The Taming of the Shrewd

By Dianne Linderman

While the gang of connivers in the White House boastfully proclaims, “Never waste a good crisis,” the barrage of America-bound, economy-busting bombs from the administration’s playbook “How to Corral Shrewd American Entrepreneurs” continues. As an entrepreneur, I would like to know where this administration got its training in business. Like so many other American businessmen and women, I keep scratching my head and wondering what the big plan for America is.

Ten years ago, my husband and I began encouraging our two kids to learn about entrepreneurship. Like any good parents, we started simply and suggested that they sell homemade cookies and coffee at our yard sale. We explained to them about start up costs and how after their sale they had to pay back their original investment to us, (the bank), and any money left over would be “profit.” At the end of the day, they had profited seventeen dollars, and, as five and seven-year-olds, they were ecstatic. I saw a huge change in them after that day. My son became more interested in learning math and writing as he came to understand the practical uses for academics. The whole world opened up to him; he saw opportunity in everything and even started a very profitable business by the time he was twelve years old!

What would have happened to my kids that day if I had told them that, in the real world, they would have to give up most of their seventeen-dollar profit as taxes, and, at the end of the day, they would probably owe money? Where would their enthusiasm, vision, excitement, and industrious qualities go? Why would they even want to put the effort out to create cookies or, for that matter, ever start anything or become anything in life, if at the end of the day, they would have nothing to show for their entrepreneurial endeavors? If I told them the confusing truth, that even though some taxes are necessary most of the taxes they would pay would go toward entitlements for others who don’t work and won’t work because they are encouraged to sit and wait for someone to hand them a meal, a condom, free health care, fee education, free housing, and a free ride, they would have been as completely and utterly confused as the rest of us hard-working Americans.

Now that they are teenagers, I try to point out some things to them such as how government employees make twice as much as the average hard-working private sector worker and that the government takes just about all of the profit from our businesses each year and sometimes we even owe money. It is hard for them to fathom what I tell them and sometimes they actually begin to show signs of depression as I share what America now offers to its people.

When I explained that the government spends our hard-earned money like a group of women on a shopping spree at Macy’s and does not pay back the money that it borrows before it borrows more, my kids were confused because when they were 5 and 7 they had to pay back their original investment for their cookie supplies. When I showed my kids how our government treats successful American companies as if they were the enemy, while embracing failed companies, people, and capitalism-hating countries with the same love and compassion as a spoiling mother, they were completely overwhelmed.

I told my kids that starting a business nowadays will take so much more than all of their great visions and ideas: they will have to jump through bureaucratic hoops and ask permission to contribute to society in the form of paying thousands of dollars for permits for everything from the initial concept to opening the doors; after they make their first dollar, they will have to pay an accountant to make sure that the government gets its share; and when they become successful, they will have to become shrewd business people and hire a team of attorneys to protect what they have made.

As owners of a huge company, they will appear to be a greedy corporation that takes advantage of its employees, and so they will have compensate by doing things like paying for their employees’ health insurance even when they can barely afford it for their own families.

My kids looked at me as if I had just read them a horror story and asked, “Mom, why would anyone want to start a business in America and how would the government operate if all of the entrepreneurs decided that they would stop running their businesses and make no more money? Where would the government get its money then?” I could only answer, “Hmmm… interesting questions!”

Dianne Linderman has been a nationally-syndicated talk show host on Radio America with her live, call-in show, “Everything That Matters, In Life, Business, Parenting and Cooking." She recently launched her own magazine, “Everything That Matters” to accompany her radio show. Dianne has appeared on national television, dozens of national radio talk shows, and has been a speaker for the 2004 Republican Convention representing entrepreneurial moms and women.

Black Swans, Butterflies, and the Economy

From The Freeman
By Max Borders

One side blames the market. The other blames government. We get two causal stories going in opposite directions and a lot of animus. But both perhaps are missing something important in this titanic debate about our current financial crisis. It’s time we exposed a complicated truth about the economy of the 21st century.

Nassim Nicholas Taleb is famous for introducing us to black swans. Though these rare creatures have long been used among academic philosophers to explain the shortcomings of reasoning by induction (“Every swan I’ve ever seen has been white, therefore all swans are white.”), Taleb uses the black swan as a stark metaphor for the inevitability of highly improbable events. In other words, black swans are rare, but one will swim by eventually.

As far as Wall Street—particularly the people with a large stake in getting things right—is concerned, this financial crisis involved a confluence of events. Some of these black swans were set in motion by government, like flexible lending standards to extend home ownership, Fannie and Freddie, and a mortgage-friendly tax code. Others were set in motion by willfully ignorant bankers, big shot risk-modelers, and people believing they could live beyond their means. It all came together in a fantastic cascade of failure. The trouble is, no one—neither government nor market actors—can predict such a large-scale event. Black swans happen.

