CNN of all places has a decent piece laying out some of the fundamental freedoms that would be compromised or destroyed by the Democrats’ health care plan. Already, more Americans disapprove of Obama on health care than approve. There’s a real chance we’ll see one of the worst threats of the Obama presidency, as compared to the preceding ones, defeated. If so, it’s all the more reason to go on the offensive, not just to stop the next move toward the total state, but to ratchet back the state, and restore the many freedoms lost under Bush, LBJ, FDR and all the other worst presidencies on the last century.

Read about and listen to Neil Barofsky, a lifelong Democrat and Obama donor put in charge as watchdog over the TARP. TARP is a fitting word for DC-style “transparency,” as a tarp has apparently been thrown over the entire Wall Street-Washington revolving door.

For daring to point out that TARP potentially puts taxpayers on the hook for $23 trillion, Barofsky and his credibility have been attacked by the White House. Unlike most in Washington, he appears to take transparency and accountability somewhat seriously. And they now threaten to bring him under control of the Treasury Department.

Obama promised the most transparent administration in American history. In a sense, he is keeping his promise. I think more and more of us can see right through it.

In response to Anthony Gregory’s Why Do Conservatives Always Side With the Cops, I agree that the Henry Louis Gates arrest incident has been misinterpreted by conservatives: one indeed has the right to security in one’s home, and should not be subject to arrest or harassment therein. However, liberals are similarly misinterpreting the incident, and are just as culpable in attempting to use it for their ends to perpetuate and extend the power of the State.

In the Maye case, drug enforcement agents violently invaded Maye’s home in a tragic example of the horrible consequences of militarizing the police force in the war on drugs. Maye was well within his rights to defend his home, by violent means against violent invaders who reportedly did not identify themselves or otherwise provide him information contrary to his impression that armed criminals were invading his home.

Our book Drug War Crimes documents the true costs, benefits, and consequences of drug prohibition, of which the Maye case is one tragic example. The evidence presented in the book yields a disturbing finding: the more resources given to the Drug War, the greater the homicide rate. The book then examines various alternatives to drug prohibition and identifies the most effective solution.

While the facts of the Gates case are now and perhaps forever mired in the politicization of race, an important distinction is that in this case the police responded to a security call by a concerned neighbor. Until we have successfully privatized security, the vast majority of people are going to be dependent on the State’s police force for dealing with such safety concerns.

The entire incident blew way out of proportion when an oversensitive Gates responded to a security concern through a filter of racism, becoming verbally offensive. However, he did provide the policeman with ID establishing that it was in fact his home.  At that point the policeman had fulfilled his security responsibility and ought to have left, and had his mother taught him as mine did, “Sticks and stones may break my bones but words can never hurt me,” he would have. Instead, he took offense personally, he had power and he exercised it.

If these are indeed the facts, then, yes, this was an abuse of police power, and the arresting policeman ought to be held accountable for whatever damages his actions caused Gates. Had he been a private policeman, the liability for paying those damages would be borne by his employer, with almost certain consequences to his employment status.

As a government policeman, of course, his employer has only the money it gets by coercion from taxpayers, and presuming Gates is one, he will thus only be doubly victimized if he sues for damages.

As our book, To Serve and Protect outlines, we need desperately to privatize all aspects of crime control, bringing police into full private accountability for their actions, which is the only way any power is kept in check.

“Race” is thus being used to obfuscate the real root problems the incident illustrates and their proper policy prescriptions. In our new book, Race and Liberty in America, the writings, speeches and experiences of freedom fighters from Frederick Douglass and Lysander Spooner to H.L. Mencken and Martin Luther King, Jr., reveal government as the problem, not the solution to racial discrimination. In claiming the mantle as heirs to such civil libertarians, Obama, Gates, and others badly distort the actual history of racism and its perpetuation possible only through the protection afforded by racist laws enforced by the State (Jim Crow and other laws passed by vested interests in contradistinction to voluntary, private behavior). Gates is more accurately the heir of the über-Statist W. E. B. Du Bois, for whose eponymous Institute for African and African American Research at Harvard he serves as Director. Du Bois of course died an unrepentant member of the Communist party in 1963—well late enough to have been aware of the horrible ramifications of the ideology’s practices worldwide—including the tragic fates of the many American blacks as well as whites who succumbed to pro-communist propaganda by emigrating to Soviet Russia in the 1930s (for more on which see here and here)—and continuing ramifications through such ongoing tragedies as today’s Zimbabwe.

