AIG Bets on Shortened Life Spans

AIG was rescued by the federal government and the Federal Reserve Bank in the bailout binge early in the Great Socialist Recession with $182.5 billion of taxpayer money.  It faces a very uncertain time in its very broad insurance business due to many factors.  Among these are:

• It is still struggling to pay the government back.
• The never-ending recession is still reducing its income.
• Insured property values are depressed and no one knows when they might improve.
• ObamaCare may or may not remain as written.
• Many of the most important provisions of ObamaCare are regulations and rules to be written by about 140 agencies and panels.
• Will the fewer and larger health insurance companies that will likely result with ObamaCare have as much need for re-insurance from AIG as the smaller, more balkanized insurance companies of today do?
• The present administration is solidly anti-business and constantly advocating increased business taxes and regulations.
• If ObamaCare becomes fully activated, how fast will medical care become degraded and how much will the lives of the primary insurance holders be shortened?

There does appear to be one business on which AIG will likely be able to make a profit.  It has a growing business in buying older people's life insurance policies.  The business is called life settlements.  If an older person wants the value of his paid-in life insurance, he can sell it to AIG and AIG will continue to make his insurance payments with AIG as the new beneficiary.  If the older person dies while the life insurance policy is in effect, AIG gets a big payout.  AIG wins on this if it can discount the paid-in amount in buying the insurance contract or figure out who is likely to die earlier than the insurance company that initially sold them the policy thought they were going to die.  This means they can look at whether someone has come to suffer a disease that is likely to shorten their lives.

The life settlement business becomes easier if ObamaCare is put into effect.  If ObamaCare works as advertised, some poor people would receive better medical care, while most middle class and wealthier people will find doctor's and hospitals with aging equipment, reduced innovations, less time for them, and a near-slave mentality brought on by being increasingly underpaid and increasing bossed around by thuggish government bureaucrats.  The middle class and the wealthier hold most life insurance policy value and their lives are clearly going to be shortened relative to the reasonable expectation when they bought their life insurance policies.  Worsening medical care under ObamaCare will help AIG to make a profit on its developing life settlement business.  Ironically, this will help AIG pay back the taxpayers who rescued it.

In 2006, the future death benefits of its life settlements business were $3.7 billion with 1,799 contracts.  In 2010, this business had grown to $17.7 billion in future death benefits and 5,673 contracts.  Just as AIG has bundled mortgages to make mortgage bonds, AIG would like to do the same with these life settlement contracts.  Unfortunately, in March, Standard & Poor's refused to put a risk evaluation on such bonds, stating the difficulty of estimating the life expectancies of insured individuals.  Wow!  Life insurance companies have been doing this quite well for decades, but now we suddenly find that this can no longer be done?  What is up?  The answer is that the uncertainty is caused by ObamaCare.  Most of the people want it changed so some changes may be made, it has been ruled both unconstitutional and constitutional, the changes of the health care system are radical, most medical experts understand that it will reduce the quality of medical care with rationing and underpayments of doctors and hospitals, the bureaucracy rules are not written yet, the state programs are not set up, and the rate of life expectancy deterioration is not yet known.

But, despite all this uncertainty, AIG can safely buy up insurance policies issued before ObamaCare was passed against the will of the people and make a profit on those policies.  They are only betting that those people will not live as long as was expected before ObamaCare came along to shorten our lives.  Any half rational adult should be able to see that.  Meanwhile, pity the life insurance companies will have to pay out benefits due to deaths that will occur earlier than expected due to ObamaCare.  This will surely reduce their profits and cause many such life insurance companies to go belly-up.  That in turn will leave many life insurance holders with insurance policies unable to pay out their death benefits.  ObamaCare and so many other Obama policies are proving to be most disruptive by virtue of creating debilitating business uncertainties.

The Union that did not Represent its Members

Unions that do not represent the interests of their members are common.  This is fundamentally why union membership in the private sector has fallen to only 6.9% in 2010 according to the Bureau of Labor Statistics.  The many grossly underfunded union pension funds are another clear proof that the unions pay little attention to the best interests of their members.  The International Association of Machinists (IAM) is involved with the recent Boeing altercation in which they and the National Labor Relations Board (NLRB) claim Boeing built a production line in the Right to Work state of South Carolina in retaliation for a strike in Washington state by the IAM.  It used to represent the employees at the facility in South Carolina, as well as those in Washington.  It is interesting to see why the South Carolina machinists decertified the IAM.

In 2007, when Vought Aircraft Industries, Inc. owned the facility in North Charleston, South Carolina, the IAM narrowly won an election to represent 200 employees there.  Vought was a Boeing parts supplier and the IAM strike against Boeing forced Vought to close the South Carolina plant temporarily.  The new IAM members were laid off.  Meanwhile, the IAM and Vought spent a year discussing the new labor contract.  The employees were grumbling and there was indication that a decertification attempt was underway.  The IAM quickly put an offer of Vought to a vote, though this surprised Vought which was working up better offers.  Apparently, the IAM wanted some contract to lock in the new members in South Carolina no matter what.  Some employees were unaware of the emergency vote on 7 November 2008 set up by the IAM just as Vought was.  The IAM announced that an overwhelming 92% of membership had approved the new contract.  After some investigation, it was found that of the 200 affected employees, only 13 had voted.  Twelve members out of 200 had committed everyone to a new labor contract.  Many of the relatively new labor union members complained that the 1.5% wage increases would not cover the increased union dues and inflation.

In July 2009, Boeing announced it was buying the South Carolina facility from Vought and completed the purchase that month.  The employees filed to decertify the IAM that month also.  The IAM was thrown out because the workers had concluded that it was not interested in their best interest.  Subsequently, the IAM is furious that Boeing is building a second 787 Dreamliner production line in this South Carolina facility using the now 1000 employees there who are no longer union members.  The Obama-packed NLRB is backing the union vendetta both against Boeing and these dissatisfied former union members.

The Purpose of the National Labor Relations Board is to Deny Cooperation

As I just wrote in my last post, the benefits of society reside in our freedom of association with others of our choosing for purposes of our choosing.  This fundamental right allows us to cooperate with others in exchanges of mutual benefit so that we might all prosper and live more secure and richer lives.  In this process, we are constantly exchanging values, which we must evaluate and rank using our minds.  We succeed in these exchanges best when we think rationally.  Government properly imposes limits on private action to keep individuals from using force to affect these exchanges so that they are voluntary and people are free to only make exchanges they see as beneficial to them.  Unfortunately, governments also commonly use force to force individuals to make exchanges of values they would not make voluntarily.

The National Labor Relations Board (NLRB) is an especially egregious actor in forcing involuntary associations and involuntary exchanges of values.  Long-established laws have given this board the power to force individuals and associations of individuals owning companies to enter into labor exchanges with labor unions rather than individual employees whenever a majority of the employees vote to join a union.  In many cases, states force those who do not want to be union members to pay union dues nonetheless.  The states that do not force individuals to join the union when the union wins an election, are called Right to Work states.  The Right to Work states preserve a larger measure of the individual employee's right to associate than do the forced union states.  Some argue that the Right to Work laws interfere with a company's right to force its employees to be union members!  That argument is an example of how crazy things get once one allows the use of force to deprive individuals of their rights.  The NLRB has long been charged with depriving companies and individuals of the right to hire union workers or not and to force them to rehire union workers after strikes.  The NLRB also runs the elections in which the employees of a company vote to join or reject a union or accept a bargaining contract.  It places severe restrictions on the freedom of speech of companies during union elections as well.

