Apparently, the “Brains Trust” really is stupid if it doesn’t understand “Government and the Uncertainty Trap,” year after recessionary year.

For years, economist and historian Robert Higgs emphasized (and measured) “regime uncertainty” as a cause of the Great Duration — i.e., why the Great Depression “lasted so long.”

Higgs’ “delicious expression” is starting to enter the mainstream:

“If Stocks Are in Turmoil, Blame the Feds: Investors Fear “Regime Uncertainty,” by Declan McCullagh (CBS News)

“Washington Post Cites ‘Regime Uncertainty’,” by Tad DeHaven

To my friends in finance, I wonder what role—and what message—YOUR regional Fed “outreach” person is sending? Word is there is division within the Fed over these issues. Perhaps some people are waking up to the “uncertainty trap,” but until the administration actually takes the economy seriously Fed divisions only exacerbate uncertainty.

So, please Mr. Obama, stop tilting at windmills and solar panel factories. It’s YOU that business is uncertain about.

Your huddled masses yearning to breathe free.

. . .

On second thought, to hell with them.

First they came for the lettuce pickers, and I did not speak out because I was not a lettuce picker.

Then they came for the maids and the dishwashers, and I did not speak out because I was not a maid or a dishwasher.

Then they came for the gardeners and the nannies, and I did not speak out because I was not a gardener or a nanny.

Then they came for the meatpacking workers, and I did not speak out because I was not a meatpacking worker.

Then they came for the construction workers, and I did not speak out because I was not a construction worker.

When they come for me, will anyone speak out for me?

President Obama says “We expect taxpayers will get back all the money my administration has invested in GM.”  As I write, GM is planning an initial public offering of stock (IPO) to raise money to pay back “…the money [President Obama’s] administration invested…”  As an aside, I do like the way the president takes personal credit here for “investing” your tax dollars.

Doing a back of the envelope calculation, the federal government (whoops, I meant to say “the Obama administration’) owns 60.8% of GM, for which it paid $49.5 billion.  If GM can cover the $49.5 billion with a stock offering, that would indicate that 60.8% of the company is worth $49.5 billion, so 100% of the company would be worth $81.4 billion.  Maybe.  The market capitalization of the Ford Motor Company is about $44 billion as I write.  Would investors really value GM at twice the value of Ford?

(I’ve actually overestimated the value of the Obama administration’s stock here, because an IPO would dilute the ownership shares of the current owners, which are mainly the Obama administration and the United Auto Workers.  So the company would have to be worth more than $81.4 billion for the Obama administration’s shares to be worth $49.5 billion.  That’s one reason I called this a “back of the envelope” calculation.)

The plan is for GM to issue stock to the public, which would then allow the Obama administration to sell their shares on the market, at the market price.  My judgment is that investors would have to place an unrealistically high value on GM stock for the Obama administration to be repaid.

I haven’t even considered the time frame over which the Obama administration will sell its stock.  Obviously, it couldn’t just offer its whole 60.8% share immediately, because the supply of shares for sale would substantially outstrip the demand, pushing the share price down.  That means that after the IPO, the market price would be an upper bound for the value of the Obama administration’s shares, and if it continues to trickle its shares onto the market, that will continue to exert downward pressure on the price.

President Obama’s view that his administration will get all that money back just doesn’t seem realistic to me.  Even if they stretch out their share sales to the end of his administration, that just gives him six years to divest and get the money back.  (It still could turn out that the Obama administration’s investment in GM will do better than your “investment” in Social Security, though.)

The current plan is for the IPO to take place prior to the November election, so we should see very soon the market value of the Obama administration’s share of GM.

With great sadness, I convey the news I have just received that Manuel F. Ayau died yesterday. Known to his friends as Muso, Ayau was one of the greatest persons I have had the privilege to know. I am not given to hero worship, but I do not hesitate to affirm that, to me, Muso was a hero.

Ayau was the principal founder of the Universidad Francisco Marroquin in Guatemala City. He was also a successful entrepreneur, an active participant in the public affairs of his country, and a dedicated champion of liberty there and throughout the wider world. The proud patriarch of a beautiful family, a warm friend to countless adherents of classical liberalism, and man of tremendous energy and striking courage, he exemplifies the realization of the finest potential that human beings can achieve.

