. The full contents of the issue are listed here.
The Decline and Fall of American Conservatism
C. Bradley Thompson
In 1994, American voters elected Republican majorities in both the House of Representatives and the Senate for the first time in forty years. This ascent to power gave Newt Gingrich and his colleagues the opportunity to launch their “Republican Revolution” with its signature “Contract with America” platform. The election was said to mark the end of an era—the era of big government liberalism that had dominated American political life since the New Deal. After struggling for almost half a century to gain political power, the conservative movement finally seemed to have reached the political promised land.
In theory, the “Republican Revolution” proposed to “relimit” the powers of the federal government and to restore some of the basic principles and institutions of free-market economy. The preamble to the “Contract with America” pledged to the American people that the GOP would put an end to “government that is too big, too intrusive, and too easy with the public’s money.”1 The political goals of the Gingrich “revolutionaries” were not revolutionary in any meaningful sense, but they did promise to begin some necessary reforms. As a rule, the Gingrich Congress preferred less to more government controls.
In practice, the Republicans began to whittle away at the welfare state. Their first post-election budget proposed to eliminate three cabinet agencies (the Departments of Commerce, Education, and Energy) and more than 200 federal programs. Within a year, the Republican-controlled House of Representatives had reduced federal spending by almost $14 billion.2 Such early successes led even Bill Clinton to declare in his 1996 State of the Union address that the “era of big government is over.”3 A Republican Congress passed and Clinton signed far-reaching welfare reform legislation that promised to end “welfare as we know it.”4
By the end of the 1990s, America’s political fault line appeared to have moved considerably to the Right for the first time since the early 20th century. The advocates of limited government faced an historic opportunity to begin the process of dismantling the welfare state and deregulating the economy.
So how goes the Republican Revolution twelve years later? What is the state of the American political Right in 2006?
Judging by electoral results and political appearances, the Right is flourishing. For the first time since before the New Deal, the Republican Party controls all three branches of the federal government. There is a Republican in the White House surrounded by conservatives; Republicans control the House of Representatives and the Senate; and seven out of nine justices on the Supreme Court are appointees of Republican presidents. Republican grand strategist Karl Rove and several conservative pundits say that prospects look good for the GOP to become America’s “permanent majority.”
It is not just Republicans but conservative Republicans who are driving this train. As William Rusher, co-founder of the modern conservative movement, reports, the “conservative movement has come to dominate the Republican Party totally.”5 In other words, the Republican Party has finally purged itself of the moderate, non-ideological, country-club, Rockefeller Republicans that once dominated the party in the 1950s and ’60s. The conservative moment—the moment when conservative Republicans become America’s ruling class—has arrived.
For over forty years, ever since the Goldwater election debacle in 1964, conservatives have methodically pursued ideological control over the GOP. Now that they do control the Republican Party and all three branches of the federal government, what exactly have conservatives bequeathed to America?
Here are some hard facts. Government spending has increased faster under George Bush and his Republican Congress than it did under Bill Clinton, and more people work for the federal government today than at any time since the end of the Cold War. During Bush’s first term, total government spending skyrocketed from $1.86 trillion to $2.48 trillion, an increase of 33 percent (almost $23,000 per household, the highest level since World War II). The federal budget grew by $616.4 billion during Bush’s first term in office. If post 9/11 defense spending is taken off the table, domestic spending has ballooned by 23 percent since Bush took office. When Bill Clinton left office in 2000, federal spending equaled 18.5 percent of the gross domestic product, but by the end of the first Bush administration, government outlays had increased to 20.3 percent of the GDP. The annualized growth rate of non-defense and non-homeland-security outlays has more than doubled from 2.1 percent under Clinton to 4.8 percent under Bush.6
Increased spending inevitably means increased taxes. Thus, despite President Bush’s much vaunted tax cuts, Americans actually pay more in taxes today than they did during Bill Clinton’s last year in office. The 2006 annual report from Americans for Tax Reform, titled “Cost of Government Day,” sums up rather nicely the intrusive role played by Republican government in the lives of ordinary Americans. The report says that Americans had to work 86.5 days just to pay their federal taxes, as compared to 78.5 days in 2000 under Bill Clinton. In other words, the average American has worked 10.2 percent more for the federal government under George Bush than under Bill Clinton. When state and local taxes (controlled in the majority of places by Republicans) are added to federal taxes, Americans worked for the government eight hours a day, five days a week, from January 1 until July 12, meaning they worked full-time for the government for more than half the year. As Tom Feeney, a congressional Republican put it: “I remember growing up and reading in some school textbooks that if more than half your paycheck went to the government, then you were living in a socialist society.”7 Just so, Mr. Feeney.