The NLRB has been stacked by Obama to make it even more biased towards labor unions.  The NLRB's acting general counsel earlier this year threatened to sue South Carolina, Utah, Arizona, and South Dakota because the people of those states amended their constitutions to give their citizens the right to a secret ballot in unionization elections.  It is amazingly presumptuous that a minor federal agency can sue a state because its citizens have decided to protect their rights in their own state constitution.  The people acted because the Obama administration and unions backed a new law that would allow unionization elections to be performed without secret ballots, using what is called card checks.  This would have allowed union bosses to strong-arm employees one by one into signing up for the union without benefit of a secret ballot.  It would be as if Obama had complete lists of everyone who voted for him or against him and could thereafter award all government contracts only to those who voted for him and give entitlement benefits only to those who voted for him.  In addition, he could use the New Black Panther Party people he has refused to prosecute for polling place intimidation to make people vote for him in the first place.  One of the main reasons the labor unions supported Obama so strongly in his election was because they wanted card check and he had agreed to give it to them.  They were gambling heavily on this to turn around their loss of union membership in the private sector, where most employees have caught on to the fact that unions are very good at killing the companies for which the employees work.

Representative Jeff Duncan of South Carolina has introduced legislation to keep the NLRB from pursuing the threatened lawsuit.  He has 30 co-sponsors of the bill.  The NLRB's purpose is so wrongheaded that 176 members of the House of Representatives voted for an amendment by Tom Price of Georgia to completely defund the NLRB.  The freedom of association will always be impaired by this agency.

The most recent new threat to our freedom to cooperate by the NLRB is its claim that Boeing violated federal labor law by not building a production line for its 787 Dreamliner aircraft in Washington state.  The International Association of Machinists and the NLRB claim that Boeing's decision to build the production line in the Right to Work state of South Carolina was retaliation against the union because of its history of strikes that cost the company many billions of dollars.  The union and Obama's NLRB claim this is an infringement of the worker's right to strike.  That right to strike exists, but so does the right of the company not to hire the striking workers back.  Present law does not let the companies fire the strikers, which infringes the rights of the company owners.  Despite the many absurdities of the present law, the Supreme Court has ruled many times that companies can consider the negative effects of strikes when making their business decisions.  What is more, Boeing's present collective bargaining agreement with the IAM allows Boeing to build new plants outside of Washington without union approval.  This is apparently unusual for such union agreements, which only shows how unions have generally been able to impose themselves into company management.

The corrective action the NLRB is asking for is that Boeing be forced to build a 787 Dreamliner production facility in Washington state at great expense.  Boeing was considering building the facility in Washington, but they wanted a no-strike clause in their labor agreement with the union so they would have production stability in their on-going competition with EADS (Airbus) in Europe, which the union would not give them on any affordable terms.  The request for a ruling against Boeing comes when Boeing has nearly completed a new facility for the 787 in North Charleston, where jobs are much needed.  Boeing has already hired 1,000 workers there.  The announcement of their plan to build this plant was made 17 months ago.  Meanwhile, Boeing has hired 2,000 more workers in Washington state, so the union was not retaliated against in terms of a reduction of employees in Washington.  But the union bosses certainly are disappointed that they cannot collect union dues from the new South Carolina employees, since they voted not to join the union.  The first production of airliners in South Carolina is scheduled for July 2011.

The Obama crew, contrary to some reports, is not calling for the direct shutdown of the new largely built facility in South Carolina.  They are just imposing equal large costs to put a facility into Washington state with an equal number of employees, who will be union members.  They no doubt plan to use this fact to claim they are not killing the jobs in South Carolina or stopping the company from continuing its hiring there.  Despite not calling for the shutdown of the South Carolina facility, Boeing, Gov. Nikki Haley, Sen. Lindsay Graham, and Sen. Jim Demint are all protesting the interference of the NLRB.  But, the state of Washington is a better bet to give electoral votes to Obama than is the state of South Carolina in his re-election attempt, so Obama does not care.

Whenever government interferes with the individual right of association or the freedom to cooperate, it causes harm to our society.  This is a real social injustice done to many individuals.  The present action of Obama's NLRB is to try to intimidate companies against building new facilities where a union they have an agreement with does not want them to.  It is also an attempt to keep unionized businesses specifically from building new plants and facilities in Right to Work states.  These restrictions only serve to reduce the value a company can offer its customers in exchanges.  This will reduce the growth of the company and may cause it to fail, ending such union jobs as it presently supplies.

In any case, companies come and go and large companies are replaced by more nimble smaller companies all the time.  If the NLRB is allowed to keep unionized companies from expanding in Right to Work states, new companies will find even stronger incentives to plant themselves in Right to Work states and avoid union interference with their plant and facility siting decisions.  Unionized companies will have no choice but to put their new plants overseas, rather than in the United States.  Overseas companies will have reduced reason to establish new facilities in the U.S. and will stay out.  U.S. unemployment will be higher as a result.  Americans will find themselves with a lowered standard of living.

Of course the Obama Democrats have been talking about placing new taxes on companies who expand aboard instead of at home.  The strongest growth in the American economy now is precisely in companies with operations abroad or with high exports, such as many manufacturers.  The Obama taxes will be targeted at those companies and reduce their growth still more than our highest in the world corporate taxes and most onerous regulations have already done.  These wrongheaded Democrat Socialists are just one economic disaster after another.

Capitalism: Freedom to Compete or Freedom to Cooperate?

The enemies of Capitalism and free markets like to describe them as being characterized by dog-eat-dog competition and the survival of the fittest.  Ayn Rand's philosophy of Objectivism provides moral support for Capitalism and hence is subjected to the same criticism.  Before examining the derogatory portions of those claims, let us ask if the free market should be viewed as that part of society in which man has the freedom to cooperate or to associate with others.

Of course, all real freedoms adhere to individuals and each and every individual has the same sovereign rights.  If I have the freedom to cooperate or associate with another person, then I have the right to use my mind to evaluate whether I will enter into a particular cooperation or association with another person and  he has the corresponding right.  If we arrive at a mutual agreement to cooperate or associate, we do so.  If we cannot do so, we go our separate ways and perhaps seek out others with whom we can reach a mutual agreement.  In practice, this means that we seek people out who we can trade values with such that each party believes they are better off because of the trade.  There are innumerable such trades being made in a society and it is perfectly rational for the parties to make such trades in many cases.  The value of living in a society is found in the wealth of such advantageous exchanges.

Such free market trading requires that men be free to use their minds to choose their own values and then to manage their own lives in accordance with their values.  Much of the prejudice against free markets is based on the opinion of elitists that others are not capable of choosing their own values and of managing their own lives.  But let us be frank that if men are not allowed the freedom to choose their own values and manage their own lives, then they are fundamentally enslaved.  There will then be no free market or a very restricted domain will be all that is allowed to the free market.

If there is no free market, what have we lost?  We have lost the ability to manage our own lives according to our own values.  We have also lost the ability to cooperate freely with others in our society or even between societies to trade values for mutual benefit.  We lose the freedom of association which is a freedom to choose with whom we will cooperate or associate and for what reason we will do so.  We lose the freedom to exchange money, goods, services, ideas, friendship, and love.  Of course a restricted society which has begun the process of eliminating the freedom of association tends to do so in the realm of money, goods, and services exchanges if freedom of speech was once well-established.  In many societies freedom of speech has never been well-established and in those societies the exchange of ideas may be among the first exchanges lost.

