Unprecedented budget deficits at the local, state and federal levels of government should not be cause for despair, but rather taken advantage of to force the public sector to confine itself to its constitutionally delegated powers.

In last Thursday’s (June 18, 2009) Orange County Register, columnist Shawn Steel jumped on a bandwagon I’ve been playing lonely drummer for since California’s last major budget “crisis” in 2003 (see here, here and here). Facing a revenue shortfall variously estimated to amount to as much as $21 billion for the fiscal year beginning July 1, and $48 billion over the next 18 months, Sacramento’s political class threatens “draconian” cuts to popular public programs, compromising, among other things, Californians’ safety and access to higher education, unless they bend over and accept significant increases in their tax bills, which already rank among the highest in the nation and have been driving private businesses and ordinary residents out-of-state for at least the past two years.

There is another option, however, as Mr. Steel and I have written. The government of California is the state’s biggest landlord. It owns nearly 33,000 properties, ranging from modest storage facilities at ranger stations in state-owned parks and at rural Highway Patrol offices, to Berkeley’s Sproul Hall, to San Francisco’s Cow Palace, to Los Angeles’s Memorial Coliseum, to San Quentin State Prison. Estimated to be worth something on the order of $167 billion, such state-owned assets are by-and-large what Hernando de Soto has in other contexts called “dead capital”—poorly managed, underutilized, costly to maintain and therefore ripe for sale to the private sector, which has the proper incentives for deploying them to their highest-valued uses.

Selling some—or all—of these state-owned properties would, to be sure, provide only temporary budgetary relief. The public revenue raised in this way certainly is no substitute for fundamental reform initiatives that limit state and local governments to their core functions of defining and enforcing private property rights and safeguarding citizens’ lives and liberty. But it’s a start. In addition to plugging the current budget gap, holding such a yard sale would get the public sector out of businesses that it should not have gotten into in the first place. Where in the constitution is the authority for public ownership and management of convention centers, sports venues, fairgrounds, golf courses and many other such white elephants?

What is true for the State of California is true for the federal government as a whole: It might surprise you to learn, as it did me, that Washington owns nearly 85 percent of the land in the State of Nevada, 69 percent of Alaska and about half of areas of the Pacific and Mountain states. As of September 30, 2004, the value of federally owned real property within the 50 U.S. states was estimated by the General Services Administration to be worth almost $327 billion. That might not come close to covering the current fiscal year’s federal budget deficit, but it might “pay for” a zeroing-out of the capital gains or corporate income taxes, which conceivably would.

Rand or Rothbard couldn’t have done a better job. This speech (watch YouTube here) has it all for libertarians. It comes from a character in Elia Kazan’s film Wild River (1960), who is fighting a land grab by the Tennessee Valley Authority.

Delivered beautifully by actress Jo Van Fleet, the speech blasts FDR’s New Deal, governmental relief, and power-hungry politicians. Most of all, it eloquently defends property rights.

Van Fleet is so effective in the role that she largely undermines the pro-New Deal message in the rest of the film.

To follow up on my recent blog posting, “Obama’s New Theocracy,” and now with the brutal crackdown and news blackout by Iranian government officials on the huge peaceful protests of the corruption and repression in Iran (see here, here, here and here), C. S. Lewis’s discussion of the enormous dangers from theocracy (faith-based statism) is most timely:

I fully embrace the maxim (which . . . borrows from a Christian) that “all power corrupts.” I would go further. The loftier the pretensions of the power, the more meddlesome, inhuman, and oppressive it will be. Theocracy is the worst of all possible governments. All political power is at best a necessary evil: but it is least evil when its sanctions are most modest and commonplace, when it claims no more than to be useful or convenient and sets itself strictly limited objectives. Anything transcendental or spiritual, or even anything very strongly ethical, in its pretensions is dangerous and encourages it to meddle with our private lives. Let the shoemaker stick to his last. Thus the Renaissance doctrine of Divine Right is for me a corruption of monarchy; Rousseau’s General Will, of democracy; racial mysticisms, of nationality. And Theocracy, I admit and even insist, is the worst corruption of all.