The other important thing to remember is that the economy is a chaotic system. Most of the time chaotic systems achieve a sweet spot between order and chaos, which is a good thing if an economy is to be robust. Chaotic systems, though, change constantly and involve dynamics that are highly sensitive to initial conditions.

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Mr. President, Meet Mr. Smith

From The Freeman
By Lawrence W. Reed

As I listened to this year’s presidential candidates discuss economic matters, one thought came repeatedly to mind: Oh, how much they could learn from Adam Smith! Since it’s obviously possible for people to reach the pinnacle of politics without seeming to know much about either economics or Smith, perhaps we’re overdue for a little reminder about both.

Smith was baptized on June 5, 1723, in Kirkcaldy, Scotland. It’s not known for certain, but it is presumed that he was either born on that very day or a day or two before. Whichever date it was, he entered a world that his reason and eloquence would later transform.

For 300 years before Smith, western Europe was dominated by an economic system known as mercantilism. Though it provided for modest improvements in life and liberty over the feudalism that came before, it was a system rooted in error that stifled enterprise and treated individuals as pawns of the state.

Mercantilist thinkers believed the world’s wealth was a fixed pie, giving rise to endless conflict among nations. After all, if you think there’s only so much and you want more, you’ve got to take it from someone else.

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RNC URGED TO DENOUNCE SOCIALIST BAILOUT AND POLICIES OF PRESIDENT AND CONGRESSIONAL REPUBLICANS

Yesterday The Washington Times reported that members of the Republican National Committee will consider a resolution in January that is critical of President Bush and Republican Members of Congress for supporting the $700 billion bailout of the financial sector and other socialist policies.

Sunlit Uplands has obtained the full text of the resolution which has been drafted by RNC Vice Chairman James Bopp, Jr. and is supported by 24 other Republican National Committee members.

We strongly support this effort to return the Republican Party to its moorings and the core principles of freedom, small government, low taxes, free enterprise and individual liberty. We have lost the White House and the Congress because the President and too many Republican members of Congress abandoned those principles. Having lost national leadership, it is now essential that the Republican National Committee take a major, unprecedented role in defending the U. S. Constitution and the principles to which the Republican Party has historically been committed. In the words of Ronald Reagan, let's raise "a banner of no pale pastels, but bold colors which make it unmistakably clear where we stand on all of the issues troubling the people."

The full text of Mr. Bopp’s resolution follows. Readers who wish to support this resolution and return the Republican Party to the conservative vision of Ronald Reagan are encouraged to show their support by signing an online petition here.

RESOLUTION AUTHORIZING THE REPUBLICAN NATIONAL COMMITTEE TO TAKE ALL STEPS NECESSARY TO OPPOSE BAILOUTS OF INDUSTRIES, INDIVIDUALS, OR GOVERNMENTS BY THE FEDERAL GOVERNMENT AND TO AGGRESSIVELY PROMOTE THE CONSERVATIVE PRINCIPLES OF THE REPUBLICAN PARTY IN PUBLIC POLICY DEBATES

WHEREAS, America is embroiled in an economic crisis which threatens to become a severe and prolonged recession; and

WHEREAS, as an alleged remedy to the economic crisis, the United States Congress proposed the Emergency Economic Stabilization Act of 2008 (“Bank Bailout Bill”), which would authorize the United States Secretary of the Treasury to spend up to $700 billion dollars to bail out the financial industry from the consequences of its own poor decisions and misguided government policies, by purchasing distressed assets, especially mortgage-backed securities, and make capital injections into banks; and

WHEREAS, when the original Bank Bailout Bill failed to pass, it was augmented with$150 billion dollars in additional, unnecessary spending designed to earn the incumbent politicians who voted for it the support of their constituents back home; and

WHEREAS, Congress adopted, and the President signed, the bloated Bank Bailout Bill; and

WHEREAS, the Bank Bailout Bill has neither reversed the economic crisis nor protected the taxpayers, but rather has added $850 billion dollars to their tax bill and raised the national debt ceiling from $10 trillion to $11.3 trillion, which has the potential long-term effect of further weakening the economy; and

WHEREAS, the Bank Bailout Bill effectively nationalized the Nation’s banking system, giving the United States non-voting warrants from participating financial institutions, and moving our free market based economy another dangerous step closer toward socialism; and