When it is well-established that the government has control of those exchanges, it can further expand its controls to ideas, friendships, and even love.  In America today, we have some cases in which government already controls ideas.  This is common in government-run schools and colleges, as well as in the workplace.  We have restrictions on friendships in the form of outlawed sexual exchanges, especially if friendship is mixed with the exchange of money.  We have restrictions on love in the form of Don't Ask, Don't Tell and the Defense of Marriage Act.  It is perfectly appropriate to view these restrictions as restrictions on the free market, which is a concept really much broader than the strictly economic concept usually given to it.  The reason is that all of our human relationships are based on an exchange of values and these values need not be economic values.  The values may be friendship, love, and ideas.  In this realm of the free market, it is not competition, as people usually think of it, that most characterizes it.  It is cooperation and willing association.

Returning to the economic marketplace, where goods, services, and ideas are exchanged, the more fundamental action an individual makes a choice about is also one of with whom and for what reason will he cooperate and associate.  His primary motive is not to bury some opponent.  It is to find a way to exchange values with others in such a way that each is made happier by the result.  Of course, he may only be thinking of his own happiness, but then so are those with whom he is trying to arrange the trade.  So, the result is that everyone, to the extent they are rationally using their minds, is better off.

Of course, some people may wish to make trades that others will not choose to make with them and they may be disappointed.  This cannot be helped because everyone has an equal, sovereign right to cooperate or associate with others.  Force cannot then be used to make others enter into exchanges to which they have not agreed.  Those who do not like Capitalism or the free market then proclaim that the disappointed person or persons have been "eaten."  This is a clear exaggeration.  The proposed solution to this disappointment is to have the government use force to make people, who calculated that the disappointed person's proposed trade was bad for them, enter into the exchange nonetheless.  A better alternative to using force would be for the disappointed competitor to establish more reasonable evaluations of his proposed trades with others.  If he is simply not good at arranging certain types of exchanges on a voluntary basis, then he needs to find other types of exchanges which he is better at arranging.  A wealthy free market society is rich in possibilities for many other alternative exchanges.

Government restrictions on free markets take the form of mandates disallowing cooperation between people or forcing unwanted exchanges of values.  Either way, the government is destroying the freedom of association, or we might say the freedom to cooperate, that every sovereign individual has.  I just learned about an example of just such a nefarious government interference upon one of my nieces today.  She is a very good soccer player and a deep-thinking strategist of the game.  She teaches soccer to children in classes operated by a sports store.  The other soccer coaches are paid.  She cannot be paid because of the Child Labor Laws.  She teaches soccer because she loves the game and she likes teaching children.  But, there is clearly no justice in the perhaps well-intentioned law, that keeps her from being paid.  Her freedom to associate with children who want to learn to play soccer well because she might both love teaching it and be remunerated is interfered with by government.  She teaches anyway, but her freedom to choose payment and maximize the values gained is lost.  Of course, she is a child, though a very intelligent and hard-working child.  We have governments which are only too happy to restrict the freedom of adults in very many exchanges as well.  Why not, since our governments think adults are no more able to choose their own values and manage their own lives than they think children can.

Government interferences with the free market always take the form of restrictions on the freedom of association.  It is voluntary cooperation that the government limits to prevent competition or to achieve other goals contrary to the choices made by individuals in the free marketplace.  The reason is that the economic marketplace exists so that people can form partnerships and companies together voluntarily, hire voluntary labor, use capital from voluntary investors, buy equipment, facilities, and supply goods from voluntary venders, acquire knowledge and ideas from cooperating consultants and inventors, buy a technical library, and provide goods, services, and ideas to voluntary clients.  Each of these relationships is characterized by a voluntary exchange of goods, services, or ideas.  Each is an example of the freedom of association.  Each is an example of cooperation.

Of course competition usually occurs in the process.  But, competition in the sense that people usually think of it is not as fundamental as the freedom to cooperate is.  While some people have a surfeit of competitive juices, many are simply seeking out one value after another and care only about the value they gain in any given transaction.  They hope to string together many successful transactions and do very well for themselves.  In many cases, they have no idea with whom or what they are in competition.  For instance, when I quote a material analysis job for a possible client, am I in competition with another materials analysis laboratory, or am I in competition with other alternative uses of the company money?  The company could buy a piece of equipment, pay off a loan costing them interest, or send an employee off for training.  My experience is that most often my real competition is not another materials analysis laboratory.  It is a host of other alternative uses that my possible client has for his money.

It is very hard to conjure up visions of dog-eat-dog competition in this context!  What does become clear in this context is that competition is fundamental to an economic exchange only in the broader context that everyone rationally is placing a value on his values that can be realized in a trade.  It is very hard to see this as evil.  Indeed, this is exactly what the moral man does and it is why he develops a moral code.  He needs a moral code to place relative values on the many possible values he might pursue and might gain in exchanges with others.  Of course the exchanges in question are all exchanges of values, of which economic exchanges are a subset.

Competition exists in the free market because people act to realize value gains in their exchanges with others.  But, the exchange itself is an act of cooperation or association.  There is no way to interfere with the natural competition without losing acts of cooperation and denying the freedom of association.  The act of competition is the act of the evaluation of values.  It is not stabbing someone in the chest.  It is not throwing them in a dungeon and starving them.  These are the things governments do when they interfere with our voluntary exchanges of values whether in the economic free market or in the broader free market.

You may say I am extreme in this assessment, but no, I am seeing the complete context very well.  If a government interferes with my sovereign right to associate with others, it may place a less severe penalty on me for trying to go ahead with a denied exchange.  If I then assert my sovereign right and refuse to take or accept the penalty, the government will ratchet up the use of force on its part and may well have a SWAT team shoot me or imprison me for life.  The real penalty for asserting my sovereign right may well be death or permanent enslavement.  This is clearly evil.

Rational men do not want their societies to go into these sorts of death spirals.  They understand the need to keep their society as free as possible from the use of force, including government-wielded force.  Capitalism is the form society takes when men are free to associate with one another.  Mixed economies deny the freedom to cooperate with others and trample the right of association.  These principles are readily illustrated in Ayn Rand's ingenious novel Atlas Shrugged and in the excellent movie Atlas Shrugged Part I.

Obama Usurps Congress' Appropriations Power

Obama, already the worst president in my lifetime, has refused to abide by the constitutional appropriations power of Congress.  The bill that passed Congress last week, which Obama has signed into law, reduced the funding to pay the salaries of four of Obama's Czars, the healthcare, climate change, auto and manufacturing, and the urban affairs czars.  Hilariously, Obama claims that the cuts are a violation of his executive power, the exercise of which apparently allows a President to spend any amount of money he wishes to claim is needed for advice at the White House.  He claims that the separation of powers are violated.  This makes sense for an entitlement President.  After all, he is entitled to anything he claims he needs and it is the taxpayers responsibility to feed him according to his needs.

It would clearly be too much to demand that he pick up the phone and get advice from the executive branch Health and Human Services Department on healthcare, the otherworldly combination of the EPA, NASA, and NOAA on climate change, the Commerce Department on autos and manufacturing, or the Housing and Urban Development Department on urban affairs.  Each of these massive bureaucracies can give him advice almost as bad as that which he gets from his czars!

Of course, he could go instead to the CATO Institute, the Competitive Enterprise Institute, Professor Walter E. Williams, Dr. Thomas Sowell, Glenn Reynolds, or me for better advice at a much lower cost.  But Obama is too wrongheaded and too much a spendthrift to do anything so sane.

The Constitution, as a carefully considered part of its separation of powers, gave the appropriations power solely to Congress!  The President can veto an appropriations bill, but he cannot on his own choose to spend money not appropriated by Congress.  If he is allowed to do that, then the Presidency can readily become a Dictatorship.  That is the ideal power every Socialist leader wants.  The fact that no President has the power of appropriations is another reason why Obama does not like our Constitution.

A Congressman just claimed once again in the last few days that Obama is a constitutional scholar.  This ridiculous claim keeps reappearing.  What hogwash!  This violation of his presidential power should be contested before the Supreme Court before the balance of power is still further skewed in favor of the Executive Branch.