Two generations ago, conservatives denounced the growth of government and called for a revolution to roll back the Leviathan State created by Franklin Delano Roosevelt’s New Deal. In 1994, conservatives, with their Republican Revolution, rode into power on just such a platform of limited government. Yet today, the conservative intellectual movement and the Bush administration are engaged in a very different kind of revolution—a revolution for big-government conservatism.
What happened to the idea of limited-government conservatism? Have the conservatives been corrupted by power, or is there something in their basic philosophy that has led them to embrace big government? Why have conservatives moved to the port-side of liberalism?
To answer these questions and to understand the split personality of the conservative movement, we must examine the various ideologies that now dominate it. To set some context, however, let us first recall the basic ideals that have traditionally been regarded as the gold standard of true conservatism: the ideals associated with Barry Goldwater’s 1964 presidential campaign, which, in turn, point to the principles of America’s Founding Fathers.
In The Conscience of a Conservative, regarded by many as the political Talmud of conservatism, Goldwater explicated the principles of conservative government. He wrote that the “ancient and tested truths that guided our Republic through its early days will do equally well for us.” The challenge of conservatism, he continued, is “to demonstrate the bearing of a proven philosophy on the problems of our own time.” He defined the Founders’ “proven philosophy” in the following terms: “The legitimate functions of government are actually conducive to freedom. Maintaining internal order, keeping foreign foes at bay, administering justice, removing obstacles to the free interchange of goods—the exercise of these powers makes it possible for men to follow their chosen pursuits with maximum freedom.”8
Enabling men “to follow their chosen pursuits with maximum freedom”—this is the proper purpose of government; this is the ideal that American conservatives have long claimed to be conserving or restoring; and this is the ideal that animated the American Founding. As Thomas Jefferson eloquently summarized in his First Inaugural address: “A wise and frugal government, which shall restrain men from injuring one another, which shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”
The Founding Fathers created a free society grounded on the moral sovereignty of the individual. They recognized that the only legitimate function of government is to protect each individual’s right to act on his own judgment—so long as he does not violate the rights of others. Accordingly, the Founders established a government limited to the protection of individual rights—that is: limited to making and enforcing objective (i.e., rights-respecting) laws, to resolving civil disputes, to protecting private property, and to enforcing contracts.
While this is the ideal that defined the American Founding—and the ideal to which Goldwater conservatives have long claimed allegiance—it is not the ideal to which today’s conservatives subscribe.
To what ideals do today’s conservatives subscribe? What are their political goals?
In recent years, the conservative intellectual and political movement has become strained and divided. Political analysts now speak of the great conservative “crack-up.” At the heart of the ideological wars now engulfing the movement are two putatively conflicting philosophies: a moral philosophy called “compassionate conservatism” and a philosophy of governance known as “neoconservatism.” To understand the state of the conservative movement and where it is headed, one must understand the nature of these two conservatisms, what they have in common, and how they shape today’s Republican Party.
Compassionate Conservatism
Compassionate conservatism came to prominence during the 1999 Republican primaries and the 2000 Presidential campaign when George W. Bush ran as a compassionate conservative. At the time, most traditional conservatives cynically assumed that Bush was using the moniker as a catchy electioneering phrase, a clever rhetorical strategy to capture the vote of America’s so-called “soccer moms,” the marginally liberal, college-educated, suburban women who twice helped to elect Bill Clinton. What few traditional conservatives understood at the time was that candidate Bush actually meant what he said, that this new creed gave expression to his previously unarticulated core philosophy—one shared by many other politicians and voters.
Compassionate conservatism, rather than simply being a slick vote-getting slogan, is a political philosophy—one that George Bush genuinely embraces and that has formed the policies of his administration. Although some conservatives in 1999 openly mocked the idea of compassionate conservatism, eventually most came around to supporting it—in part because they saw that it helped to elect Bush in 2000 and then reelect him in 2004—but, more importantly, because compassionate conservatism brought to the surface principles that traditional conservatives had silently followed for decades.
What is this philosophy? What are its principles and goals?
