Mixed Messages

Barney Frank says if we had more government stimulus spending, we would have less people on Food Stamps. But Democrats have repeatedly said that spending money on Food Stamps is stimulus spending.

Agriculture Secretary Tom Vilsack touted the “economic stimulants” that food stamps provide, arguing that such benefits curb unemployment and funnel millions of dollars into the hands of American business owners: “Well, obviously, it’s putting people to work. Which is why we’re going to have some interesting things in the course of the forum this morning. I should point out, when you talk about the SNAP program or the food stamp program, you have to recognize that it’s also an economic stimulus. Every dollar of SNAP benefits generates $1.84 in the economy in terms of economic activity. If people are able to buy a little more in the grocery store, someone has to stock it, package it, shelve it, process it, ship it. All of those are jobs. It’s the most direct stimulus you can get in the economy during these tough times.”

Steny Hoyer (D-MD) said that the continuance of funding government welfare programs is vital to a struggling economy. “If you talk to economists,” Hoyer contended, “they will tell you there are two things that are the most stimulative that you can do — one’s unemployment insurance, the other’s food stamps, okay?”“Why is that?” Hoyer posited. “Because those folks who receive those resources must spend them. And they’ll spend them almost upon receipt. Most economists with whom I talk believe that those with significant discretionary income — that that’s not the case.”Anyway you slice it, the Democrats want to spend more and drive us further into debt.

Dodd Calls For Internet Censorship and Regulation

If you are looking for a statement that best summarizes the mindset of the Democratic Party, and unfortunately some Republicans too, it was just uttered by former Sen. Chris Dodd.

Dodd is now a multimillion dollar lobbyist for the movie industry.  Making the case for regulation of the Internet, Dodd said, “You can’t just have a legal, free environment where there aren’t any restrictions whatsoever. It’s dangerous,” he continued. “It would be dangerous for the Internet.”

What would the world do without government regulation of the Internet, or for that matter, any industry?

Dodd has a long history making these scurrilous arguments.  He is, of course, the author of the Byzantine labyrinth of banking regulations, known as Dodd-Frank.  As a Senator, he advocated regulations for almost every industry known to man and now as a lobbyist he wants the government to regulate what is, perhaps, the last unregulated bastion in America — the Internet.

The lack of faith modern day politicians and the public have in the free market is not surprising after a century to red tape and regulation.  But Dodd is demonstrating another reality of regulation — under the rhetoric of safety — there are always those who benefit when one industry is shackled under the restraints of government.   In Dodd’s case, regulation of the Internet would hurt prosperity, ingenuity and technology but Hollywood would certainly benefit.  Isn’t all what government regulation is all about?

The Constitutional Dollar

If you want to limit federal spending, you must limit the ability of the federal government to print money with a gold standard.  For decades the idea was in hibernation as Americans enjoyed bubble after bubble often created by the federal reserve and loose monetary policy.

But now it seems, thanks in part to Ron Paul, the idea as taken hold.  It was remarkable to see the Wall Street Journal allow Seth Lipsky to make an effective case on the issue:

An under-reported development of this campaign season is the Republican Party’s decision this week to send Gov. Mitt Romney into the presidential race on a platform effectively calling for a new gold commission. The realization that America’s system of fiat money is part of its economic problem is moving from the fringes of political discussion to the center.

This is a sharp contrast from the last time a gold commission was convened, in 1981, a decade after President Nixon abandoned the Bretton Woods system and opened the era of a fiat dollar. The 1981 commission recommended against restoring a gold basis to the dollar. But two members—Congressman Ron Paul and businessman-scholar Lewis Lehrman—dissented and outlined the case for gold.

The new platform doesn’t use the word “gold,” describing the 1981 United States Gold Commission as looking at a “metallic basis” for the dollar. But the metal was gold, and the new platform calls for a similar commission to investigate ways “to set a fixed value for the dollar.”

What has stayed with me from 1981—I covered the commission as a young editorial writer for this newspaper—is how momentum for a new gold standard faded amid the successes of the supply-side revolution. President Reagan pushed through his tax reductions and Federal Reserve Chairman Paul Volcker maintained tight money. Inflation was defeated. The value of the dollar, which had sunk below 1/800th of an ounce of gold during President Carter’s last year in office, soared.

The 1981 commission was also stacked against a gold-backed dollar from the start. The ruling philosophy was monetarism—which, as propounded by Milton Friedman, seeks to keep prices steady by adjusting the money supply. The commission’s executive director was Anna Schwartz, co-author of Friedman’s “Monetary History of the United States,” and the Democratic-controlled House held firm to monetarist orthodoxy.

Today things have changed. Both Friedman and Schwartz died as heroes of capitalism and freedom, but monetarism lacks the sway it once had. Even Friedman before he died seemed to adjust his thinking on using the quantity of money as a target. Schwartz predicted that monetary instability would be a breeding ground for a restoration for the role of gold.

In the ferment within today’s Republican Party, the gold standard has become almost the centrist position. On the left would be those who favor a system of discretionary activism in which brilliant technocrats, such as Ben Bernanke at the Fed, use their judgment in setting interest rates. A bit to their right would be advocates of a rule, such as John Taylor’s rule linking interest rates to various conditions, or one that requires the Fed to target the price of gold but stops short of defining the dollar in terms of specie.