The Movie Atlas Shrugged Part 1

I have loved the book Atlas Shrugged by Ayn Rand since I first read it when I was just turning 18 in April 1965.  On 15 April 2011, I saw the movie Atlas Shrugged Part 1 for the first time at an 18-screen theater in Gaithersburg, Maryland in a 9:15 PM showing with a good-sized audience.  To my surprise, the audience did not have an age distribution similar to that of people who have read the novel.  In fact, the age distribution was quite young.  There were almost no children, but almost all of the audience appeared to be in their late teens to early thirties.  One Objectivist commentator I read regularly, Robert Tracinski, said that the number of theaters showing Atlas Shrugged grew greatly in the last few weeks because Tea Party enthusiasts requested it.  Maybe, but the audience at the showing I went to was much younger on average than the people I see at Tea Party rallies.  This young audience seemed to be paying rapt attention to the movie.  There were a number of times when many people laughed at the beliefs expressed by the usual Progressive Elitists.  Such comments as I heard after the movie seemed to indicate that the audience enjoyed the movie.  If this is true in the highly Socialist State of Maryland in the highly Socialist County of Montgomery, this is very significant.  We have a very leftist school system here, yet some young people are looking for an alternative view of life to that they have grown up with.  It is clear that most of this young audience is unlikely to have read Atlas Shrugged yet.  Based on this, I expect a surge in book sales is going to result.

My wife Anna and I enjoyed the movie ourselves.  It is an effective telling of the story.  The movie makes it clear that man's well-being and human civilization depend upon those who use their independent minds to create ideas, goods, and services that enrich our lives and enhance our security.  It also makes it clear that those advancing collectivism are largely using it to gain power and to enrich themselves at the expense of others, while the producers are enriching themselves and others.  The movie shows Dagny Taggart, Hank Rearden, and Ellis Wyatt as capable, heroic people worthy of our respect.  It also conveys the brotherhood of the producers and their exchange of love and affection for one another.

Given the rushed production of the movie, I thought it was itself an heroic achievement.  Professional movie critics seem to be inclined to claim the film has many shortcomings in the filming.  I am not a professional movie critic, but just a movie viewer.  I did not see those shortcomings in any significant way.  I thought there was a great deal of striking and appropriate cinematography in fact.  It is not the case that there were no areas of improvement that I could see, however.

There was so much material to cover from the first ten chapters of the book, that I really do think the movie should have been 30 minutes longer so there could have been more character development.  I do not believe the character development was so underdone that one could not assess the nature of most of the important characters.  I just think that Ayn Rand developed the nature of Dagny and Hank as heroic producers and as people who hungered for the sight of achievement and purpose in others so greatly that this is one of the main rebuttals to the frequent collectivist claim that businessmen care only about themselves.  The movie tries to establish this fellowship, but that fellowship is so rich that it would have made a greater movie if the movie had had the time to develop it further.  There may have been many financial, time, and distribution reasons why the movie could not be longer, especially given that it was not backed with the promotion power of a major movie production company.  This may make my wish for a longer movie no more than that: a wish.

There were a few oddities.  It took me a moment to get over the fact that Ellis Wyatt was played by an older man, rather than a younger man than Dagny Taggart.  In the novel he is full of youthful enthusiasm and he comes upon the scene of Colorado and quickly changes everything.  He actually takes over his father's rundown oil field and finds ways to extract remarkably more oil from them and then discovers new fields.  The older actor does work fine in the story and nothing essential was lost.  It was just a momentary jolt.  In fact the actor playing Ellis Wyatt did a very good job.  Anna was very impressed by his performance.

Another casting oddity to my mind was Francisco D'Anconia.  Almost every Objectivist woman who has read the novel falls in love with Francisco.  I am not convinced that the actor in the movie would have that effect on women, even if he had had adequate screen time.  It would be interesting to have the response of women who have seen the movie on this.

I generally liked Taylor Schilling as Dagny.  She projects good strength of character, intelligence, and she is a beautiful woman.  There were a few times when she probably should have been slightly more assertive or more passionate.  There is also a scene in which she is called back to Taggart Transcontinental to deal with an emergency and she seems to move somewhat more slowly than I can imagine Dagny doing.  Of course, it is hard to move really fast in very high heeled shoes, so maybe I am being unfair.  It just seemed to indicate a bit less passion than I would expect of Dagny.  I think Dagny would have taken her high-heeled shoes off and run barefoot or she would have worn shoes she could run in.  The bottom line though is this: could I love the woman Dagny in the movie?  Not as much as Dagny of the novel, but, yes, I could love her.  Her agony upon reaching Ellis Wyatt's oil field, with it ablaze and a sign saying he was giving it back as he found it, brought tears to my eyes.  When I read the book the first time, Ayn Rand's development of that event brought tears to my eyes also.  The injustice that such suffering should be visited upon Dagny was a part of the reason, but perhaps it was more graphic yet in the movie.  As a man and a romantic, it is just revolting to see the effects of such evil upon a great and lovable woman such as Taylor, er.... Dagny.

When the movie noted that a producer had vanished, it put up the name, what industry he was in, and a date of disappearance.  In the novel, the first man-of-the-mind disappearance noted is McNamara, who was the Cleveland contractor who finished building the San Sebastian Line to Francisco D'Anconia's copper mine in Mexico in which James Taggart and Orren Boyle had invested.  Dagny was counting on him to rebuild the Rio Norte Line to Ellis Wyatt's oilfields in Colorado, where a cluster of productive manufacturing companies had grown.  The movie just notes his disappearance after that of several other people and identifies him as a Manufacturing CEO without any connection to the upcoming building of the John Galt Line.  Richard Halley, the composer, is the second disappearance in the novel, but he is not mentioned.  Only businessmen are mentioned.  To be sure, the first disappearance in the movie is of a prominent businessman, the banker Midas Mulligan, which we later learn in the novel was the first such man to disappear.

Another incongruity was the bridge on the Rio Norte Line that Hank Rearden tells Dagny he can affordably replace with one built of Rearden Metal.  They walk onto the edge of the bridge which has a structure only suitable to span a narrow gap or if the gap is wider, which must have many supporting legs.  You do not see the complete bridge, but the part you see is decrepit.  Later, the train making the inaugural run on the John Galt Line, the temporary name for the railroad Dagny has created to rebuild the Rio Norte Line using the controversial Rearden Metal, passes over a magnificent bridge of unusual structure that could not be built of steel.  The gap it spans is too wide and too deep for the kind of bridge it was represented as replacing.  It is consistent with the challenge the bridge solved in the novel, however.  It is also understandable.  No bridge available for filming over such a chasm could be in such bad condition as the one shown had been.  We have not yet arrived at that level of decay.

These differences from the novel and oddities are nit-picking.  I really do not think they significantly detract from the movie or from Ayn Rand's work.  But, part of the fun of seeing the movie is in trying to see which things you can identify as different.  Why not have the fun of observing them, but then do put them in context.  Remember that context is everything, or at least crucially important.

I really do recommend that people with any interest at all in Atlas Shrugged or Ayn Rand's ideas go see the movie.  I believe most of you will enjoy it, if you give it a chance as a movie.  Remember, no movie can be a substitute for reading the great novel.  As most of us know who have loved the novel, it has many, many layers of themes and a very broad, life-living philosophy permeating paragraph after paragraph.  The novel is a remarkable work of genius.  The movie Atlas Shrugged Part 1 is at least very good and entertaining.  With the success of this movie, the producers will make a still better Part II, I expect.  I think they will have learned from making Part I and they ought to have more time and resources to make Part II.  I also think they will have a bigger audience after DVD sales of Part I and after it reaches TV audiences.