The guiding moral principle of compassionate conservatism is the idea that we, by way of our government, have a “duty” to serve the needs of the poor, the homeless, the sick, and the aged—hence “compassionate,” which means desiring to relieve the pain and suffering of others. Its advocates seek to uphold this moral principle through “free-market mechanisms”—hence “conservatism.”
Myron Magnet, a leading theorist of compassionate conservatism, describes it as representing an “epochal paradigm shift” in American political thinking. It amounts, he writes, “to a sweeping rejection of liberal orthodoxy about how to help the poor.”9 Why reject the liberal orthodoxy on this count? Because, says Magnet, “liberal prescriptions, good intentions notwithstanding, have in fact made the lot of the poor worse over the last 35 years.”10 As such statements reveal, compassionate conservatism fully accepts the liberal notion that we have a “duty” to help the poor—compassionate conservatives simply disagree with liberals as to how to help them.
Compassionate conservatives decry the liberal welfare state for causing the “worst-off” to be “more mired in dependency, illegitimacy, drug use, school failure and crime than they were when the experiment began.”11 The problem, according to the Bush Administration, is that government bureaucrats are incapable of promoting the long-term success of the poor, that “lasting and profound change in a human life comes most often when care is offered on a personal level by families and by those with a stake in the community, who are motivated by a burden of the heart to improve the lives of those around them.”12
The compassionate conservative solution, however, is not for the Federal government to abolish welfare and leave it to “those with a stake in the community” to help those about whom they care. Instead, their solution, as described by Bush advisor Stephen Goldsmith, is for the Federal government to outsource the administration of welfare:
Although [compassionate conservatives] acknowledge the role of government in helping those who need assistance, they do not believe that government itself needs to deliver those services. Small, local civic associations and religious organizations have the detailed knowledge and flexibility necessary to administer the proper combination of loving compassion and rigorous discipline appropriate for each citizen.13
Such a policy serves only to redirect taxpayer dollars from government welfare agencies to private religious and civic organizations. The net effect is the same: The wealth of Americans is forcibly taken and redistributed to serve “compassionate” purposes.
Michael L. Hauschild| 6.23.09 @ 6:57AM
Old habits die hard (like being a Republican) but they do die. These once conservative publications (include The Weakly No Standard) still have contributors worth a look but very seldom a complete read. The term “Republican” used to mean something to me but now it is approaching profanity. Evan the term RINO has become an oxymoron.
Robert| 6.23.09 @ 7:19AM
A takeover target is "...any firm whose combination of size, leverage, and interconnectedness could pose a threat to financial stability if it failed."
Failed at what? Toeing the Marxist line at dispensing the Leviathan State's approved news perhaps? There's language through which a slick lawyer could drive a truck!
Watch out AmSpec...Fox News! You are takeover targets in obama's Brave New World.
D| 6.23.09 @ 7:33AM
National Review has four material assets: Jonah Goldberg, Jay Nordlinger, Victor Davis Hanson and Mark Steyn. And the latter are only contributors.
Everything else there is expendable.
Mike| 6.23.09 @ 7:59AM
A triumph of common sense over ideology. What the NR appears to finally have come to realize is that "regulation" and "nationalization" are not synonymous terms. Also, they appear to also have come to the stunning conclusion that the holy grail of right wingers, laissez-faire capitalism, is a far from a perfect economic system. And maybe, just maybe, NR is placing the welfare of the nation above the demented desire to see the president of the United States fail at any cost.
Bob| 6.23.09 @ 8:49AM
As I've said many times before, I believe, long term, that the bailouts were misguided. All they did was stretch out the problem so the pain would not be felt at one time. However, the NR is also right that an orderly, and KNOWN process is important in protecting consumers. Much of retirement funds are now invested in the market. Conservatives should consider this a good thing that it is not the government that controls their retirement monies. However, just as the FDIC protects savings of most people, with the change in retirement structures, it is important to also protect the funds of 401(k) investors. As we live longer, the effects of an economy based on consumption is drastically affected by a significant loss in retirement funds. In order to have a more rational process, we need to extend the FDIC methodology to other financial institutions. If you don't agree with this methodology, then you should also call for the elimination of FDIC guarantees to be ideologically consistent.