Obama, Gates, liberals, conservatives and all others desiring a true end of racism would thus do far better to abandon the failed model of identity-based politics and fully embrace the classical liberal tradition as detailed in Race and Liberty and America.

The unpleasant incident in Cambridge, where a police officer arrested a professor after mistakenly thinking he was an intruder in his own home, has unfortunately become a national issue dominated by the question of race. But race need not have anything to do with it. I see this as another example of police abuse in our increasingly authoritarian country.

Conservatives are used to talking about the government as being tyrannical, socialist, and oppressive. When John Ashcroft was being confirmed for Attorney General, Ted Kennedy mocked him for his belief that the 2nd Amendment was meant to ward of tyranny, since in the left-liberal’s mindset, the democratic government can never be tyrannical.

But here’s the interesting thing. If the government is tyrannical, then so must be the police forces, which constitute the enforcement arm of the state. If taxation is oppressive, it is only being carried out under threat of imprisonment and fines, which are administered by the police. If gun control is tyranny, and it most certainly is, then the officers enforcing it must also be acting tyrannically. It is impossible to have Big Brother and a benign police force.

If a police officer mistakenly enters a private home without permission, on a good faith misunderstanding that he is there to protect private property, I would certainly not react rudely. But this standard should apply to non-officers of the law, too. Under the natural law, we all have the same rights and limits on our behavior. If a concerned neighbor came into my home thinking something was amiss, he’d be a good-faith trespasser, and I’d similarly treat him with some charitable respect.

However, being rude to someone for being in your home without your permission is not a crime. Depriving someone of their liberty, even for a few hours, is a crime. Arresting someone in their own home for being rude to you is an unjust act. The police officer acted tyrannically, no matter how belligerent the professor was in his own home. (Yes, I know he followed the cop out and continued to yell, but that’s not an arrestable offense, either. The officer should have driven away.)

Unfortunately, many on talk radio have jumped to defend the police, insisting that if you are rude to police, you get what you deserve, and if you are obedient to them, you will get along fine. The latter is not always true, of course, in our increasingly militarized police state, where grandmas and little kids are being tasered, handcuffed and beaten; where generally non-threatening people are shot in the back and rounded up in staggering amounts to fill up the government’s cages.

“My home is my castle” is a central value in a free society grounded in property rights. If police and bureaucrats can enter your castle freely, the free society is gone. When Cory Maye defended his home against an intruder, he was sentenced, at first, to the death penalty—all because the intruder was a cop. This is all backwards. Police do not have any rights under natural law than anyone else does. If some normal American broke into Maye’s home—or a cop’s home—regardless of his reason, and was shot dead, it would be a tragedy but few people would want the protector of his home to be executed.

This overall attitude is the attitude of a statist, and it is a double standard reeking of moral relativism. The law is unchanging and it applies to all of us, regardless of what uniforms we are wearing.

It will be impossible to combat Obama’s plans to erect ever more socialism and authoritarianism so long as so many opponents of his regime have a fetish for police power. As Mao said, political power grows out of the barrel of a gun. That gun is typically holstered next to a taser on the belt of an officer of the law. Their enforcement of unjust laws is a key part of the problem. So long as so many Americans consider rudeness to a cop to be an arrestable offense, we will never have our sweet land of liberty.

A majority of Americans, including an overwhelming majority of Democrats, oppose the U.S. wars in Iraq and Afghanistan. Yet the warmongering persists. The Afghanistan war has been expanded and Obama has greatly expanded upon Bush’s drone attacks in Pakistan.

I predicted this would happen with an Obama presidency. Because the Democratic voters tend to be more pro-peace than the Republicans, a Democratic president means that the opposition is greatly weakened, as Democratic voters fear putting too much pressure on their president, and the conservative dissent from the Obama regime coming from the right is coupled with accusations that he has weakened our military, cut defense spending, planned to end the war on terror and other such complete falsehoods. Since conservatives are, unfortunately, still by and large pro-war, the mainstream critique we hear about the Democratic regime is incoherent and has very little traction for independent thinkers: They claim he is a tyrant expanding government power, but also a peacenik who is gutting the warfare state.