—From The World’s Last Night: And Other Essays, by C.S. Lewis

When my younger stepson Drake was in high school during the Clinton era, he took a class in graphic art at the California College of the Arts one summer, and one of his assignments was to create a propaganda poster. Drake took the photo of Elian Gonzalez being taken at gunpoint from his Miami relatives to be returned to Castro’s Cuba, with Bill Clinton’s head superimposed on the body of the soldier, and added the text “We’re from the government and we’re here to help.” I’m not sure it’s what his instructor had in mind in giving the assignment, but he accepted it as offered.

Clinton’s Attorney General, Janet Reno, who ordered the armed home invasion, had gotten earlier practice with such methods against the Branch Davidians, in which 76 men, women, and children died horribly. Her Deputy Attorney General, Eric Holder, is of course Obama’s current Attorney General.

Under George W. Bush, the individuals and agencies responsible for securing the homeland not only failed to defend against the 9/11 terrorist attacks, but rather than being held accountable for the failure, were instead rewarded with the enactment of the USA PATRIOT Act granting vast new powers to a vast new bureaucracy, and accelerating the end of the system of checks and balances to grant almost unlimited power to the Executive. Apparently its Clinton-era precedent, the Antiterrorism and Effective Death Penalty Act of 1996, was deemed insufficiently draconian, despite its own habeas corpus-impinging powers. Instead, this sweeping new legislation was passed before its ink was dry, unread and rubber-stamped by those sworn to uphold the Constitution. Interestingly, today’s pundits railing against Congress’s similarly passing the horrifying Obama Stimulus Package without having had a chance to read it seem not to fault Congress’s preceding abdication of responsibilities.

Now, in a proposal akin to putting Al Capone in charge of the FBI, the very Congress and regulatory agencies culpable for the current economic crisis are to be given not less but greater power — over those very institutions their own actions corrupted. For a more complete and learned exposition on the subject, see Robert Higgs’s “Mommas, Don’t Let Your Babies Grow Up to Report on the Government’s Financial Reforms,” and don’t say we didn’t warn you when the little-remaining, private financial sector has collapsed completely. (To gain a more full understanding of the causes and players behind the current financial crisis, see our “Anatomy of a Train Wreck: Causes of the Mortgage Meltdown.” And if you need a laugh to relieve the painful truth, see “Saturday Night Live’s” lampoon of the bailout, here.)

My father was a great lover of acronyms, creating them for every occasion. One of his perennial favorites was TLARTA – The Lunatics Are Running the Asylum, and he gave bumper stickers bearing this to everyone who would take one.

Indeed they are, Dad. Indeed they are.

There are so many shootings in major urban areas these days that most have ceased to garner any public attention. An exception occurred last year when an 11 year-old boy taking a piano lesson on a school-day afternoon was shot and paralyzed by a stray bullet from a gas station hold-up attempt across the street—an accident so arbitrary and a victim so clearly innocent that it captured the hearts and attention of the entire Bay Area community. The trial for that crime has just ended here in Oakland, the gunman sentenced to 70 years to life in prison, with the young victim, Christopher Rodriguez, telling him “I forgive you.”

At the Independent Institute’s Gala for Liberty last fall, attendees were entranced listening to Archbishop Desmond Tutu describe South Africa’s Truth and Reconciliation Commission’s trials for the horrific violence conducted under apartheid. At the trials, perpetrators were given the opportunity to stand before their victims (or their survivors) to confess their crimes and ask for forgiveness. As the Archbishop explained, though criticized by some for letting criminals off without “punishment,” the commission in fact delivered “restorative justice:”

The commission chose to grant amnesty in exchange for the whole truth: a complete disclosure of all the relevant facts relating to the offense for which amnesty was being sought. A confessing perpetrator bore the stigma of public shame and humiliation regarding his crime, which frequently included very real family and career consequences.