But then again, most TAS readers are reactionary and don't consider the implications of their knee jerk reactions. Again, I think the bailouts were wrong, and longer term we would have been better off going through a couple of years of a much more severe recession than the inefficient delay of the inevitable. Our deficits would have been hurt either way from more spending or reduced revenues, but it would have enabled a stronger economy in the future.
Having spent my life in Fortune 100 companies, I believe some regulation is absolutely necessary to make markets fair. So extending the FDIC methodology to other financial institutions is a good process. Those who rail against it must have little background or economic training in the financial sector.
Sean| 6.23.09 @ 9:05AM
The NR's main goal is to provide cover for big government Republicans and statism. They will feign outrage over big government here or there, but in the end will support those Republicans that support big government and statism over those that don't.
2Anglico| 6.23.09 @ 9:27AM
"it is important to also protect the funds of 401k investors."
Inside EVERY 401k there are CHOICES. If you don't like RISK, you can invest in money market funds or in a lot of cases they offer a FIXED, GUARANTEED account. No sexy 60% upside but no 50% downside either.
Next we'll hear about the need to "protect" cattle futures investors.
Oh, one more thought, if the GOVERNMENT had not STOLEN all the money paid into SS, and "protected" it, with you know, like maybe a "lockbox", there might be trillions in the SS "Trust Fund". As it stands now there are only IOU's in the trust fund.
The government that has been in charge of running the biggest PONZI scheme in history is going to "protect" 401k assets?????? LMAO
Bob| 6.23.09 @ 9:37AM
Under your logic, 2Anglico, we should also get rid of the FDIC. After all, it was your choice to put it in a bank instead of your mattress.
I'm afraid you don't understand the word "protection". It is not the same as "risk". This is not a guarantee against loss -- you would still be at risk with your 401(k) depending on your choice of investments. However, this would prevent contamination to companies who ran their businesses properly. It would also allow for identifying potential problems like undercapitalized derivatives. I'm afraid you don't understand this legislation.
With regard to Social Security, you are certainly correct that it is a Ponzi scheme -- just like derivatives. It should have been tied to average lifespan rather than absolute age. Today that would mean you would get benefits at 78 years of age rather than 65. I'm sure you could get elected on that platform.
Tim| 6.23.09 @ 9:41AM
"Too big to fail" is the issue. Either you believe that failure is failure or you get into the long intellectual grass of "Too big to fail". If one accepts this idea, then it logically follows that one asks if a firm is too big to fail maybe it is too big to exist and thus we need regulation. I think that's where NR is.
If Chrysler had failed in 1980 we would have had no bail out in 2009. If GM had been allowed to fail maybe the President could be focusing now on North Korea and Iran not green cars and CEO hirings.
Bah. Can't even really blame Obama because Bush opened the door to all this.
Alan Brooks| 6.23.09 @ 10:01AM
WFB was the last great American, besides George F. Will (who will be 70 two years from now). There's the Derb, too; but he is more of an Englishman.
may they both live to be 100 at least.
Bob| 6.23.09 @ 10:01AM
Tim, the legislation does not call for the break-up of very large financial institutions. The only purpose of the legislation is to provide the same oversight we have with banks and insurance companies and an orderly process for a transfer of assets in case of failure. If a company does not manage itself well, this legislation will not protect it. It will cause the companies to have higher capital requirements and lower leverage -- and that is a good thing. So "too big to fail" is not really the issue. AIG is an example of this. It is the largest insurer in the world and its insurance businesses are quite healthy with adequate capital reserves. If the Financial Products Group had been adequately regulated, the company would not have gone under. Hank Greenberg knew how to manage insurance businesses, but didn't have a clue about banking and investments.
As for the auto bailouts, this was a huge mistake by both Bush and Obama. Even with Wagner gone, the management of GM has not changed. You can turn a company around as Gerstner did with IBM and Iacocca did with Chrysler -- but these were marketing guys with a vision. There is no one like that now at either GM or Chrysler. Financial institutions are part of our infrastructure, auto companies are not.
Alan Brooks| 6.23.09 @ 10:05AM
Tim,
you are of course correct about Bush opening the door.
MOST OF ALL, where are our shares of GM?
and BTW Who exactly does Bush's prescription healthcare plan help today? these questions and many more.
Alan Brooks| 6.23.09 @ 10:47AM
oh and btw, Codevilla's condescending piece here at AS on How Young Latinos Enrich America-- nothing but a preface to a piece, containing every bit of the boilerplate you would expect-- was as bad as anything in NR.
it's the coming brave new world of journalism.