Eventually, at least most people will know the answer to the question, "Who is John Galt?"  It amazes me that many educated and professional people do not have a clue.  Many more people will also read the novel itself.  I am sure of that now.  That will be the ultimate measure of the success of the movie in my mind.

More Missing Jobs in March 2011 than in March 2010

While there are 869,000 more people employed in March 2011 than in February 2011, there are 263,000 more missing jobs in March 2011 than in March 2010!  Job creation by the private sector in March 2011 was fantastic, but so many jobs were killed by the idiocracy [consistent wrongheadedness while determinedly ignoring reality] of the Obama Central Planners in 2009 and 2010, that we have a very long way to go to recover from this Great Socialist Recession.  In January 2011 the American economy was missing 23,502,000 jobs and in March that number was down to "only" 22,339,000 missing jobs.  The real unemployment rate has fallen from 14.59% in January to 13.85% in March.

This is progress, but it may be very fragile progress, given that the prices of oil and gasoline are now so high.  Food prices have also risen substantially.  The Republican House of Representatives has as yet been unable to significantly cut government spending and seems even to lack the will to do so.  Since we have already had a double-dip recession, we may be in for a triple-dip recession.  The Democrat Socialist Party is trying very hard to make that happen with its anti-energy policies of treating CO2 emissions as though they are pollutants and denying nearly every attempt to explore, develop, and produce oil, gas, and coal resources in America.  They have reduced the job-killing consequences of ObamaCare by giving out huge numbers of exemptions to mitigate the future harm of that system to jobs and to dampen the criticism of that liberty-trampling fascist program.

The employment figures and the missing jobs calculation are given in the Table below.  The number of jobs is the actual number of working people, not seasonally adjusted jobs.  The number of missing jobs is based on the number of jobs plus jobs sought in January 2000, when jobs were plentiful and enticing.  67.49% of the total non-institutional civilian working age population wanted those good jobs.  If similarly good jobs were available now, I believe 67.49% of the civilian working age population would be working or looking for work now also.

The number of missing jobs since November 2009 is plotted below:  In December 2010, we actually had very slightly fewer missing jobs than in December 2010.  Unfortunately, the number of missing jobs shot upward in January, so that January, February, and March of this year each had more missing jobs than the corresponding month of 2010.  We have a very long ways to go yet in creating jobs.

The Arrogance of Joe Biden's Staff

Scott Powers, an Orlando Sentinel reporter, was the pool reporter to cover a fund-raiser for Democrat Senator Bill Nelson at Alan Ginsburg's palatial home in Florida.  Joe Biden and Bill Nelson were to speak at the $500 a head dinner.  When Scott Powers arrived, he was escorted to a small, overcrowded storage room and told he had to wait there until Biden arrived.  Powers was kept in the overflowing room with a chair squeezed in near its door for 1 hour and 15 minutes, before Biden staffers would allow him to come out as the speeches began.  When the un-newsworthy speeches were finished, Powers was immediately escorted to his car and told to leave.  He was never allowed to talk to any guests.

Given Joe Biden's claim that no individual has any sovereign rights, but only such provisional "rights" as the government chooses to give individuals at the convenience of the government, this imprisonment of a respected reporter is not really surprising.  It is certainly consistent with the theft of our ownership rights in our own bodies and minds provided for by ObamaCare.  Joe Biden is a man of principle and that principle is that every American individual is to serve the needs of the government or more exactly, its VIP political leaders, such as Joe Biden.  Such is the arrogance of power among the Democrats.

You can read more about this here.

The Cost of Living in the United States

The Composite Cost of Living results for the states across the United States for the 4th Quarter of 2010 are now available:

The cost of living is influenced by the cost of doing business, the cost of land, the cost of housing, and the cost of government, among many other factors.  Crowded areas or those in which the federal and state governments own too much of the land will tend to have high land costs.  Housing costs are a function of land costs, building codes which may be designed to force the hiring of local labor or to use expensive materials, zoning restrictions limiting home development, and building permit restrictions designed to slow growth.  The cost of doing business varies greatly due to differing government policies on taxes and regulations, as well as Workmen's Compensation costs.  Then government spending varies greatly and the more the government's spend, the higher the taxes.

Examining the map above, we find the Northeast and the Pacific Coast to be the highest cost of living areas.  The lowest cost of living states tend to be between the Appalachian Mountains and the Rocky Mountains minus the northern tier of states.  Illinois and Louisiana are also excluded.  The heroically inexpensive states with their composite cost of living indices are:

Kentucky, 89.2
Tennessee, 89.5
Oklahoma, 90.1
Arkansas, 90.6
Texas, 91.0
Nebraska, 91.1
Kansas, 91.3
Missouri, 91.7
Georgia, 92.2
Mississippi, 92.3

The worst states are:

Hawaii, 165.6
DC, 139.9
California, 132.6
Alaska, 132.6
Connecticut, 130.2
New Jersey, 128.5
New York, 128.3
Maryland, 124.8
Rhode Island, 123.2
Vermont, 120.4

My state of Maryland is expensive, but then what do you expect of a Democrat state.  On the other hand, I have family members living in Oklahoma and Kansas and they really do live much better on much less there than one can in Maryland.  If you want Nanny State, all intrusive government, you must pay through the nose for it.

Your Payment on the National Debt Interest

If you are employed, what is your share of the cost of the interest on the national debt?  The national debt is presently $14,255,760,000,000.  The interest paid in 2010 on the national debt was $413,954,825,362.17, according to the Treasury Department.  [The White House claims the interest paid in 2010 was only $196 billion on a public debt of only $9.019 trillion, but we know how creative the Obama administration is in misinforming us.]  In February 2011, the Bureau of Labor Statistics says 138,093,000 Americans were employed.  The average debt interest payment per employed American is then $2997.65.

I sure am not making enough to be able to pay about $3,000 a year of interest payments on the national debt.  Actually, I am not paying that much.  There are a few rich people covering most of my share, I am sure.  This will also be true for most readers.  But, we should be asking ourselves if we have any business spending about $3,000 per employed person just to make interest payments.  Don't you think we have a strong incentive here to greatly reduce government spending to the point we can pay down the national debt and reduce these incredibly high interest payments?

The Hypocrisy of Democrat Caring - Inflation, Another of Many Examples

The Democrats always claim to care for the well-being of the poor and the middle class.  When we examine this claim critically, all we see is hypocrisy and the maneuverings of flim-flam artists in most cases.  Let us consider another such case.

When faced with a recession brought on by a spike in oil prices which then burst the housing and credit bubbles, the Democrats produced a huge porkulus bill to funnel more than $800 billion preferentially to their political followers, mostly overblown state and local governments, crony big business merchantilists, labor unions, trial lawyers, environmentalists, and community organizers.  This was a huge transfer of money from the productive private sector to the non-productive government sector and away from the jobs-producing small businesses of the free market.  The Democrats further restricted the free market with ObamaCare, so-called financial reform favoring big Wall Street firms over banks and financial companies of a smaller scale, threatened and real tax increases, cutbacks in coal mining and oil and gas extraction, and increased regulation burdens, especially by the EPA.  Job loss was quick to follow.  In December 2008, we lacked 15,287,000 jobs and by February 2011 we lack 23,108,000 jobs.  The Democrat control of the House, Senate, and White House quickly added a loss of 7,821,000 jobs, which was added to the 4,254,000 jobs lost in the second year they controlled the House and Senate in 2008.  The under-educated and low-skilled people the Democrats always claim as their own and to be so close to their hearts, were preferentially found among those now without a job.  The Democrats could not have done a better job of targeting them for grief and deprivation.