In reality, the worst things Obama has done, both in terms of natural law principles and in terms of constitutional limits on his power, have to do with the war. Obama has turned Bush’s de facto indefinite detention policy into an official one. He has used secrecy to cover up torture and wiretapping. And he has slaughtered innocent people in the Middle East. These were also the types of crimes that qualified as Bush’s worst offenses.

To have a true, consistent and meaningful critique of the Obama government, we must continue to put foreign policy and the imperial executive at the center of it. So long as enough conservatives support the national security state, empire, and growing police state, and so long as liberals give their president a pass even as he builds upon the worst policies of his predecessor, reclaiming constitutional liberty is a metaphysical impossibility. America’s financial well-being can never be solid so long as we live under the empire.

If the Republicans and conservatives want to save us from Obamunism, they have to admit they were wrong about Bush, about his corporatism and economic planning, and especially about his wars, police state and shredding of the Bill of Rights. They have to admit they were wrong about torture, surveillance, Guantanamo and the unitary executive. So long as they try to have their cake and eat it too, their effectiveness in opposing Obama will be short-lived and yield a series of relatively small victories. If they want America on their side, they need to take advantage of the fact that a majority of Americans oppose the Bush/Obama foreign policy, and embrace the cause of peace more sincerely and completely than they ever have. So long as the American right defends Bush’s management of the economy, which caused today’s economic crisis, as well as his wars, they will continue to lose credibility.

Opposing Obama fully means opposing Bush. And the left must also learn, opposing Bush fully means opposing Obama.

A friend of mine had heart bypass surgery three weeks ago.  He’s a healthy, fit, and active 86-year old, but started feeling bad one day and ended up in the hospital.  The next day he had an MRI, which showed significant arterial blockage, and the day after the MRI he had his bypass surgery.  I talked with him yesterday, and he’s on the road to recovery.

As we in the United States debate health care reform, one of the key components President Obama talks about is eliminating unnecessary procedures.  That is just another way of saying we’ll ration health care.  It may be that many health care procedures today are not cost-effective, but they are probably not unnecessary in the sense that the doctor and/or patient don’t think they provide some health benefit.  There are few health care procedures that would fall in the category of “pleasant,” so even if they were “free,” few people would want procedures that would not provide some benefit.  (That may not be true of providers, who earn income from the procedures.)

In Canada people wait an average of three months for MRIs, so if my 86-year-old friend was in Canada, he would probably still be waiting for his MRI, if he could get approval for one.  In Britain, determining whether procedures are cost-effective is calculated by valuing an extra year of life at $35,000 (this figure, and the MRI waiting time both come from the National Center for Policy Analysis), so it may be that my 86-year-old friend would not even have had bypass surgery were he in Britain.  It might not be cost-effective for someone that old.

In the abstract, it sounds like a good idea to eliminate unnecessary procedures, and to eliminate health care expenses that aren’t cost-effective.  In reality that means that some people won’t get as much spent on their health care as they would have without the reform.  That’s still pretty abstract, so I’m thinking about it in the context of my friend.  The way we are reforming health care, would he have gotten the MRI?  Would he still be waiting for it?  Would he even be eligible for bypass surgery?

There is no way we can answer these questions now, because even if we pass legislation this year, the consequences will only become evident in future years and this year’s legislation will surely be altered.  Massachusetts, which passed its reform requiring everyone to have coverage in 2006 is finding its health care expenditures well above projections, and is looking for ways to cut costs.  Surely any U.S. health care reform passed in 2009 will need to be modified in the near future too, as its actual consequences are revealed.

As to whether my friend’s MRI or bypass surgery were necessary, or cost-effective, I don’t have a good answer.  But the way things are shaping up, it appears increasingly likely that ten years from now he wouldn’t get the MRI, and might be put on medication rather than getting the surgery.  To practice cost-effective medicine and eliminate unnecessary procedures means rationing, and it appears that government bureaucrats will replace your doctor in determining what treatments you actually get.