JoJo| 6.23.09 @ 11:01AM
The editorial which Mr. Berlau dissects here is unfortunate, but most of the pieces on NR have opposed all this nonsense being initiated by Obama. Perhaps it was just a lapse in good conservative common sense.
Perhaps.
Old Texican| 6.23.09 @ 11:14AM
Rosencranz
Once again, thank you for rounding out the "starter article" in a competent fashion so as to lead to a quite reasonable discussion here.
I have personally been educated further here, and gotten a much better perspective.
Gosh!
I suppose I am a closet "compassionate conservative". I do like the idea of helping put a safety net under the young, the old, and the infirm.
I don't guess I mind too much if the feds collect the funds and sorta' organizes it all, IF the funds are funneled efficiently to the beneficiaries through local responsive (semi independent) organizations.
Again, Robert thank you for getting us started out on the right foot here in comments.
JP| 6.23.09 @ 11:38AM
There are 2 things at play here; first is the ability of a multi-national holding company to grow, and grow, and grow. Since the 1980s, there was the conceit that any firm or enterprise can be managed as long as it had the correct processes in place, and the correct people to run it. Diversified holding companies like GE (it is now really nothing but a holding company for a diversified global portfolio). Shareholders, theoretically would be the final arbiter. In the business world there has always been a debate whether a firm could reach a place of diminishing returns. Rarely do firms remain profitable when they diversify beyond thier core competencies. Is a firm like GE or Siemens, or Fijitsu really that good an investment?
Overseas, in both the Asian and Euro markets, the multi-national holding companies that we all know and love receive generous subsidies, tax abatements, and near monopoly status. In return, they pay thier employees generous benefits, secondary education oppurtunities, as well as allow goverment agencies to regulate their behavior and set executive pay caps. The enterpriises out of Japan and the EU are anything but dynamic; but they are stable. Thier returns are about where the S&P 500 is. And, they don't have to worry about any upstart like Microsoft, or Apple rocking the boat.
We are at a crossroads. Will we trade off the kind of dynamic capitalism that we've enjoyed since 1983, for a stable yet scoleric economy? I can tell you, China and India are more than ready to create the next generation of industrial and electronic goods and services.
The sad fact is, large American businesses enjoy free markets when they are doing the innovating, but they will think nothing of turning on a dime and seeking government protection when they fail to compete. It could be that the next generation of CEOs only task will be to grow the company not with profits in mind, but with government protection as the final goal.
The theoretical justification for capitalism has been on the downslope for decade -perhaps longer. For me, it isn't capitalism that I fear is going away, but freedom and liberty. We are close to being where the Germans were in 1930. They were willing to trade thier liberties and freedoms for material comforts and security.
Michael Tomlinson| 6.23.09 @ 11:49AM
If more regulation is necessary, as some imply, why does the Obama oligarchy continue to follow the Democrat party line and refuse to crack down on Fannie Mae and Freddie Mac? On 3 separate occassions President Bush and Republicans in Congress attempted to reign in these quai government institutions with their creative book keeping, but Democrats like Barney Frank and Company vehemently refused. Is that because Obama friend and supporter Franklin Delano Raines and Jamie Gorelick were working so hard to enrich themselves and other Democrat hangers on like Rahm Emmanuel from its coffers that Democrat legislatures were loath to stop their friends fun? Some have speculated had these 2 institutions been properly regulated, as Bush and Republicans attempted, we may have avoided the current financial mess the Democrat's so badly wanted. Thus, saving us from Obama and the Obamacons/conservatives for Obama (most being anti-neocons).
As for the unsigned editorial in National Review could this be just another sign of many American's acceptance the soft despotism Alexis de Tocqueville warned about?
As one who still has faith in the democratic process I believe the American electorate will rebel against the chaos being wrought by Obama as unemployment continues to rise and our standard of living continues to decline. Its the economy stupid and everything Obama is doing is insured to make it worse.
Paul from SA| 6.23.09 @ 11:56AM
I visit NRO everyday but find myself choosing NOT to read any articles more and more each day. I stopped subscribing a few years ago. (It's an unnecessary cost for old news and applies to lots of mags these days.)
Goldberg, Hanson and Steyn are outstanding, but many others often don't sound like true conservatives anymore. I want more partisanship against the liberals who are ruining our country.