WHEREAS, what was needed, and is still needed, to fix the banking industry is not a bailout, but rather a commitment to fiscal responsibility. This entails more than considering only the quick fixes for Wall Street. It also entails considering how to restore Wall Street to sustainable profitability. It involves common sense legislation from Congress, such as (1) eliminating the capital gains tax, which will lead investors to flood the real estate and financial markets in search of tax-free profits, creating liquidity in the markets; (2) examining, and if need be, amending the Community Reinvestment Act (Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. § 2901 et seq.), to ensure that it accomplishes its purpose of preventing discriminatory lending without also forcing the financial industry to engage in high risk lending; and (3) adopting a “hands off” approach from government toward the financial sector, so that free-market forces can correct the market; and

WHEREAS, there have been other federal government bailouts, including the $85 billion dollar bailout of American International Group Inc. in return for its nationalization, with the United States acquiring an almost eighty percent equity stake in the company, a bailout and nationalization of Fannie Mac and Freddie Mac, and a bailout of Bear Sterns; and

WHEREAS, the cost to the American taxpayers of the various bailouts enacted by the 110th Congress and signed into law by the President is potentially $8.7 trillion dollars; and

WHEREAS, none of these bailouts have forestalled the economic recession, protected the jobs of American workers, made American companies more competitive, or relieved the tax burden on American taxpayers, but rather have threatened to deepen the economic recession, and have increased the national debt and the burden faced by the American taxpayers; and

WHEREAS, the “Big Three” Automakers (Chrysler, General Motors, and Ford) appealed to Congress for a bailout bill of their own, seeking up to $34 billion dollars in emergency aid; and

WHEREAS, the American people overwhelmingly oppose a bailout of the Big Three, with 61% of those polled opposing government assistance to the automakers and 70% saying that such assistance would be unfair to American taxpayers; and

WHEREAS, when faced with both Congressional and public disapproval, Ford announced that it
did not need actually need federal money at this time, but Chrysler and General Motors continued to request financial assistance from the government; and

WHEREAS, on December 11, 2008, the House of Representatives passed the Auto Industry Financing and Restructuring Act (H.R. 7321) (“Auto Bailout Bill”), which authorized $14 billion dollars in loans to the automobile industry in exchange for, among other things, the nationalization of the auto industry, whereby the United States receives warrants for up to 20% of the common or preferred stock of each automaker, and the appointment by the President of an executive officer (“Car Czar”) to oversee various aspects of the auto industry’s business; and

WHEREAS, the Auto Bailout Bill was rejected in the United States Senate, garnering only 52 of the 60 votes necessary to bring the Bill to the Floor for consideration; and

WHEREAS, on December 19, 2008, the President announced that he would create a $17.4 billion dollar Auto Bailout Package for the auto industry, taking the money from the funds appropriated by the Bank Bailout Bill; and

WHEREAS, the President has announced that Chrysler and GM must prove they are financially viable by March 31, 2009, or face the possibility—but only the possibility—of the recall of the funds extended to bail them out; and

WHEREAS, President-elect Obama is under no obligation to insist that Chrysler and GM meet this obligation, or pay back the money used to bail them out and the UAW is already calling on President-elect Obama to reject the wage reduction requirements of the Auto Bailout Package; and

WHEREAS, the Auto Bailout Package is not only a bailout of the bad management decisions of the leadership of the automobile industry, but also a bailout of the leadership of the United Auto Workers union (UAW), whose excessive labor wage and benefit demands have substantially contributed to the automobile industry’s financial woes, as demonstrated by the fact that the average hourly cost to the unionized Big Three Automakers for its workers’ salary and benefits is nearly $80 per hour, compared with Toyota, Honda, and Nissan, whose total hourly U.S. labor costs, with benefits, are about $48 per hour; and

WHEREAS, the UAW has steadfastly refused to renegotiate its current labor contracts to ease the financial burden on the Big Three, and has also self-servingly insisted that bankruptcy was not an option for any of the Big Three, because bankruptcy would allow a renegotiation of their labor contracts; and

WHEREAS, bailing out the UAW with the Auto Bailout Package will not make the automobile industry solvent, because it does not address the underlying cause of its financial difficulties, but merely applies a band aid to tide the industry over for the time being; and

WHEREAS, the open-ended nature of the Auto Bailout Package, which only contains the possibility of a recall of the bailout money if Chrysler and GM do not have a plan for financial viability by March 31, 2009, will not provide incentive to their leadership and the leadership of the UAW to create a financially viable business plan, but rather will encourage them to continue ‘business as usual’ and count on future government bailouts whenever such are needed; and

WHEREAS, the men and women who work in the automobile industry are patriotic Americans who work hard to supply America with automobiles and also to provide a decent living for themselves and their families; and