Also in keeping with Keynesian economic theory, long known to be balderdash, but much beloved by governments always looking for reasons to spend more money, the Democrats increased the money supply hugely.  Once that is done, avoiding a future bout of price increases is very nearly impossible.  Cutting back on the growth rate of the money supply, once the economy begins to respond to having increased cash, but decreased saving and investment values due to dilution, becomes painful to many.  Among the many who cannot cut back are the governments themselves.  To spend so much, they create huge new debt and that debt has to be financed.  Presently, the Federal Reserve Bank is buying 70% of U.S. Treasury notes!  Without a fundamental change in spending policies by the government, which it is clearly loathe to do given the unwillingness to reduce spending by even $60 billion in the face of a deficit for 2011 of about $1,600 billion, the Federal Reserve Bank will be the only buyer of U.S. Treasury notes for a long time.  They will lighten that obligation by causing inflation, so the debt becomes less burdensome over time.  This is a favorite way for governments to effectively tax the people, without having to pass a tax increase.

This has further consequences for those who are poor, out of a job, on fixed income, or are in the middle class.  Let us examine the consumer price index trends we are now seeing clearly:

Since July 2010, there have been only increases in consumer costs.  These increases are given in terms of annual rates so that adding the last 12 months given adds to 2.0%, but round-off loses 0.1% of the total 2.1% increase over the last 12 months.  The alarming message is that zeroes and negative numbers have been replaced since July with large numbers.  The average monthly increase since July has been 0.2875.  Projecting that alone forward would give us a consumer price index (CPI) increase from July 2010 through June 2011 of 3.45%.  Still more alarming is the fact that the trend is actually upward over that time.  It is more realistic to project at least a 4% increase in the CPI for this period.  Such an increase generates further uncertainty which will make businesses more reluctant to add employees.

 

These increases have been led by increased food costs and fuel costs.  Food and fuel costs are particularly difficult for the poor, those on fixed incomes, and even middle class families to bear.  As we know, medical costs continue their high rate increases, accelerated by ObamaCare. The hardship is increased when many more people are unemployed.  In 2009, the median U.S. inflation-adjusted household income fell 0.7% from 2008.  It is estimated that the median inflation-adjusted household income in 2010 was down by 1.0% compared to 2008.  Income has been going down and now prices, especially unavoidable ones such as food and fuel prices, are going up at a great clip.

Democrats, this is really the way to show how much you care for the poor and the middle class!  Your slip is definitely showing.  No, that would be much too nice.  That can happen to anyone, or at least any woman.  No, you are clearly revealed for the con artists you are.  You cannot put this flim-flam game over on the American people for long.  Surely they will catch on.  A 5% decrease in the ability to purchase goods and services (4% CPI increase, 1% income decrease) is hardly likely to go unnoticed.  Your snake oil is not working and sick Americans are going to notice they are becoming sicker.  You had better hightail it out of town, you flim-flam Democrat con men and women!  This is pure shades of Jimmy Carter replayed and the hopey-changey misdirection magic is not working anymore.

Third-World Property Rights in California

California is well-known for its high taxes, high deficits, never-ending regulations, its coddled government employees, its poor schools despite spending twice the national average per student, its building restrictions and high property costs, its high level of domestic out-migration to other states, and its third-world property rights.  California is one of the states that still allows governments to seize private property for private use virtually without restriction.  National outrage following the Supreme Court decision to allow New London, Connecticut to seize the Kelo home and neighborhood for proposed private use brought reforms in many states and local governments to reign in such abuse of property rights recognized in our Constitution.  The land seized from its rightful owners in the Kelo case is now a vacant wasteland.  Similar vacant wastelands have resulted in troubled California owing to similar eminent domain abuse of private property for private, connected company gain.

Third-world property rights are one of the worst impediments to economic growth and the standard of living in third-world countries.  California, with all its woes, has opted for property rights uncertainty to replicate those destructive effects upon ownership and investment right here in our most populated state.  Tim Cavanaugh gave some examples at reason.com:

But the acres of south Los Angeles wasteland generated by the Community Redevelopment Agency of Los Angeles (CRA/LA), the state’s largest and wealthiest RDA, are a grim testament to failure. The agency’s Normandie 5 Redevelopment Project has generated zero development. Its 107-acre Watts Project area, which has been in effect since 1968, boasts nothing but a Food 4 Less that hardly required government help to come into being. The massive $163 million Marlton Square project has stagnated, unbuilt, for nearly 20 years as a shady developer with friends in City Hall looted taxpayer funds. The two-block project area at the corner of Vermont and Manchester Avenues is a vacant lot. So is the long-fallow Central/Slauson project, where the CRA used eminent domain to shut down a metal works that was the only functioning business in the area.

 He also notes that the people attracted to such government property seizure schemes are not the best people:

Maybe the most important factor is the tendency of public-private partnerships to attract the worst elements of society: union goons, neighborhood activists, reverends, public-trough developers, political appointees, city planners, and so on. The Marlton Square project came close to breaking ground in 1999 under the legendary Lakers point guard and successful developer Magic Johnson—until itinerant local politician Mark Ridley-Thomas forced Magic out and turned the project over to a developer with a history of bouncing checks and cheating on his taxes, who went on to make millions of city dollars vanish before going bankrupt.

One of the more notable characteristics of these ignoble schemes is that they usually victimize the poor or the lower middle class for the comfort and profit of unscrupulous well-off people with good connections to government.  Fortunately, these would-be victims have a resolute champion in the Institute for Justice, which is making a point of becoming a nemesis for such low-life dispossession in the rascal-ridden state of California.  An example of the work the Institute for Justice does is its defense of a community youth athletic center against the out-of-control use of eminent domain by National City near San Diego.  A cavalier declaration of blight has been issued to 700 properties so that the city can exercise eminent domain over any of the properties over the next ten-year period.  The property owners must successfully fight off the blight rulings within a limited time to save their property from some potential exercise of the eminent domain claim in later years.  This means considerable expense and effort to prevent the loss of their property which may or may not happen.  This arrangement is a most cunning way to cause many property owners to fail to get the blight ruling overturned, especially when they are people of limited financial resources.  This is a plague upon the unwealthy for the future benefit of unscrupulous wealthy developers.

The Institute for Justice and some brave would-be victims have something to say about that however:



You can read more about this worthy case here.  Please consider becoming a supporter of the Institute for Justice while you are there.

The Ships That Won't Go Down

A friend sent this poem to me.  I like it.

The Ships That Won't Go Down
    by Henry Lawson (1898)

We hear a great commotion
'Bout the ship that comes to grief,
That founders in mid-ocean,
Or is driven on a reef;
Because it's cheap and brittle
A score of sinners drown.
But we hear but mighty little
Of the ships that won't go down.

Here's honour to the builders –
The builders of the past;
Here's honour to the builders
That builded ships to last;
Here's honour to the captain,
And honour to the crew;
Here's double-column headlines
To the ships that battle through.

They make a great sensation
About famous men that fail,
That sink a world of chances
In the city morgue or gaol,
Who drink, or blow their brains out,
Because of "Fortune's frown".
But we hear far too little
Of the men who won't go down.

The world is full of trouble,
And the world is full of wrong,
But the heart of man is noble,
And the heart of man is strong!
They say the sea sings dirges,
But I would say to you
That the wild wave's song's a paean
For the men that battle through.

 

Thanks Paul. 

No Improvement in Employment, Recession Continues Unabated

Do not be encouraged by the announced falling unemployment rates.  These are only informing us that the prospects for finding a job have been so bad so long that the unemployed have either given up on hunting for a job or the government has decided to assume that they no longer want a job.