"Too big to fail" just means more redistribution of our hard-earned property. --harming one person to help another.
Pete| 6.23.09 @ 12:01PM
Michael T gets at the heart of the matter, which is that it really isn't about "sensible" regulation or even any system that actually works. It is about more money and more power for our current ruling class. We can argue all day about what might or might not actually work in theory, but in practice, these are all ways of putting more of their D buddies in power and controlling the flows of money. These mobsters need to be shown the door as quickly as possible.
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Kingsmill| 6.23.09 @ 1:07PM
National Review was over when Willmoore Kendall fled "the world of the Buckleys".
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Doctor Right| 6.23.09 @ 1:12PM
National Review only has a handful of REAL Conservative writers (Victor Davis Hanson, Jack Dunphy, Jonah Goldberg) who contribute on a regular basis...Most of the rest are limp-wristed, pseudo-conservatives like David Brooks.
Christopher Buckley is NO credit to his Papa. NR died with Bill Buckley. Let it rest in peace.
Ellis Wyatt| 6.23.09 @ 1:18PM
Oh God, I wish someone would hold up a copy of the Constitution in today's press conference and ask the Pres where in the US Const. does it give the govt the power to regulate and or takeover business and the financial sector!!!
2Anglico| 6.23.09 @ 1:31PM
Bob, 401k investments are in segregated accounts. If XYZ Brothers Investment House goes broke, the underlying funds are solvent. So, what kind of "protection" are you talking about? Seems to me you were wanting the government to "protect" people against loss of value in their investments. That would in essence be "protecting" them from risk.
Nowhere in my post did I mention FDIC. If you want to "invest" your money in a bank account "insured" by the FDIC, be my guest. For me that would mean a 1.8% after tax return, IF I could get a 3% rate. The ONLY investment that gives me a reasonable, long term return is EQUITY. And EQUITY ALWAYS involves RISK.
In case I was not clear, I do NOT trust the government AT ALL. Who would be doing this new "regulation"? Probably the same old corrupt government employees. If you are talking about tighter rules for Self Governing Organizations, I might go along with a little of that.
2Anglico| 6.23.09 @ 1:42PM
After reading Michael Tomlinson's post above, it occured to me that our wonderful government is calling for even MORE activity from the Community Reinvestment Act. This is SOOOOOO typical. The cancer that started this whole mess is going to be used even more vigourously to FORCE banks (non-bank financial institutions?) to make MORE BAD LOANS!!!!!
The only silver lining is that MAYBE private companies, having been burned by poison derivatives, will NOT make the same mistake again and collateralize these garbage loans.
When donkeys fly!!
Central Coast| 6.23.09 @ 1:58PM
For R. Rosencrans: I apprciate your opinion(s) but when your responses (and many others here) are longer than the article you respond to , please summarize your thoughts and less fill!
Bob| 6.23.09 @ 2:00PM
2Anglico -- I was talking about SWINGS in valuation in 401(k)'s. You can only make good investments with transparency. Derivatives were not transparent at all. I see this regulation as increasing transparency and reporting. The process of shutting down a financial institution is the RESULT of transparency and reporting. Now do you understand? The main purpose of the FDIC is to check the solvency of banks first and foremost. Then, when they become insolvent, they can transfer the assets quickly and easily. The FDIC couldn't do its job without transparency and reporting. Have you ever worked in an FDIC institution? If not, talk to someone there.
That said, you raise an excellent point about who will do the work. I don't believe the Fed is the right group -- they don't have the expertise -- they are mostly economists, not financial executives/accountants.
Again, you make the mistake of assuming that the CRA was the cause of the latest crisis. Not even close. It was securitization, the Fed, and deregulation of non-bank financial institutions. Think of it this way. The rise in the prices of homes was across the board. Less than 5% of homes were CRA related. If CRA was the cause, you would not have seen the extreme rise in values of high end properties. Besides, most of the defaults have come from speculative properties, not subprime.
Old Texican| 6.23.09 @ 2:21PM
Robert
Ignore "Central Coast"!
He has a short attention span.
janet| 6.23.09 @ 2:38PM
Centralcoast,
If you want cliff notes, don't read TAS posts. I, for one, appreciate in depth, knowledgeable commentaries that provide further insights into the subject matter.