The commission also created a means by which rehabilitation and re-acceptance into the community was possible, providing healing and reconciliation for victims and perpetrators alike.

Contrast this with the usual criminal justice system: in most criminal cases it is “The State vs. [Perpetrator],” as if the crime has been committed against “The State” rather then the individual(s) actually harmed. Indeed, the victim is rarely any part of the trial at all. The criminal owes a debt to “society;” the victim receives no restitution for his/her loss. Though in the case cited above the perpetrator has been ordered to pay the victim and his family $130,000 that he presumably does not have—else why was he attempting to rob a gas station—what State penitentiary system is set up for prisoners to be other than a continual, huge financial drain on their tax-paying victims?

For alternative approaches to justice, see the Independent Institute’s book, To Serve and Protect (summary here), providing practical examples such as:

For instance, prior to prosecution, most Japanese criminals bargain with their victim through a mediator, and offer to pay restitution so that the victim will not demand further punishment. Few offenders receive government imposed penalties on top of their restitution.

Such a system places the victim squarely at the center of the justice system, where s/he belongs, and additionally provides restorative healing to the victim, re-empowered through the process, whether the victim chooses forgiveness, restitution, punishment, or a combination.

In the case of young Christopher Rodriguez, his forgiving is clearly an important part of his establishing a hopeful future for himself despite his injuries, and it may in the process provide healing to the casebook “predator” who shot him. Once again, “out of the mouth of babes” comes a timeless lesson.

You can watch the video of Archbishop Tutu’s Gala address here.

For his related op-ed, “Desmond Tutu’s Advice for the Next U.S. President,” see here.

I’m not an expert on the German health care system, but as we move toward nationalized health care in the U.S., I can’t help but think back to something I witnessed in Berlin, when I was there for a conference in 2004.  I was walking from the conference venue to my hotel when I was passed by an ambulance, and a few blocks later I saw it had stopped in front of a restaurant with a large window in front.  I could see in the window that there was a man lying on the floor of the restaurant, and paramedics were pumping on his chest.  When they pushed on his chest his body would move in response.  When they quit, the man lay perfectly still.  I stood on the sidewalk (although discreetly on the other side of the street) and watched this for 10 or 15 minutes.  I was curious about what the paramedics might do next, but uncertain about how much longer this might go on I continued on back to my hotel.  That’s what I saw.

My interpretation of what I saw is that the man had a heart attack in the restaurant and the paramedics were trying to resuscitate him.  If the man was unable to regain consciousness in the restaurant, the paramedics were not going to put him in the ambulance and take him to a hospital.  With nationalized health care, that’s one way to save money.  In the U.S., this man would have immediately been put in the ambulance and the paramedics would have tried to resuscitate him on the way to the hospital, and his chances of survival would have been greater.  Surely, given the amount of time I watched these paramedics in action, and considering that it took some time for them to arrive at the restaurant, by the time I left the man on the floor was dead.

My concern is that we are heading for that type of health care system in the U.S.  That’s my one observation of the German health care system at work.

Here’s a second, very indirect, observation.  The year before my trip, in 2003, my colleague Bill Serow went to Germany to give some lectures, and while there died of a heart attack.  He was 57.  I’ve often wondered if what I saw in Berlin bore any resemblance to Bill’s heart attack, and that if Bill’s heart attack had happened in the U.S. he might have survived it.

Jack Welch, former Chairman and CEO of General Electric, gives CNBC his opinion of Ben Bernanke: “I think he saved the system, I think he’s a national hero,” Welch said. “I think Bernanke seems to be a guy operating on a clear intellectual framework. This guy’s done a hell of a good job.”