Reading about the first Quarterly Bloomberg Global Poll of investors, which found that almost 75 percent of those surveyed give Ben Bernanke favorable marks for his actions as chairman of the Fed during the current financial and economic crisis, my first reaction was to wonder, What are these people thinking? The news article also notes that Martin Feldstein, a leading establishment economist, recently said in an interview with Bloomberg that Bernanke has “done a very good job and I think he should be reappointed.” Feldstein is a fairly reliable barometer of what mainstream economists think about macroeconomic policy.

In contrast, when I think of Bernanke’s actions as chairman of the Fed, I am appalled. During the past year, he has taken the lead in flooding the financial system with an unprecedented amount of newly created central-bank credit—more than a trillion dollars of new Fed credit has been advanced since mid-September 2008, more than doubling the total amount outstanding. Thus, Bernanke has shown himself to be the greatest inflationist of modern times in the advanced economies.

Because the commercial banks have added almost all of the newly created base money to their reserve accounts at the Fed, rather than using it to make new loans and investments, the effect on the money supply and hence on the price level has been muted so far. Bernanke clearly supposes that he has been heroically fending off the greatest threat to the world economy he can imagine – the dreaded deflation of the price level for currently produced goods and services, a phenomenon associated in his mind with the horrors of the Great Contraction of 1929-33.

He also believes that when the price level begins to accelerate as the banks put their vast, (legally) excess reserves to use, he will be able to take counter-measures, such as paying a higher rate of interest on commercial-bank reserves at the Fed or selling securities now held by the Fed in the open market, which will soak up just enough of the potential for the creation of new money that the Fed will be able to disengage gradually and smoothly from its recent, gigantic effusion of new credit, thus avoiding the hyperinflation that it might otherwise produce.

I have serious doubts about whether Bernanke will be able to pull off this Houdini escape from the ravages of the still-dormant monster he has created, but at the moment my concern is not so much with that issue as with the amazing fact that so many investors and economists have applauded his actions so far. The politicians are not so puzzling: in today’s world, they invariably demand resort to inflation of money and credit whenever a recession begins—they are inflationists to their very souls (that’s assuming they have souls). Putting aside the politicians, I am willing to conjecture as to why so many investors and economists are making what seems to me a huge mistake in evaluating Bernanke’s actions.

The root problem, I believe, lies in the aggregative character of contemporary thinking about macroeconomic fluctuations. In this view, rising aggregate real output is good, no matter what the composition of the newly produced goods and services. A recession, which most analysts understand as a sustained decline of aggregate real output, is bad, and, in their view, it should be combated by fiscal “stimulus” and by expansionary monetary policy in order to reverse the decline in aggregate demand. They do not worry about – indeed, they rarely even pay much attention to—the makeup of the aggregate output that is added during business expansions, lost during business recessions, or brought into being by the government’s compensating fiscal and monetary actions. Output is output; spending is spending. In fact, the whole idea of using government spending to offset reduced spending by investors or consumers turns on this assumption that a dollar spent is a dollar spent, regardless of what it is spent for.

In today’s vulgar Keynesian environment, investors and economists do not appreciate how the seeds of macroeconomic busts are sowed by artificially created credit that is employed to finance investments that would not be undertaken if they had to be financed by real savings—investments known in economic theory as malinvestments. When a large volume of malinvestments has been undertaken during a boom (e.g., much of the investment in residential housing and commercial real-estate development between 2002 and 2006), and when for whatever reason the pace of new credit creation slows, causing interest rates to rise, then the unsustainability of these malinvestments becomes increasingly apparent. More and more of them are terminated, often in unfinished condition, and many such projects go bankrupt for want of buyers willing and able to pay for them in the market.

If the government and the central bank use their fiscal and monetary policies to prop up these malinvestments, they do not solve the basic problem; they only paper it over for the time being. The vast assistance given recently to financial institutions embarrassed by investments in bad real-estate-related securities, for example, has allowed these institutions to delay the write-offs and other balance-sheet adjustments that would reflect the errors they have made. The bailouts have created a large number of zombie financial institutions, much like the ones that caused the Japanese economy to stagnate during the 1990s and later. Owners and managers of financial firms laden with rotten securities have been holding out for government rescues of various sorts, rather than carrying out the required restructuring, which in many cases must include bankruptcy proceedings.