Robert Rosencrans| 6.23.09 @ 2:40PM
Actually, that post was not as copied. Somehow I must have moved the mouse and bought on the entire article. Anyway, it's still a good read because it's filled with good points.
Paul McGrath| 6.23.09 @ 2:41PM
Attacking the National Review in this way is utterly and thoroughly asinine. With this one single article you have diminished yourselves in my eyes forever.
Mike| 6.23.09 @ 3:19PM
Ellis Wyatt,
While he is at it, maybe he can find where in the U.S. Constitution the feds have a right to create and maintain the USAF. Sorry its no longer 1789, but get over it.
Marcell| 6.23.09 @ 3:52PM
A different view of universal health care. Warning...
by arodb
Mon Jun 22, 2009 at 05:09:43 PM PDT
this won't be fun to read. And I guess it won't be much fun for me to read the comments. But what the heck, this is a place for sharing observations, even when they are disturbing.
Let's start with this Article from the Washington Post, Primary-Care Doctor Shortage May Undermine Reform Efforts, with this first paragraph:
As the debate on overhauling the nation's health-care system exploded into partisan squabbling this week, virtually everyone still agreed on one point: There are not enough primary-care doctors to meet current needs, and providing health insurance to 46 million more people would threaten to overwhelm the system.
Fixing the problem will require fundamental changes in medical education and compensation to lure more doctors into primary-care offices, which already receive 215 million visits each year.
We would like to pretend that the only impediment preventing every citizen in the U.S. from getting adequate medical care is something fixable, less waste, less greed by private gatekeepers (insurers), betters record keeping, different types of treatment (preventive) and the like.
Medical caregivers--- doctors, dentists, nurses, chiropractors, physical therapists, pharmaceutical manufacturers and distributors........all of them are free agents who are profit maximizers. Within the constraints of law and ethics they have every right to make the most income they can in doing their jobs.
Let's focus on M.D.s. As profit maximizers they will treat the mix of people (defined by payment method) and illnesses, that provides them with the most income. No medical reform, including full single payer, ever plans to deny the physician the right to be independent income maximizers.
All government really can do in order to redistribute the allocation of the scarce resource of doctoring is to tinker with the payment of the classes of insurance that they control. In emergency conditions, wars, disasters etc, the rules of profit are suspended; and humanitarian interests elevate "triage," the calculation of amount of resources, chance of success and immediacy of need-- to determine who gets treated. But that is the exception, and we will continue to allow the free market to decide who gets treated.
Here is where there seems to be a universal conceptual error, among the left especially. The current plans being devised in congress will add to the number of people who have the means to employ a doctor by subsidizing their insurance, which will also increase the demand on doctor's services. If they were an underutilized resource, if there were doctors engaged in other occupations because not enough people were seeking their services, there would be no problem.
But this is not the case. So when demand increases for a service that is being utilized at full capacity, what happens? We know what happens; the cost of the service, whether a Broadway show, a view of the ocean while dining, or a front row seat at a shiny new stadium....will increase.
From the WaPo article:
The overall shortage of doctors may grow to 124,400 by 2025, according to a study by the Association of American Medical Colleges. And, the report warns, "if the nation moves rapidly towards universal health coverage" -- which would be likely to increase demand for primary care and reduce immediate access to specialists -- the shortages "may be even more severe."
Many of the measures needed to compensate for shortages -- such as easing the debt incurred by medical students and expanding the role of community health centers -- are included in the provisions being put forth by lawmakers, but there is no quick or easy fix within the grasp of Congress or the Obama administration.
"You're talking about an eight-to-12-year period to fix the problem,"
Economics: "The study of how society allocates scarce resources." The free market, what a willing buyer will pay a willing provider is usually considered a good way to allocate scarce resources. It's not so good if you happen not to have much to trade, like skills in demand or money. But the option to this system is something that rarely works, either a caste system, or central planning.
But won't some expansion of health insurance at least take care of the worse inequities. Won't it alleviate pain for those who are most suffering without any care right now? Not necessarily. It could make it worse by having physicians shift their clientele more to those with the wealth to pay higher fees as I describe in something that is already occurring, retainer practice.
I'll cut this short. I wrote this diarya couple days ago that described how Medicare will pay doctors less than the Private insurance option in the new House of Representatives draft plan. That's one way to allocate resources, less service to Medicare clients and more to those on the new Private Option. Is it fair? I guess it depends on your personal circumstances, but it sure confirms that such choice must be made.