Perhaps Bernanke did save the system, at least for the moment, but the question remains: what do you mean by “the system”? If you mean an economy dominated by ill-managed, irresponsible big banks and other financial institutions (e.g., Fanny, Freddie, AIG) backed up by an ill-managed, irresponsible central monetary authority that stands ready to bail out these high-stakes gamblers, then, yes, Bernanke has saved the system so far. It may still crumble, however. This house of cards is surely not fated to last as long as the pyramids of Egypt.

Welch thinks Bernanke “is operating on [sic] a clear intellectual framework.” I agree. Bernanke’s career as a mainstream macroeconomist is a matter of public record. Inspecting his writings and his speeches over the years, one sees that with regard to macroeconomic stabilization, Bernanke believes in the Fed’s ability and its right to act as a monetary central planner for the U.S. economy (and to a large extent, for the world economy, owing to America’s dominant position in global trade and finance). He has never met a recession or depression he thinks cannot be prevented or moderated and reversed by sufficiently great inflation of the money stock. And he definitely practices what he preaches, as shown beyond all doubt by this evidence on the Fed’s recent doubling of the monetary base.

Welch’s approbation of Bernanke’s “clear intellectual framework,” however, must be taken with a grain of salt. What does Jack Welch know about macroeconomics or optimal monetary policy? In making such pronouncements, he follows in a long tradition of huffing and puffing about economics, politics, and all sorts of other things by men whose only proven talent is their ability to run a big company. In 1970, Herman Krooss brought forth a book about such pronouncements called Executive Opinion: What Business Leaders Said and Thought on Economic Issues, 1920s-1960s. If this tome does not convince you that leading business executives tend to make fools of themselves whenever they make statements about anything other than their own businesses, then probably nothing can convince you.

Via Google Alerts, I receive periodic e-mails notifying me of online publications (many of them respectable economics and finance blogs) citing Robert Higgs‘s analysis of “regime uncertainty” during the years of the New Deal. (His article “Regime Uncertainty: Why the Great Depression Lasted So Long and Why Prosperity Resumed after the War” first appeared in the Spring 1997 issue of The Independent Review, and a revised version appears in his superb recent book, Depression, War, and Cold War: Challenging the Myths of Conflict and Prosperity.)

However, it was not by Google Alerts but by sheer dumb luck (or rather via the U.S. Postal Service, which arguably amounts to the same thing) that I happened recently upon a reference to Higgs’s analysis of “regime uncertainty” from an unexpected source: the lead article in the 2008 Annual Report of the Federal Reserve Bank of Richmond.

How do government functionaries make use of criticisms of past government policies? Very carefully. Consider the passage in the article in which the authors, Richmond Fed employees Aaron Steelman and John A. Weinberg, reference Higgs:

Through the [current] crisis, the Fed’s approach has evolved and changed in numerous directions, including the direction of credit to particular market segments and institutions. Beyond winding down its many new lending vehicles, the Fed will need to make it clear to all market participants which principles it will follow during future crises…. Public policies by all agencies must be well articulated and time consistent so that market actors can make rational plans regarding their financial and other business affairs. Arguably, such policy uncertainty did much to prolong the Great Depression in the United States (pp. 16-17) [footnote to Higgs (1997)].

Note the wording in the last sentence. “Arguably” can function like a weasel word: its use allows a writer to confer a measure of respectability on a particular conclusion, without the writer having to publicly endorse that conclusion. (At least “arguably” is arguably like a weasel word. Its use is perfectly justified, of course, when one finds an explanation plausible but inconclusive—or when it’s employed to keep the mail carrier on semi-cordial terms, as in paragraph 2 above.)

I don’t chastise Steelman and Weinberg for employing that term, however. Space limitations and other legitimate concerns may have prevented them from doing anything more than to note Higgs’s piece. And even if their use of the term was “strategic” (in the weasel-word sense), their efforts to critique other Federal Reserve policies—from within the belly of the beast itself!—should be lauded.