Just as the malinvestments were made possible in the first place by effusions of artificially created credit and hence artificially depressed interest rates, so now the Treasury and the Fed are keeping the owners of these malinvestments afloat by further effusions of artificially created credit. But so long as these inherently unsustainable projects continue, they constitute a huge legion of the living dead. They may look viable, but their viability hinges entirely on de facto subsidies via the government’s various bailout schemes. Such projects will remain unsustainable unless continually propped up at the expense of the general public, who will suffer because of increased ordinary taxes or a mounting inflation tax on their dollar-denominated assets. If the government goes forward in this fashion, it will be sustaining an economy rife with malinvestments kept in operation only by constant transfusions of other people’s wealth channeled to the zombie projects by the Treasury and the Fed—a permanent policy of robbing prudent, responsible Peter to pay imprudent, irresponsible Paul. No sound, long-run economic development can be based on such productivity-sapping transfers of wealth into projects that are not worth the expense of keeping them going and which misallocate resources to the overall economy’s detriment so long as they continue.

Meanwhile, to return to the Bloomberg poll, “more than three-quarters of investors expect U.S. financial institutions will be in better shape a year from now,” and a majority believe “the world economy is stable or improving.” And why do they expect this progress will occur? Because, “almost three quarters say[,] central banks will hold rates near current levels to support growth.” Indeed, Bernanke promises that this policy is precisely the one he will continue to follow. “Monetary policy remains focused on fostering economic recovery,” he declares. The Fed will maintain a “highly accommodative” stance “for an extended period.” In short, if an immense amount of monetary-base inflation and other artificial credit expansion is good, then a great deal more of the same is even better. Après nous le déluge —oh, but I forget, Bernanke stands ever ready to sponge up that base money the minute the price indexes begin to rise at more than a slight, tolerable annual rate. Trust him.

Except for the Austrian School economists, hardly anyone is worried that the extensive restructuring necessary to put the economy back on a healthy, market-sustainable track is not being carried out—or, certainly not being carried out on the scale that the current situation requires. For the overwhelming majority of today’s investors, economists, and policy makers, output is output, and spending is spending. They are blind to the mountain of malinvestments staring them in the face. In the seventy years since John Maynard Keynes steered macroeconomic policy thinking into the dead-end street of misleading, highly aggregative thinking, tremendous damage has been done, but clearly a great deal of additional damage will have to be suffered before the people who bear the burdens of this kind of policy-making awaken to its operation as a mechanism for robbing the many for the benefit of the politically connected few.

In 1971 Elaine May wrote, directed and starred in the now-classic “A New Leaf.” May played the awkward and painfully shy heiress Henrietta Lowell who has taken refuge in an academic career in botany and left the handling of her household and fortune to her hired help. The hired help, given full check-writing access to her fortune and overseen solely by her lawyer who in turn is receiving handsome kickbacks from the staff, is living high on the hog, pulling down breathtakingly high salaries, with expense accounts to boot. Meanwhile, Henrietta must habitually take the bus because her chauffeur is never to be found when she wants him; and her mansion and its grounds, despite the huge staff, are neglected and in total disrepair.

As Henrietta’s dysfunctional household is but a subplot of the film, I doubt Ms. May meant the movie as a commentary on the dysfunction of government — but when I see items like the following, it’s the most apt model that comes to mind:

The number of San Francisco retirees or their survivors knocking back $100,000 or more a year in city pensions has grown to 709.

That’s 229 more than last year. It’s also 124 more than for all of Los Angeles – a city with more than four times San Francisco’s population – according to figures freshly provided to the California Foundation for Fiscal Responsibility, a pension reform group.

Those in San Francisco who have earned a ride on the golden highway include six former police chiefs, four former fire chiefs or their widows and a slew of former department heads.

The highest pension – $242,000 – goes to former Police Chief Earl Sanders. He got a $20,000 bump this year, thanks to a cost-of-living increase.

Further:

A new civil grand jury report on pension costs said there was a widespread practice of “spiking” in the police and fire departments – the practice of members getting temporarily promoted in their final year on the job to bump up their retirement benefits.

The report also said that more than half of the police and firefighters who have retired since 1998 are getting paid more in retirement than when they worked.