In the center would be advocates of a classical gold standard, in which a dollar is defined as a fixed amount of gold. These include, among others, Mr. Lehrman, James Grant of Grant’s Interest Rate Observer, publisher Steve Forbes, economist Judy Shelton, and Sean Fieler of the American Principles Project.

A bit further to the right would be partisans of the Austrian school of economics, including Rep. Paul. He advocates less for a gold standard than for an idea of Friedrich Hayek, the Nobel laureate who came to favor what he called the denationalization of money and a system centered on private coinage and currency that would compete with government-issued money. Further right are purists such as the radical constitutionalist Edwin Vieira Jr., who would simply price things in weights of gold or silver.

A good bit of overlap exists among the camps, but Congress has come alive to all points on this spectrum. Rep. Kevin Brady, a Texas Republican who is vice chairman of the Joint Economic Committee, is seeking to pass the Sound Dollar Act, which would end the Fed’s mandate to keep unemployment down, instead having the central bank focus only on stable prices. Rep. Paul is pressing the Free Competition in Currency Act, which would end legal tender and put Hayek’s ideas into practice.

In the Senate, Jim DeMint, Mike Lee and Rand Paul are offering the Sound Money Promotion Act, which would remove the tax on the appreciation in the value of gold and silver coins that have been declared legal tender by the federal or a state government. Utah has already made gold and silver coins legal tender in the state.

Then there is Mr. Romney. In Paul Ryan he chose a running mate who understands the idea of sound money. In June 2010, as chairman of the House Budget Committee, Mr. Ryan asked Mr. Bernanke what he made of record-high prices of gold. (The value of the dollar had just slid to below 1/1,200th of an ounce of gold; it has since plunged to below 1/1,600th of an ounce.)

“I don’t fully understand the movements in the gold price,” Mr. Bernanke replied. He confessed his belief that some people were hedging “against the fact that they view many other investments as being risky and hard to predict at this point.” No wonder the eventual House bill to audit the Fed passed with overwhelming bipartisan support.

This is the context in which Mr. Romney last week moved so pointedly to distance himself from a suggestion by one of his advisers, Glenn Hubbard, that Mr. Bernanke should be considered for another term. Mr. Romney made clear that he would be looking for a new Fed chairman, an important signal from a candidate who has made some mistakes—such as suggesting that monetary policy should be kept away from Congress. In fact, it is precisely to Congress that the Constitution (in Article 1, Section 8) grants the power to coin money and regulate the value thereof.

The New York Sun, the online paper I edit, has warned that a gold commission could prove to be the graveyard for sound money—on the principle that if one wants to bury an idea, one need but name a commission. But it’s possible that a well-conceived and well-staffed gold commission could actually sort out the debate.

It’s no small thing that Mr. Romney’s platform calls for a gold commission and an audit of the Fed. The last Republican to run on a platform calling for a dollar “on a fully convertible gold basis” was Dwight Eisenhower, who cast the promise aside once in office. That’s a strategic misstep for Mr. Romney, should he win in November, to avoid.


Obama’s Correspondence

The Gateway Pundit has hit paydirt when he discovered that President Obama sent form letters to Navy Seals killed in combat but wrote a personal letter of condolence when a rapper Heavy D passed away.

It seems like Heavy D’s family was not the only people to hear from the president in a personal manner.  So did Second Lieutenant Sandy Tsao.

Tsao thanksfully was not killed in battle.  No, it was her decision to come out of the closet that got the president to put pen to paper.  Obama wrote “Sandy – Thanks for the wonderful and thoughtful letter. It is because of outstanding Americans like you that I committed to changing our current policy. Although it will take some time to complete (partly because it needs Congressional action) I intend to fulfill my commitment. — Barack Obama” in his hand written note.

Dying for one’s country in a tragedy gets one a form letter from this administration.  Coming out of the closet gets you a personal note of encouragement.  Something is rotten in the White House.

Obama Letter

Be Like China

A common refrain among liberals is that the United States would be better off if we followed the lead of communist China.

President Obama and his green energy allies continue to argue that China is making huge investments into solar energy and hence, we should as well.  Progressive icon Elizabeth Warren, running for the Senate in Massachusetts, actually ran an ad with similar logic.

“We’ve got bridges and roads in need of repair and thousands of people in need of work. Why aren’t we rebuilding America?” asks Warren. “Our competitors are putting people to work, building a future. China invests 9% of its GDP in infrastructure. America? We’re at just 2.4%. We can do better.”

Such reasoning is faulty if one believes in the free market.

F.A. Hayek and other Austrian economists argue correctly that government investment decisions are not necessarily correct more often than not because there is no market discipline in the decision.  The “fatal conceit” of socialists is the believes that government bureaucrats can make better investment decisions than millions of people working in the confines of the free market.

There is no reason to chase China and their solar panel spending or Europe and their government-run health care spending.  Bureaucrats don’t know more than the marketplace. Never have and never will.