As I have done many times before, we can calculate the number of jobs that people would want if the economy were robust and offering plenty of good jobs.  It is not doing this due to the huge increases of wealth transfer from the private sector to the government sector throughout the first decade of this century and the many, many tens of thousands of federal, state, and local regulations which are strangulating businesses and preventing the formation of new businesses.  When the situation was better in the late 1990s after the supply-side economics efforts from 1981 on had time to work their magic, many people wanted to work in desired jobs and the unemployment rate was very low.  In January 2000, 67.49% of the total non-institutional working age population was either working, looking for work, or transitioning from one job to another.  Our working age population has grown since then by more than 30 million people.  We can estimate the number of jobs that would be desired now based on the 67.49% who wished to have a job in January 2000.  I know of no fundamental reason why people would not be as eager to work now, if only good jobs were available.

Once we determine how many jobs would be wanted by this criterion, we can subtract the number of jobs actually held by Americans now.  The resulting number is the number of missing jobs.  This number of missing jobs is a great measure for the health of the economy, just as the GDP is also.  The GDP has been improving somewhat for some time in this Great Socialist Recession thanks to productivity improvements per worker, but as we will see, job creation is more dismally deficient than we are led to believe.

Let me provide the job numbers for January and February employment and unemployment before we go on.  The numbers in the table below are from the latest Bureau of Labor Statistics report or earlier reports.  The table does not use seasonal adjustments.  These are the actual numbers of people employed and unemployed.

The unemployment rate, using numbers not adjusted seasonally, was 9.8% in January and 9.5% in February.  This is not as good as 8.9%, the seasonally adjusted unemployment rate.  The real story is much worse than this.  In December, we had 22.067 million missing jobs, which we can compare to only 5.689 million missing jobs in January 2000.  Some sizable fraction of the January 2000 unemployed were probably briefly between jobs as they switched from one job to another, so this actually slightly overstates the number of missing jobs then.  The job market was so good, people were then changing jobs frequently.  In January 2011, the missing jobs rose to 23.5 million and we saw a small improvement in February to a mere 23.1 million missing jobs.  The percentage of missing jobs is actually 14.3% now.  That is much worse than the 8.9% unemployment rate we are told by the government and the media.  Of course, we also know that many people are also underemployed in addition to this appalling number.

To get a better sense of what the progress has been on job creation as the economy measured by the GDP has begun to improve, let us examine a graph of the number of missing jobs (given in thousands, making 1,000 jobs in thousands equal to 1 million jobs).  This graph has a baseline of 20  million jobs, so no month in the time from November 2009 through February 2011 has as few as 20 million missing jobs:

We see that January and February of 2010 were awful months, but there was some job growth through July of 2010.  Then the jobs situation became worse through the end of the year into January 2011.  February 2011 shows a bit of improvement, but the economy is still missing more than 23 million jobs!  If the Democrats had increased taxes as they wanted to before the voters convinced them in November 2010 that that would be suicide for their political careers, this missing jobs situation would certainly be worse.  But, with the upcoming scheduled reduction of corporate tax rates in Japan, the U.S. will have the highest corporate tax rates in the developed world.

It is easy to make a huge difference in the number of jobs available to Americans.  Right now, it makes more sense for companies to expand their operations overseas, close to their non-American customers and where the taxes and the environmental regulations are often less onerous.  The Cato Institute just released a study entitled New Estimates of Effective Corporate Tax Rates on Business Investment.  The effective tax rate on U.S. corporations is 34.6%, but it is only 18.6% for the average OECD nation.  The average for 83 nations is even lower relative to the U.S. rate at 17.7%!  Only an idiot can fail to see that this is a strong negative factor for the creation of U.S. jobs.  Indeed, this is why major corporate tax rate reductions have been made in Canada, our largest trading partner.  Canadian business is booming compared to the U.S. and generating more tax receipts for government as a result, thereby reducing the Canadian deficits.  Over the last decade or a bit more, Austria, Bulgaria, the Czech Republic, Germany, Greece, Iceland, Ireland, Italy, Netherlands, Poland, Slovakia, Turkey, Egypt, Georgia, Kazakhstan, Lesotho, Mauritius, and Singapore have made large corporate tax rate reductions.  Australia, Belgium, China, Denmark, Finland, South Korea, Luxembourg, Mexico, New Zealand, Taiwan, and the United Kingdom made substantial corporate tax rate cuts also.  Many of these countries are going to make further tax rate cuts.

Only the U.S. has been too dumb to stop penalizing companies for providing the goods, services, and jobs we want!  The Democrats have actually raised the future effective corporate tax rate with provisions in ObamaCare and the Dodd-Frank financial reform bill.  They raised the rate with the imposition of mandates to use expensive and unreliable "green energy" and will raise it more with anti-carbon regulations out of the errant EPA.  On top of all that, before the November election, they wanted to raise the basic corporate tax rate.  The Obama budget proposal for 2012 and beyond calls for tax increases of $650 billion.  He wants to add $46 billion of taxes from oil companies, thereby preventing them from taking advantage of many new oil and gas finds in the U.S. to create new jobs and wealth.  Actually, they probably will not be able to extract much more oil and gas anyway while Obama occupies the office of the president since he is allowing no leases to be sold.  In addition, he plans to hit multinational corporations with an additional $129 billion of taxes.  Such an anti-business climate makes the avowedly socialist countries of Europe look like better bets for expansion in too many cases.  The Democrats talk about wanting to create jobs, but virtually every concrete proposal they make will kill jobs.

Investment in U.S. corporations is also blocked with high taxes on dividends.  The owners of a corporation pay an effective tax of 34.6% prior to any dividends being issued and then pay an amount on ordinary dividends equal to their individual income tax bracket.  Through 2012, that bracket may be 35%, making the total tax they pay on an ordinary dividend equal to an overall tax of 0.346 + (1 - 0.346)(0.35) = 0.5749 or 57.49%.  This leaves little incentive for such investors.  In 2013, the situation gets worse, since the Democrats want the highest income tax bracket rate to automatically go up to 39.6%, which will take the dividend rate along with it.  Dumb and dumber.

Job creation is mostly the business of small business.  The personal income tax rates strongly affect small businesses, since their profits are normally added to the income of individuals on their personal income tax returns.  The same is true for many angel investors and the family members who invest in a relative's business when he starts one up.  The risks in starting a small business are huge.  Most go out of business within ten years.  Those that succeed in generating profits, return less to their investors by virtue of the long-term capital gains tax.  Through 2012, this has just been set at 15%, but it is scheduled to go up to 20% in 2013, unless the more economically savvy Republicans can pass legislation opposed by Obama and the Democrat Senate before then.  Meanwhile, no one can undertake a long-term investment without assuming that any success will be taxed at the 20%, not the present 15%, capital gains tax.

One of the most important requirements of good tax laws is that businessmen should be able to count on their tax rates not going up.  When tax rates go up, they turn calculations that justify an investment of money and years of work into failures.  Wealth and jobs are lost as a result.  Even the threat of a tax increase causes proposed investments to be tossed out as excessively risky and it can cause somewhat marginal businesses to be closed down early.  Most businesses have a learning curve in which the owner messes up and has a number of close calls with failure and bankruptcy.  Many wildly successful businesses had such close calls in their infancy.  Every time a tax burden or a regulatory burden is added for a young business, that business may be pushed over the cliff.  We cannot calculate how many future successes are killed in this way.  But, we do see that countries with lower tax and regulatory burdens on businesses do tend to have higher growth rates, generate more wealth, improve the living standards of both the poor and the wealthy, people live longer, there is less pollution, and they have lower unemployment rates.