On p. 10 of their report, Steelman and Weinberg employ the “regime uncertainty” concept (and give it a different name) while they offer explanations for why the banks finally became cautious about lending and why investors became cautious about banks:

Third, there is policy uncertainty. After the onset of the crisis, the Federal Reserve and the Treasury took several actions to help stabilize the financial sector. However, these actions appeared to evolve on a case-by-case basis. Some institutions received support, while others did not, making it more difficult for market participants to discern the governing principles and to make predictions about future policy moves. These institutions were already facing an uncertain economic environment, which contributed to relatively sparse lending opportunities. Coupled with an uncertain public policy environment, it is not surprising that many have been hesitant to lend and that many have had trouble raising private capital.

It’s nice to see the authors allude to the harmfulness of “policy uncertainty”—i.e., a policy of waffling. However, the article is marred by (arguably more) instances of the authors’ own annoying waffling:

In hindsight, private lenders and borrowers may have made some imprudent decisions…. Also, the Federal Reserve kept interest rates low for a long period, which may have encouraged additional lending that exacerbated the crisis. (p. 12, emphasis added.)

Such mistakes may have been made? Is there any basis for doubt?

On the plus side, however, Steelman and Weinberg resist calling for more and stronger doses of government intervention:

[T]here is also a strong case to be made that the function of market discipline can be improved by constraining some forms of government intervention, especially those that dampen incentives by protecting private creditors from losses (p.5)…. However, additional regulation of financial markets would likely hamper innovation in that industry. An alternative approach is to seek to reduce the scope of explicit safety net protection—as well as creditors’ expectations of implicit protection of firms deemed too big to fail (p.11).

Even more interesting are Steelman and Weinberg’s other thinly veiled criticisms of Federal Reserve policy during the recent crisis:

The Fed could benefit from heeding the advice of two classical economists, Henry Thornton and Walter Bagehot, who considered how the Bank of England could act effectively as the lender of last resort. The Thornton-Bagehot framework stress six key points:

• Protecting the aggregate money stock, not individual institutions
• Letting insolvent institutions fail
• Accommodating only sound institutions
• Charging penalty rates
• Requiring good collateral
• Preannouncing these conditions well in advance of any crisis so that the market would know what to expect.

Current Federal Reserve credit policy has deviated from most if not all of these principles.

Just in case Steelman and Weinberg’s article is too transparently critical of policies proposed by Federal Reserve H.Q., however, their author-i.d. line is followed by the standard bureaucratic disclaimer:

“The views expressed are those of the authors and not necessarily those of the Federal Reserve System.”

Arguably, therein lies a problem.

In the USA, it is “All hail to Caesar!” So it seems by the clampdown on students satirizing President Obama at Bucknell University. Readers may recall that during the election campaign the freedom-fighting (?) faculty of the University of Illinois got a reversal of a ruling that would require them to eschew political buttons bashing President Bush and/or candidate McCain. During that free speech fracas, the AAUP and ACLU rushed to join FIRE in protesting this restriction. The AAUP’s professed commitment to academic freedom involved both faculty (its constituency) and students (read AAUP Joint Statement here under Student Affairs).

Now that the favorite of academe (Obama) is in power, we wait for the other shoe to drop. And the AAUP, ACLU are . . . silent as a tomb.

Civil libertarian David French opines on the Bucknell situation here. A Bucknell alum notes that his alma mater is a repeat offender.

At least FIRE is consistent: They have attacked Liberty University (the conservative evangelical institution) for derecognizing the College Democrats.

Speaking of speech tombs, the election in Iran shows how difficult it can be to get out the message. Twitter has emerged as the primary means, along with bloggers who are putting their lives on the line. Why? Because a 2008 Iranian law imposes the death penalty for all those who “disturb the mental security” of others. Hmmm. Have the mullahs been reading U.S. harassment codes?

Read on about the cyberwar being fought in Iran.

Lost in the election debate is the distinction between freedom and democracy. Democracy may be the means to an end but if women are beaten for showing their ankles, Lady Liberty is outraged, even if an election was “fair.” The media (and presidential) focus on democracy misconstrues the individual yearning for freedom–the same desire that motivated minorities in this country to cite our natural rights tradition and Constitution protecting the right to deviate from the norm. But that’s a subject taken up in my forthcoming book (due out next month), Race and Liberty in America: The Essential Reader.

One final note: there is no moral equivalency between the USA and Iran on matters of speech. Nonetheless, if tyranny has a tendency to spread, it is aided by the forgotten arguments for freedom.

Postscript: On the conflict between democracy and liberty, I can recommend the following reprint of a classic study, Arthur Ekirch, Jr.’s The Decline of American Liberalism (1955, reprinted 2009).

The depiction of Barack Obama as the new, secular, American messiah began with his full approval during his presidential campaign and led directly to the spectacle of his coronation/inauguration. In what can only be described as a delusional, self-righteous pronouncement of himself as the new messiah (“the chosen one”), Obama has stated that:

“We are the ones we‘ve been waiting for. We are the change that we seek.” [emphasis added]

The following video on the worship of Obama by his politico-religious cult was featured on the Obama campaign website:

But this cult extends far further than Obama’s devout worshippers and includes major portions of the mainstream media whose apologetics for Obama appear to have few bounds. For example, on the June 6th edition of MSNBC’s “Hardball with Chris Matthews,” we find Matthews stating the following about Obama:

The question now is whether the president we elected and spoke for us so grandly yesterday can carry out the great vision he gave us and to the world. If he can, he will be honoring what happened on D-Day 65 years ago tomorrow. He will be delivering the world once again from evil.

In response, Newsweek columnist Evan Thomas then actually claims that “Obama stands above the country, above the world. He is sort of God.”

Since taking office and to help establish his new, secular theocracy, Obama has greatly expanded the White House Office of Faith-Based and Neighborhood Partnerships (see here and here), originally created from a program by Bill Clinton and then revved up by George W. Bush as the White House Office of Faith-Based and Community Initiatives. The result will be to create an even greater threat to participating faith-based, private charities, who will lose their independence. If charities become dependent on government funding, such support will likely come with politically correct mandates in order to qualify, including prohibitions on hirings outside their religion. As reported earlier by CNN:

[There are] separation-of-church-and-state advocates and human-rights organizations that say the government must constitutionally compel these organizations to follow nondiscrimination laws if they accept federal funding. Anything less, they say, would at best be a violation of church-state separation and at worst an implicit endorsement of discrimination.”

[President Obama] is under heavy pressure from those who support faith-based hiring in these enterprises to not just eliminate it,” said Ira C. Lupu, a professor at The George Washington University Law School. “Others say that hiring on the basis of religion is discriminatory and that the government should never subsidize that. As a political matter, there is a lot of pressure from both sides.”

During his presidential campaign, Obama stated that:

“If you get a federal grant, you can’t use that grant money to proselytize to the people you help and you can’t discriminate against them—or against the people you hire—on the basis of their religion,” Obama said in the July 1 speech at the East Side Community Ministry. . . .

At Pastor Rick Warren’s presidential forum in August, then-presidential candidate Obama said a distinction should be made between how federally funded groups hire within their own mission and how they hire when it comes to secular charitable work. “The devil’s in the details,” he said then. “What we do want to make sure of is that as a general principle we’re not using federal funding to discriminate, but that is only when it comes to the narrow program that is being funded by the federal government. That does not affect any of the other ministries that are being taken, that are taking place.”

In other words, to qualify for federal funding, a faith-based charity must conform to Obama’s politico-statist agenda, hence ending their being both voluntary and faith-based.

The solution instead is to strip the presidency of its immense unconstitutional powers (see Recarving Rushmore, by Independent Institute Senior Fellow Ivan Eland), eliminate government welfare programs altogether, and leave such work to faith-based organizations that have the demonstrated track record of actually helping people (see here, here, here, here, and here).