WHEREAS, America’s auto workers are not helped by a temporary band aid which does not require the automobile industry and the UAW to change practices and create a sustainable profitability. Rather, they need a solution that will enable the American automobile industry to recover and thrive again in order to ensure the long-term survival of their jobs; and

WHEREAS, what is needed to fix the American automobile industry is restructuring that will eliminate the competitive disadvantage faced in their costs and finished products relative to foreign brands, which can only be accomplished by (1) negotiating new labor agreements to align their pay and benefits to match those of their competitors; (2) reducing the benefits paid to their retirees so that the total burden per auto for the Big Three is not higher than that of foreign companies; (3) restructuring their business plans with an eye to the future, such that they invest in competitive products and innovative, fuel-saving technologies; and (4) recruiting management teams who excel in marketing, innovation, creativity and labor relations; and

WHEREAS, a group of governors met with President-elect Obama to press for their own bailout plan, whereby federal taxpayer would pay $136 billion for state infrastructure projects and untold billions of dollars for state health care costs; and

WHEREAS, President-elect Barack Obama decided to propose an enormous public works project, which is really a cleverly disguised Government Bailout Plan designed to bail out state and local governments by providing federal tax dollars to repair and rebuild their local infrastructure; and

WHEREAS, some have proposed spending up to $1 trillion dollars to fund the President-elect’s Government Bailout Plan; and,

WHEREAS, the Government Bailout Plan will be the biggest earmarked spending program in our Nation’s history;

WHEREAS, the Government Bailout Plan will not fix our economic woes, but rather will extend the current economic crisis, much as President Franklin Roosevelt’s Works Progress Administration extended the Great Depression, and will cost the American taxpayers $1 trillion dollars or more; and

WHEREAS, what is needed to ease unemployment and stimulate the economy is not a Government Bailout Plan to bail out state and local governments from their deficit spending, but rather common sense solutions which will work, including (1) lowering our corporate tax rate which is the second highest in the world and fifty percent higher than our international competitors, so that corporations will have more ability to invest in product development and job creation; (2) lowering taxes on the middle class and eliminating the capital gains tax, so that America’s families will have more money to invest and spend for their families’ needs; (3) spending to replenish and, where necessary, modernize our military equipment and improve our national defense capabilities against both foreign nations and terrorists; (3) investing in energy research, exploration and development to free our Nation from its dependence on foreign oil; and (4) eliminating wasteful government spending and restructuring government programs that can be accomplished more efficiently. Together, these measures will create jobs, energize the economy and protect our national freedoms, all of which will improve the quality of life of the American family; and

WHEREAS, the Republican Party must, for the good of America, reestablish our commitment to the common sense, conservative values of free enterprise, free markets, limited government, and personal responsibility, which are advocated by the Republican National Committee in its national platform; and

THEREFORE, BE IT RESOLVED, that the Members of the Republican National Committee commend the Members of Congress who have opposed the bills seeking to bailout American industries and to nationalize American companies; and

BE IT FURTHER RESOLVED, that the Members of the Republican National Committee call for all Members of Congress to oppose any and all future bailouts that might come before the Congress, including President-elect Obama’s public works program; and

BE IT FURTHER RESOLVED, that the Members of the Republican National Committee call on Congress to identify the government programs and policies which have lead to the current economic crisis and to revise or repeal them in favor of government policies which promote free enterprise and free markets;

BE IT FURTHER RESOLVED, that the Republican National Committee, in cooperation with Republican Members of Congress and the Republican Governors of the various states, shall be authorized to engage in vigorous debate on public policy issues, including calling for Congress to oppose measures which are detrimental to the welfare of our Nation and our People, consistent with the conservative principles of the Republican Party as expressed in its national platform, and to devote appropriate resources of the RNC for this purpose.

Submitted by

James Bopp, Jr., NCM IN
Randy Pullen SC AZ
Lilly Nunez NCW CO
Dick Wadhams SC CO
Sharon Day NCW FL
Steve Scheffler NCM IA
Kim Lehman NCW IA
Cindy Moyle NCW ID
Dee Dee Benkie NCW IN
Helen Van Etten NCW KS
Kris Kobach SC KS
Evie Axdahl NCW MN
Cindy Phillips NCW MS
Pete Ricketts NCM NE
Sean Mahoney NCM NH
Rosie Tripp NCM NM
Carolyn L. McLarty NCW OK
Solomon Yue NCM OR
Donna Cain NCW OR
Giovanni Cicione SC RI
Cynthia Costa NCM SC
Mary Jean Jensen NCW SD
Cathie Adams NCW TX
Fredi Simpson NCW WA
Diana Vaughan SC WY