I am starting to feel that what President Obama and the Congress is doing is misguided. The problem is larger than increasing the number of people who are insured, since without increasing the number of providers, it is meaningless. In fact, I am starting to suspect, since AARP approved the House proposal, that this will probably end up being a trillion dollar bonus to the health care establishment, including insurers, with actually a detrimental effect on aggregate health care to average American citizens.
Ran| 6.23.09 @ 4:07PM
Paul... it isn't an "attack" fer Pete's sake. Right. Don't forget to cancel your subscription.
Old Tex, Robert, well said. NR's editorial reminds one that it is not enough to stand athwart History and merely shout Stop! One must scream Back! and Push. Very. Hard.
Roy| 6.23.09 @ 6:54PM
Re: arodb, who wrote:
"No medical reform, including full single payer, ever plans to deny the physician the right to be independent income maximizers. "
This is true but it doesn't really matter. It really can't deny that right because the physician can always choose not to be a physician. But under full single-payer the government will dictate how much profit is available to a physician, so the effect would not be skyrocketing prices but shortages. It's not like this is controversial. Look at Canada.
2Anglico| 6.23.09 @ 7:33PM
Bob, first, the Inurance Commissioner of Florida's job, job #1 and 2 and on down is making sure insurance companies are able to pay claims, i.e. solvent. In the last 20 years each politician holding that office thinks their job is SETTING RATES, for all the usual "fairness", "consumer protection" reasons. In so doing Florida is now on the hook for $500 BILLION of risk with $10 BILLION in reserve. This is what political "regulation" has wrought.
That is why this cool new government speak term "transparency" sets off the warning bells in my brain. The political class is about power and any "crises" is a green light for more power grabs.
I see a point you make about non-banks, the Glass -Steagall repeal was a disaster. We knew it was going to be bad but did not see where the hits were going to come from.
Now, you seem to know about derivatives, so, can you summarize what really happened, in your opinion?
Alan Brooks| 6.23.09 @ 8:52PM
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Alan Brooks| 6.23.09 @ 8:55PM
delete the spam please, send to NR if that makes you feel any better
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Elis Wyatt| 6.24.09 @ 8:45AM
Mike
"A well ordered and maintained militia"
WM| 6.24.09 @ 9:10AM
Ran's comment: "NR's editorial reminds one that it is not enough to stand athwart History and merely shout Stop! One must scream Back! and Push. Very. Hard."
You nailed it! And in order to push back, you have to have the right philosophy, or your efforts will fall apart. That was the NR's undoing. They still have not accepted the idea that the individual is an ends in himself, not a means to serve others or "society" at large. Thus, they are left giving away our freedoms piecemeal as they quibble over minor points on each one.
An excellent article, and the CEI does fine work.
Mike| 6.24.09 @ 9:23AM
Elis Wyatt
To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;
Bilwick| 6.24.09 @ 10:04AM
Onbiously the growing influence (at least in inetellectual/upper-middle-class/urban East Coast conservative circles) of the "Uncle Daves," the safe, gelded, soft-spoken , subservient "house cons" who always want to assure Massa 'Bama that they're no threat to the Plantation, unlike those "uppity," loudmouthed Rush Limbaugh types.
No doubt T. Coddington Van Voorhees VII of NATIONAL TOPSIDER will soon be getting aboard the yacht, too:
http://iowahawk.typepad.com/iowahawk/2009/03/i-daresay-it-is-time-we-deal-with-the-mutineers-aboard-the-ss-conservatism.html
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fatburningfurnace | 12.14.09 @ 4:30AM
The venerable conservative publication National Review is backing Obama's bid to have the government start "Financial reform"
Tony Gray| 12.18.09 @ 10:21PM
Now, National Review tells us that Obama's resolution authority, "done right, would at least put us back on the road to a rule-based system.
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OhBummer's Healthcare Hijacking is nothing more than an atrocious act of vandalism, in the wake of which he struts around like the cxck-o-the-walk, arrogantly crowing that he has gotten away with this crime. He challenges those who would repeal this mess, daring them to lose votes in that enterprise, but one must remember that those who favor the Healthcare Hijacking would have voted for OhBummer and the OhBummer Wrecking Crew in any case. Perhaps OhBummer had better find a country with which we do not have an extradition treaty and start transferring his millions of dollars there now, as insurance against justice.
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