This picture is so clear that it is evidence of a strong idiocracy in academia, the political class, and most of the media.  Idiocracy is my word for persistent wrongheadedness in the face of a multitude of evidence to the contrary often subscribed to by otherwise intelligent people.  The word is applied most frequently to college indoctrinated Progressive Elitists.  They have worked very diligently to produce the Great Socialist Recession and to maintain our economy in a jobless state.

The Real American Energy Opportunities

Gasoline prices are rising at the gas pumps and look as though they will continue to do so for some time.  There are many predictions that the price of regular gas will rise above $4.00 a gallon.  The present recession occurred when it did because a sudden oil price surge was the pin that popped the housing credit balloon.  Ten of the eleven U.S. recessions since the end of WWII were precipitated by a sudden rise in oil prices.  In addition to the instability of the Middle East and the fact that Obama by design has no foreign policy to deal with it, Obama is determined to force fossil fuel prices upward drastically.  Such an action must have an effect similar to an international upsurge in the price of oil.  Our fragile economy may not be able to survive his efforts to rapidly reduce the use of coal, to virtually end exploration and drilling for oil and gas in America and its waters, to penalize CO2 emissions, and to misdirect the economy into expensive and unreliable wind and solar generated electric power.  It will certainly not prosper and generate the millions of jobs we desperately need it to, especially in view of our huge national debt and the unfunded looming liabilities for Social Security and Medicare for the retiring and politically blind Baby Boomer generation.

American energy policy is absolutely critical and should be founded upon the following facts:

• Catastrophic anthropogenic global warming is a scientifically failed hypothesis.
• Carbon dioxide is not a pollutant, but is plant food which will only promote plant growth should its concentration in the atmosphere continue to increase due to the warming of the oceans since the end of the Little Ice Age.
• It is not practical and economic for the U.S. to pursue energy independence.  We presently import over 60% of the crude oil we refine.  This imported crude and other petroleum products cost $453 billion in 2008.  Decades of Presidential declarations of our pursuing energy independence have failed to make progress toward the goal.
• The best way to assure the availability of adequate oil and gas supplies is to have as many sources of them in as many areas of the world as possible.  The resulting competition for income will do more to relieve price and availability concerns than any other approach to the problem.
• Presently, 77% of wold oil reserves are owned or controlled by national governments, some of which are unfriendly and many of which are subject to instabilities.  Nationalized oil companies are also inclined to be inefficient, often under-capitalized, and to lack innovation.
• The U.S. has 22.6% of the known world reserves of coal, which leads the world.  Russia has 14.4% and China has 12.6%.  In 2010, despite increases in natural gas use for electric power generation in the U.S., coal still produced 45% of American electric power.  Coal power stations require scrubbers and generate fly ash, but their problems are exaggerated by many environmentalists and Progressive Elitists.
• Ethanol additions to gasoline only provide corn-growing farmers and ethanol refiners with welfare payments and drives food prices upwards.  Ethanol provides neither net energy nor pollution benefits, despite claims years ago that it did both.
• Wind generation and solar power plants are very expensive and exist on the power grid only due to government mandates and subsidies.  These power sources have little utility except in remote locations far from the electric grid or for temporary setups to avoid power hookups.  They are also unreliable and use the land inefficiently.  When on the grid, they require expensive gas-fired power plant back-up.
• The U.S. has huge oil and natural gas reserves compared to those acknowledged by the U.S. government.  The government estimated that Alaska's Prudhoe Bay held 9 billion barrels of oil, but it has already produced 15 billion barrels and is still producing.  The Bakken Formation of North Dakota and Montana is now thought to have up to 4.3 billion barrels of oil, but the government had previously thought it had 25 times less than this amount.  Much of America is effectively unexplored for oil and gas and there are many, many areas worthy of exploration and development.  This situation exists because the government has not allowed exploration in many areas.

Let us discuss a few of the exciting oil and gas opportunities that the U.S. has, if only the Obama gang were not so determined to stifle them.

Northern Economics and the University of Alaska - Anchorage's Institute of Social and Economic Research has just recently released a study concluding that Alaska's Outer Continental Shelf could make Alaska the 8th largest oil-producing region in the world.  This would place it ahead of Nigeria, Libya, Russia, and Norway.  Alaska could produce 10 billion barrels of oil and 15 trillion cubic feet of natural gas.  About 55,000 new jobs would be created and add payroll of about $145 billion nationally.  Because oil royalties are very high, government revenues through the year 2057 would be increased by $193 billion.  The operating life of the 800-mile Trans-Alaska Pipeline System would be extended by such production.

The development of the many oil shale deposits in the United States holds huge promise and were recently discussed in the Investor's Business Daily article A Shale of Difference.  The known shale oil deposits are shown in the map below:

Late in his presidency, George Bush opened up 2 million acres of federal lands in the Green River Formation to possible development for shale oil and tar sands.  Interior Secretary Ken Salazar of Obama's cadre has refused to allow this to happen, claiming that the leases must be reviewed.  Of course environmental groups have also filed federal lawsuits to prevent its development.  The area is thought, by the U.S. Geological Survey, which commonly makes underestimates, to hold 1.5 trillion barrels of oil.  This is six times the proven reserves of Saudi Arabia and would supply the U.S. with enough oil for 2 centuries of use!  But, despite the recession and the soaring costs of oil, the Obama cadre sees only reasons to prevent the development of this oil source.  After all, it would only make it too easy for Americans to pollute the atmosphere with CO2!  The consequences of such wrongheadedness mean that we will not be producing 2 million barrels of oil a day from oil shale fields as we could have been doing by 2015.  That production would have exceeded the production of the Gulf of Mexico prior to the Deepwater Horizon event.  The now booming Bakken formation of North Dakota could have had some good company and America could have been much richer and had many more jobs.

An ICF International study claims that opening up the federal waters off the Pacific Coast, the Eastern Gulf of Mexico Coast, and the Atlantic Coast for development of oil fields would increase domestic oil production by nearly 1 million barrels a day and 3 billion cubic feet of gas a day.  Allowing efficient and innovative American oil and gas companies to tap these resources as the economics allows would provide a strong steadying hand to the problem of oil and gas availability and price stability for Americans.  The benefits for the American economy over the next several critical decades would be huge.

Yet faced with an exemplary environmental track record in recent years, a fragile economy due to many government interferences, a 13% real unemployment rate with many more Americans underemployed, a lack of good jobs for those without a college degree, an entire Middle East unstable and in revolt, and all of these opportunities for wealth creation, our Progressive Elitist overlords have decided we are best put on a severe energy diet.  Energy Deprivation is Good, say our all-knowing federal and many state masters.

We the People clearly need to mount an Energy Plenitude is Good campaign!  Drill, Baby, Drill!!!!

ObamaCare Now Seen as so Bad, Democrats Consider it Disparaging

Recently, Representative Tom Graves, Republican of Georgia was speaking on the House floor in favor of an amendment to defund ObamaCare.  He describes how it is so expensive that 915 companies and union health plans have received waivers, letting 2.5 million Americans off the hook for ObamaCare.  A Democrat Representative from Florida rudely interrupted him several times claiming she wanted a ruling on a parliamentary inquiry.  She was allowed to make that inquiry only after Representative Graves finished and yielded the floor.  Her point was that members of the House were not supposed to make disparaging remarks about the President.  She claimed that by calling the Affordable Care Act by the popular shorthand name ObamaCare, that Rep. Graves was being disparaging.  It is very interesting that this great triumph of the Obama presidency is now seen as so bad that Obama's being associated with it is seen as disparaging.  What an amazing admission by a Democrat in the House of Representatives!  The brief Graves talk and the "lady" from Florida can be watched in this video clip: