Liberty & Power: Group Blog
This question of whether or not to take federal funds also perplexed some of the governors in the 1930s during the massive federal spending of the Hoover and Roosevelt presidencies. For example, in 1932, under the Emergency Relief and Construction Act, welfare was first made a federal function. Before that, states and private charities provided one on one relief service for hungry and jobless people in their communities. With the promise of federal funds, the governor of Illinois (and the mayor of Chicago) declared urgent and dramatic need. In doing so,they secured over $55 million of this fund--more than New York, California, and Texas combined.
Interestingly, Massachusetts, a state almost comparable to Illinois in population, neither asked for nor received any of the federal money. Boston and many other parts of the state had serious need for relief, but Governor Joseph Ely and other state officials still believed that relief should be a local and state function. They constantly worked to raise local money for local needs. A statewide unemployment drive, for example, raised over $3 million. The Boston Civic Symphony repeatedly gave concerts to benefit the jobless. Boston College and Holy Cross played an exhibition football game for charity in 1931. A benefit wrestling match at the Boston Garden supplied %45,000 for local needs. City officials helped Mayor James M. Curley of Boston raise a remarkable $2.5 million from city employees; even the city's schooteachers donated 2 percent of their salaries for six months in 1931 to feed the poor. Historian Charles Trout, who studied Boston's maazing efforts to meet local needs, wrote that"no major city assisted so high a percentage of its jobless" as Boston did in the early 1930s.
Five other states, mostly in New England, joined Massachusetts. They raised money locally and took none of the $300 million offered under the emergency act. In effect, what that meant was that Massachusetts not only paid for all of its own relief, but for part of Illinois's as well. That is a critical point. Massachusetts citizens, through their payment of federal taxes, were contributing to relief payments for Illinois. Then they were paying state taxes and sometimes making charitable donations to relive the hungry and jobless in Massachusetts.
Governor Joseoh Ely of Massachusetts asserted his independence from federal aid."Whatever the justification for relief," Ely said, the fact remains that the way in which it has been used makes it the greatest political asset on the practical side of party politics ever held by any administration." In 1934, Massachusetts succumbed to pressures to take federal funds. Governor Ely retired and James Curley won election to replace him. Under Governor Curley, Massachusetts claimed massive federal need and received over $100 million in federal aid for welfare by 1935. Here was the new game from Washington: Which states could argue most convincingly for need and attract more federal dollars than they paid in?
One of the many dangers of the stimulus bill is that it will remove incentives for states to solve problems they created and encourage states to look to Washington to try to secure more money than they pay in taxes. This is not responsible constitutional government, but grab bag politics and democracy at its worst.
Chris Matthew Sciabarra
The Journal of Ayn Rand Studies was first published in the Fall of 1999; our Fall 2008 issue (running just a little late) is now out, and marks the beginning of our Tenth Anniversary Celebration.
The abstracts for the newest issue appear here; the contributor biographies appear here. There have been a few changes over at the JARS site... and more are coming. New indices for the Table of Contents and the Contributor Biographies are now on the site. Also, JARS has recently been picked up by the indexing service, Scopus.
The newest issue includes the following articles:
Mind, Introspection, and"The Objective" - Roger E. Bissell
The Peikovian Doctrine of the Arbitrary Assertion - Robert L. Campbell
Economic Decision-Making and Ethical Choice - Kathleen Touchstone
Reviews and Discussions
Re-Reading Atlas Shrugged - J. H. Huebert
Plato, Aristotle, Rand, and Sexuality - Fred Seddon
Reply to Fred Seddon: Interpreting Plato's Dialogues: Aristotle versus Seddon - Roderick T. Long
Rejoinder to Roderick T. Long: Long on Interpretation - Fred Seddon
Reply to Peter E. Vedder,"Self-Directedness and the Human Good" (Fall 2007): Defending Norms of Liberty - Douglas J. Den Uyl and Douglas B. Rasmussen
Rejoinder to Douglas J. Den Uyl and Douglas B. Rasmussen: Difficulties in Norms of Liberty - Peter E. Vedder
Cross-posted at Notablog.
During the first five years of the New Deal, from 1933 to 1937, the gross domestic product grew more than 60 percent. This was the New Deal's biggest expansion.
Krugman and others say that none of FDR’s budget deficits were big enough to qualify as Keynesian “stimulus.”
So, if the economy expanded more than 60 percent in 5 years without any Keynesian stimulus – why do Keynesians continue to say that the economy needed government spending stimulus back then, and we need it now?
In any case, of course, the issue most concerning everyone back then wasn’t how to stimulate the economy. The issue was why did double digit unemployment rates persist for so long, despite the dramatic expansion.
Look to the New Deal business tax hikes and
uncertainty that discouraged investors from investing, and the labor laws that made it more expensive for employers to hire people.
The New Dealers never did make the recovery of private sector employment their top priority.
-- Jim Powell
McLean relates how “on July 13, [Treasury Secretary Henry] Paulson announced a plan under which Treasury would backstop all of the G.S.E.’s debt and buy equity if needed. ‘If you’ve got a bazooka, and people know you’ve got it, you may not have to take it out,’ Paulson told lawmakers.” Paulson’s plan was enacted into law shortly afterward. But, as Robert Burns’s poem warns us, “The best laid schemes o’ mice an’ men / Gang aft a-gley.”
Paulson’s bazooka to help Fannie and Freddie failed. . . . Investors were unsure what their eventual losses would be. Both companies announced terrible 2008 second-quarter results, with Fannie losing $2.3 billion and Freddie losing $821 million. But investors were also unsure what the new legislation meant. No one wanted to risk putting money into the G.S.E.’s, only to have the government radically raise capital requirements—or step in and wipe the shareholders out. And so, as if the second-quarter results hadn’t caused enough alarm on their own, the legislation had the perverse effect of ensuring the companies would be unable to raise new capital, even as everyone began to say that they had to do so.
For the past six months or more, the entire U.S. economy has been subject to increasing regime uncertainty, as the government has adopted, almost daily, gigantic new schemes to subsidize, bail out, prop up, take over, recapitalize, guarantee, stimulate, or otherwise interfere with formerly private enterprises, markets, and other arrangements. It seems likely that the recession’s continued worsening may be attributed in substantial part to the regime uncertainty the government’s frantic actions have created, and bid fair to continue creating. When private parties need reassurance the most, the government continues only to roil the waters.
Jeffrey Rogers Hummel
1. There are up to five different ways of defining bank insolvency, and most discussions equivocate among them. While many of the banks may face"regulatory insolvency" because of failure to maintain mandated capital, they are not necessarily insolvent under GAAP (generally accepted accounting principles). The government imposition of the former is worsening the situation.
2. The capricious nature of government policy is making it more difficult for the banks to weather the crisis and is piling on losses much larger than they otherwise would suffer.
Hat Tip: Tyler Cowen
David T. Beito
Russian Prime Minister Vladamir Putin has said the US should take a lesson from the pages of Russian history and not exercise “excessive intervention in economic activity and blind faith in the state’s omnipotence”.
“In the 20th century, the Soviet Union made the state’s role absolute,” Putin said during a speech at the opening ceremony of the World Economic Forum in Davos, Switzerland. “In the long run, this made the Soviet economy totally uncompetitive. This lesson cost us dearly. I am sure nobody wants to see it repeated.”...
Sounding more like Barry Goldwater than the former head of the KGB, Putin said, “Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.”
Putin also echoed the words of conservative maverick Ron Paul when he said, “we must assess the real situation and write off all hopeless debts and ‘bad’ assets. True, this will be an extremely painful and unpleasant process. Far from everyone can accept such measures, fearing for their capitalization, bonuses, or reputation. However, we would ‘conserve’ and prolong the crisis, unless we clean up our balance sheets.”
The new administration’s measures in this field so far have been just as bad as his nominations. During his first week in office there were federal raids in California on medical marijuana clinics operating legally under state law, an action that broke a campaign promise to change this Bush policy. Although, the leader of NATO in Afghanistan, a U.S. general under Obama’s command, did announce a policy change, henceforth his subordinates were to kill on sight anyone involved in the drug trade irregardless of any connection with the insurgency. Also, when the City Council of El Paso Texas voted for a resolution merely calling for a national discussion on legalization of drugs they were threatened with a loss of stimulus package funding from the Obama Administration. And, there is no evidence that any of the above actions has displeased our new leader.
However, last week Obama did do something that drew praise from the nation’s drug law reform organizations, he nominated Seattle police chief Gil Kerlikowske to head the Office of National Drug Control Policy. The Drug Policy Alliance for example cited the facts that Seattle had legalized medical marijuana, made recreational marijuana the lowest law enforcement priority, allowed the implementation of needle exchange programs, and pursued a progressive policy when it came to dealing with overdoses as very good signs. Perhaps the greatest cause for optimism is the fact that Chief Kerlikowske has followed in the footsteps of retired Seattle police chief Norm Stamper now a prominent member of Law Enforcement Against Prohibition (LEAP) who “believes the drug war causes untold misery, undermines effective law enforcement, and does not begin to pass any sort of cost-benefit analysis.”
Cross posted on The Trebach Report
Cross posted on The Trebach Report
Jane S. Shaw
It has a theme, of course--that Roosevelt’s rhetoric about the “forgotten man” was directed at the wrong person; Shlaes’s “forgotten man” is the politically innocent individual who was forced to pay for ad hoc tinkering by intellectuals hankering for socialism. Roosevelt’s amazingly successful rhetoric--fireside chats on the one hand and outrage at big business on the other--allowed the president and his cronies to grab and keep power, even as the depression ground along with no end in sight.
A brief visit at Barnes & Noble resolved my puzzle. The featured books about the Depression tend to be hagiographical, like Jonathan Alter’s and Adam Cohen's, whose titles speak for themselves: The Defining Moment: FDR and the Triumph of Hope and Nothing to Fear: FDR’s Inner Circle and the Hundred Days that Created Modern America. Against these, Shlaes’s book is a refreshing antidote, if a bleak and skeptical book can ever be called refreshing.
Roderick T. Long
Jeffrey Rogers Hummel
Jeffrey Rogers Hummel
Jeffrey Rogers Hummel
The authors essentially argue that the reason the crisis spread beyond housing is because of all the explicit and implicit government guarantees for large financial institutions. Thus, they emphasize that the problem was most definitely not the spreading of risk through securitization and fancy credit derivatives. Rather, the problem was the financial system’s failure to spread risk. The large institutions used these innovations to engage in regulatory arbitrage in order to take on and concentrate excessive risk.
Let me quote a central paragraph: “In a world without regulation, creditors of financial institutions (depositors, uninsured bondholders, etc.) would put a stop to excesses of risk and leverage by charging higher costs of funding, but lack of proper pricing of deposit insurance and too-big-to-fail guarantees has distorted incentives in the financial system. And, for years, regulation—capital requirement in particular—has targeted individual bank risk, when the justification for its existence resides primarily in managing systemic risk. It is to be expected that financial institutions would maximise returns from the explicit and implicit guarantees by taking excessive aggregate risks, unless these are priced properly by regulators. ”
I’ve been claiming for some time that deposit insurance was central to the crisis. It is striking to have that analysis confirmed by mainstream economists who in no way share my opposition to government guarantees and indeed explore ways (ultimately futile, in my opinion) to “fix” them. This should make their book, when it comes out, one of the more important on this enormous government failure.
Hat Tip: Tyler Cowen.
James Hansen, one of the world's leading climate scientists, will today call for the chief executives of large fossil fuel companies to be put on trial for high crimes against humanity and nature, accusing them of actively spreading doubt about global warming in the same way that tobacco companies blurred the links between smoking and cancer.
I'm sure that my good friend Gus is going to tell me that these folks aren't representative of the mainstream of environmentalist thought or that just because people say things like this, we shouldn't dismiss the environmentalists' concerns completely. I am in agreement with the latter, but I'm increasingly doubtful of the former. James Hansen"heads NASA's Goddard Institute for Space Studies in New York." and is often noted as"Al Gore's science advisor."Just how much more mainstream can you get?
More important: who will have the courage to name such demagoguery for what it is?(HT to Max)
David T. Beito
David T. Beito
I don't think so but this is certainly the message communicated by the recent cartoons on the main page of the HAW website.
David T. Beito
In this audio of an interview with Scott Horton, Chalmers Johnson discussion the intersection between military Keynesianism and empire. It was Johnson who first popularized the term"blowback." He also deplores Obama's"insane" policy in Afghanistan.
Jeffrey Rogers Hummel
As for the swaps, the Fed is now breaking them out from under the category “Other assets” in sections 1 and 8 of the H.4.1 Release into a category of their own, “Central bank liquidity swaps.” One thing that was previously unclear was whether the swaps involved any exchange-rate risk, and if so, how it was booked on the balance sheet. But the Fed now explains that the swaps are unwound at exactly the same exchange rate at which they first take place. If the Fed creates $200 and exchanges it with the Bank of England for 150 pounds, then when the Bank of England is done with the $200, it gets exactly 150 pounds back, irrespective of what has happened to exchange rates during the interval, which can be three months or more. This is one way swaps differ from normal central-bank interventions into foreign exchange markets.
What made this confusing is that the Fed marked to market all its holdings of foreign currency on a daily basis anyway, even those from the swaps. This created no problem for reading the balance sheet if the value of foreign currencies fell, because the Fed put a positive exchange rate adjustment factor into “Other assets,” the total of which would therefore be unaffected on net. But when foreign currencies rose in value, the rise in the value of “Other assets” would be matched by a positive exchange rate adjustment factor on the other side of the balance sheet, in “Other liabilities and accrued dividends.” This meant that any appreciation of foreign currencies would overstate the size of the Fed’s balance sheet until the offending swaps were unwound. Fortunately, the Fed has discontinued this balance-sheet oddity. It will now book “Central bank liquidity swaps” at the originating exchange rate throughout their duration.
Not that this has removed all of the balance-sheet mysteries surrounding the Fed’s currency swaps. They continue to mainly show up on the liability side not as foreign deposits at the Fed but as Treasury deposits, and I’m still not entirely sure how this works in detail.