Though perhaps extreme, San Francisco is hardly unique in such practices. Cozy I’ll-scratch-your-back-and-the-next-in-line-will-scratch-mine practices deliver unaudited expense accounts, bonuses, and golden nest eggs to retirees far beyond just the police and firefighters reported herein. “Spiking” is reportedly practiced in nearly every government office, including public colleges and universities, and other common practices include the imminent retiree’s being able to “buy” credits for more years of service to bump up his/her pension. And, of course, in addition to pensions we mere taxpayers can only dream of, government retirees also receive generous medical and dental coverage.

So the next time you see a headline quoting government officials as having “no choice” but to cut social services to the destitute, and close firehouses, schools, and libraries, you may want to ask who’s got the checkbook and if they’ve given the outlays a sniff test lately.

Testifying today before the House Financial Services Committee, Fed Chairman Ben Bernanke took some well-deserved flak for the Fed’s power-grasping attempt to gain even greater control over the nation’s financial institutions.

People who have progressed beyond Political Science 101 understand, of course, that congressional hearings are rarely anything more than propaganda theater. From time to time, however, the unfathomable human element bursts through the highly scripted limits, and someone blurts out the truth.

Such was evidently the case today when, according to an Associated Press report, Republican Congressman Spencer Bachus of Alabama declared:

“The Fed has made some big mistakes” . . . .  Letting the Fed become the financial supercop would be “just inviting a false sense of security” that would be shattered at taxpayers’ expense, he warned.

So, there you have it. In a topsy-turvy world, a world in which you have scarcely any guide to rely on, the one rule that has served us so magnificently in the past—the rule that if a politician is moving his mouth, he is lying—has been refuted. I remain confident, however, that this extraordinary event will prove to be nothing more than the exception that illustrates the rule.

Federal Reserve Chairman Ben Bernanke told Congress he has an exit strategy to rein in excess growth in the monetary base when the time comes.  The problem is, any action that would reduce the bloated monetary base would do so by increasing interest rates, and Bernanke has also said he will keep interest rates low to support the recovery.

The recovery is likely to be slow, for one reason because the “stimulus package” imposes so much government spending on the economy, which must be supported by private sector productivity, and because of the burden of the trillion dollar deficits President Obama projects for as far out as they are projected.  Ironically, the “stimulus” measures we’ve undertaken will slow the recovery, not help it.  Thus, Bernanke will be reluctant to raise interest rates as an anti-inflationary measure until we actually see rising prices.

By that time, it will be too late to prevent inflation.  As Milton Friedman said, with monetary policy there are long and variable lags.  Once inflation starts to show up, it will continue for a few years even if Bernanke starts anti-inflationary moves (which will come with higher interest rates) immediately.  If the economy enters a robust recovery, higher interest rates won’t be a problem.  If the recovery is sluggish, Bernanke is likely to hold off on inflation to support the economy.

How high would inflation have to get before Bernanke saw it as a problem?  Three percent?  Four percent?  If he waited that long to deal with it, we’d have inflation several percentage points higher than that before inflation actually moderated.

Will Bernanke be skillful enough, or lucky enough, to work a balancing strategy between supporting a fragile economy and keeping inflation in check?  I’m guessing no, because there is too much of a temptation to hold off on the inflation front until confronted by the actual evidence of rising prices, and by then there will be several more years of rising inflation before it starts to fall again.

This is just what happened in the 1970s.  We knew how to stop inflation, but we also knew it would be painful (that pain was the 1982 recession), so we put it off until inflation went into double digits.  Bernanke is a smart guy, and he knows monetary history—including the monetary history of the 1970s—very well.  So what I’m saying would not be news to him.  He just thinks he’ll be able to balance the twin goals of supporting a weak economy and keeping inflation in check so that inflation doesn’t reappear.  I’m not confident he can do this.

I’m guessing that in five years we’ll be looking at inflation in the 5 to 10 percent range, but if it gets as high as 15 percent I wouldn’t be surprised.  Yes, once it gets over five percent we’ll be concerned and want to do something about it, but by then it may be too late to stop it from getting to 10 percent.  And if we’re still concerned about the soft economy when inflation gets to 7-8 percent, an eventual rate of 15 percent would look more likely.

Bernanke says he has an exit strategy, and I hope he’s able to pull it off more successfully than when Nixon told us he had an exit strategy for the Vietnam war.  I’m hopeful, but not optimistic.