The university he founded and led to maturity is now a beacon to those who seek knowledge and wisdom; it stands as without doubt the finest institution of higher education in Guatemala, and in many respects, it has no peer anywhere in the world. I have been honored to have played a small role in its affairs, and I am sure that it will ascend to even greater heights of accomplishment in the future, paying a fitting tribute to the man whose vision, dedication, and personal bravery brought it into being.

Muso is gone now, but his spirit will live forever in the hearts of the multitude who knew, admired, and loved him.

In my capacity as chair of the Alabama State Advisory Committee of the U.S. Commission on Civil Rights I am featured today in two Fox stories (print and television). Our committee has been investigating eminent domain as a civil rights issue.

The stories describe how “eminent domain through the back door” has become commonplace in Montgomery, the cradle of the modern civil rights movement. Under this system, Montgomery has demolished homes without the normal due process of conventional eminent domain and often gives little notice. The city alleges that these homes are “blighted” but, as the story on Jimmy McCall shows, at least some are in excellent repair.

Typically, under eminent domain through the back door, the city of Montgomery bills the owner for the cost of demolition and he or she is left with an essentially worthless property. The victims are often low-income blacks, many of whom live near or in Rosa Parks’s old neighborhood. According to the print version of the story,

Karen Jones testified before a hearing held by Beito’s advisory panel, charging that the city demolished her grandparents’ property without proper notice.

“When we got here, like I said, half the house — the back half of the house was demolished,” Jones said. “I said let me see your paperwork, I need to know what are you doing here, because the taxes are paid on this land, you’re trespassing. And they told me that I couldn’t be on the land while they are demolishing the house.”

Jimmy McCall and his attorney Norman Hurst were among more than 100 witnesses and property owners who testified before the same hearing. McCall says he was building a 5000 sq. ft. home out of salvaged and recycled wood. His property sits along a busy thoroughfare. McCall says many have asked him to sell his land but he is always refused.

“It was my dream house and the day they tore it down my wife cried and my little girl cried.” McCall explained.

McCall says he took the city to court to prevent demolition and won in both state and federal courts. McCall also got an injunction forcing the city off his property. Using the blight ordinance, McCall’s property was eventually demolished and he was sent the bill.

“I never thought a municipality or any other government agents would go against a court order,” McCall said. ”I never thought they were that bold and arrogant and that they, you know, could just say away with you — we’re gonna do what we want to do and they did it. You know they actually came out and did it.”

On virtually all the major civil liberties issues of the Bush era, the Obama administration has followed its predecessor’s example. Detention without trial has continued. Torturers will not be investigated. Warrantless surveillance of the citizenry goes on uninterrupted. What’s more, by vindicating these policies as a left-liberal Democrat, Obama has solidified them in American political culture, making them a bipartisan, regular feature of the U.S. national-security landscape. Under Bush, many of these policies were controversial. Now they are simply to be taken for granted. You don’t have to take my word for it. The ACLU seems to agree emphatically, with a worthwhile paper “Establishing a New Normal,” looking at the first year and a half of Obama’s reign and concluding that “[t]here is a real danger. . . that the Obama administration will preside over the creation of a ‘new normal.'”

This was mostly predictable, of course. When the party in power changes, one of the most reliable consequences is the entrenchment of the other party’s policies into the mainstream. Eisenhower, Nixon, Ford and the Republicans who followed made the New Deal and Great Society permanent. So too do the excesses of Republican rule become as bipartisan as apple pie once a Democrat has presided over the same excesses for a year or so.

This week’s Lighthouse (available online here) touches on the WikiLeaks documents (Ivan Eland), the right to bear arms (Stephen Halbrook), the cost of U.S. foreign policy (Robert Higgs), and Hugo Chavez’s support of terrorists (Alvaro Vargas Llosa).

Here are links to the individual items:

1. Lessons from the WikiLeaks Docs
2. Halbrook Lauded for Defense of the Constitutional Right to Bear Arms
3. The Trillion Dollar Foreign Policy
4. Venezuela’s Smoking Gun

The Lighthouse is emailed on Monday evenings, Pacific Time. You can receive a free subscription by adding your email address to the distribution list by clicking here.

When he says “everybody else does it, too.”

Rangel helped create the Rangel Center for Public Service in 2004 to archive his papers and provide what potential donors were told would be a “well-furnished office for Congressman Rangel.” He secured federal earmarks totaling $1.6 million for the center. (His attorneys make clear that this, too, is accepted congressional practice.)

In addition to self-dealing with federal funds, at a time that he served as senior Democrat on the House Ways and Means Committee, Rangel sent out dozens of fundraising letters on his congressional stationery to a group of corporations and corporate-controlled foundations that included AT&T, JPMorgan Chase, Citibank, Goldman Sachs, AIG, Merrill Lynch & Co., Wachovia—all of which had “interests in tax matters overseen by the panel.” Also:

On three occasions … he discussed donations to his center with registered lobbyists: Melvin Norris, a former aide lobbying for Verizon Communications; George Nichols, a lobbyist for New York Life Insurance; and Edward Cloonan, a lobbyist for AIG.

We ought to know by now, surely, that Rangel is speaking the truth when he says everyone else does it—from my City Councilwoman with her boyfriend’s daughter drawing a full salary in her office—a neat trick for a student enrolled in college 3,000 miles away—to former Presidents with their ever-larger “Monuments to Me” Presidential Libraries littering the country.

It’s time to say “enough,” and go beyond trying to cut “waste” and “fraud.” Let’s just eliminate all the money and power at their disposal: they’ve shown they can’t be trusted, and now they’re even saying they can’t be trusted. Got it?

From today’s Associated Press:

Spirit Airlines: no hitch with carry-on fees
By ANDREW VANACORE
August 2, 1010 7:06 am EDT

NEW YORK — Spirit Airlines’ controversial carry-on fees took effect Sunday, catching some customers unhappily by surprise. But the low-fare carrier contends that the move will cut down on flight delays, potentially allowing Spirit to add new flights.

Spirit spokeswoman Misty Pinson said the new approach already appears to be working. “The check-in process is going well so far,” Pinson said Sunday afternoon. “It looks like this is going to speed things up.”

I first proposed this little idea in the February, 2000, issue of The Freeman.

As is, overhead bin space is allocated on a first come first served basis. A better system would allocate first to those with the highest value on time, risk-abatement, and comfort, and then to others who can claim left-over space or place them underfoot or simply check them in advance at the ticket counter.

[…]

Okay, this sounds good in theory, but what about the practical side? We can’t exactly expect people to run up and down the aisles shouting out their supply and demand prices for overhead bins. Talk about wasting time! But there is no reason to resort to this kind of barter solution. Instead, let’s capitalize on the airlines’ existing computerized information system to settle this for us. Airlines would sell overhead bin space as an add-on to a passenger ticket. “Would you like overhead space with that?” If you’re in a hurry, or you’re carrying something really valuable or breakable, you’re answer would very likely be “yes.” And you would pay a little extra for your ticket in order to ensure some overhead bin space. On the other hand, if you don’t want to pay the extra, just say “no” and go on your merry way to the baggage carousel. Soon enough, the airlines will balance out all the yes’s and no’s and reach an equilibrium overhead bin price, just like all other markets work when they are not overly regulated. Those who really value the space highly will get it, and those who do not will not. An efficient outcome.

Full article here: Mad Scramble at 30,000 Feet

Robert A. Lawson and I just published our paper “Human Rights and Economic Liberalization” in Business and Politics. The paper can be downloaded here. Here’s the abstract:

Using several case studies and data from the Economic Freedom of the World annual report and from the CIRI Human Rights Data Project, we estimate the effect of human rights abuses on economic liberalization. The data suggest that human rights abuses reduce rather than accelerate the pace of economic liberalization.

The paper was inspired by my reading of Naomi Klein’s The Shock Doctrine and a critical essay by Johan Norberg. I wrote a review essay on The Shock Doctrine for the Journal of Lutheran Ethics last year. Klein’s discussions of human rights abuses carried out by US-backed regimes are gripping and saddening, but her thesis that torture and human rights abuses are “silent partner[s] in the global free-market crusade” is undermined by the data. People who really want to understand the interplay between crises and institutional change would be much better served by reading Robert Higgs’s Crisis and Leviathan (the link is to the Independent.org bookstore, but Amazon.com has a used paperback for $7.20 + shipping as of right now). For data-driven approaches to liberalization over the last thirty years, here’s Andrei Shleifer’s paper “The Age of Milton Friedman,” and here’s Peter Leeson’s “Two Cheers for Capitalism.”

Cross-posted at the Mises Economics Blog.