Canada’s Remarkable Economic Recovery

 BY BOB ADELMANN
In its annual Index of Economic Freedom, the joint effort by the Heritage Foundation and the Wall Street Journal, Canada ranks 6th among the 179 countries of the world, ahead of the United States (9th), the United Kingdom (16th), Japan (20th) and Germany (23rd). Considering ten components of economic freedom (among them: Business Freedom, Fiscal Freedom and Government Spending), the report ranks countries on the degree to which “individuals are free to work, produce, consume and invest in any way they please, with that freedom both protected by the state and unconstrained by the state.”

The latest report from the Canadian Labour Force Survey illustrates the degree to which Canadians have benefited from the rebound from the global recession by exercising their freedom to work, with employment increasing by 215,000 from July, 2010 and 675,000 since the bottom of the recession in July, 2009. In a workforce of 17 million, this represents an improvement of 4 percent at a time when employment in the United States has remained flat over that same period. Unemployment in Canada is 7.2%, a full two percentage points lower than in the United States.

Moody’s was positively euphoric when it announced it was continuing to rate Canada’s sovereign debt as AAA, passing its annual checkup with flying colors. “We had a AAA rating on Canada throughout the crisis, and the rating record outlook remained stable all that time,” said Steven Hess, Moody’s lead analyst for the United States and Canada. Noted Eric Lam of Financial Post,  “With the deficit peaking at 3.6% [United States is 10%] and debt still less than 40% [United States is 98%], Canada’s federal finances and outlook for the next several years support…the AAA rating.” Especially important in Moody’s analysis is “fiscal balance and declining debt.”

With Canada’s close economic ties to the United States, and its long tradition of liberal politics, how has that country managed to escape the brunt of the continuing recession plaguing the US and Europe? Aren’t all these countries tied together by the same economic umbilical cord? David Lee, writing forMises.org explains that the liberal perception has long outlived reality. Canada’s recession only lasted three quarters, making it the shortest and mildest among the countries to which Canada is often compared: France, Germany, Italy, Japan, the United Kingdom, and the United States. And its GDP only declined by 3.3% from the third quarter of 2008 to the third quarter 2009, while in the United States output fell by almost 4%. Since then, the Canadian economy has been on a tear, posting GDP gains of 3.9% in the first quarter of this year while the US has struggled just to stay positive. Says Lee, “By any conventional metric, Canada’s economic performance can thus be demonstrated to have surpassed those of its peers during and subsequent to the recession.”

The prime driver behind Canada’s remarkable rebound is government inaction, says Lee. Instead of trying to “prime the pump” Keynesian-style, Canada did the common sense thing and let the recession run its course. This naturally outraged liberal economic advocates such as John McCallum who said in November of 2008 that “Whereas other countries like England, France and Japan are pouring tens of billions of dollars into stimulus, and China and the U.S. hundreds of billions, what does this government do? Nothing. All it does is cut.”

And that has been the prime motive of the Canadian government for at least the past ten years. As Lee explains,

Under the joint leadership of Prime Minister Jean Chretien and Finance Minister Paul Martin, Canada underwent one of the most fiscally responsible periods in its history. Debt reduction was a goal that figured prominently throughout the ten years of the Chretien administration and in the subsequent two years of the finance minister's administration. Taking power as Canada's debt levels were hitting record levels, Martin made it clear from the start that the priorities of the government would be fixed squarely on eliminating the deficit and the record of the following decade leaves little doubt that this was a commitment that was delivered upon powerfully.

In fiscal year 1993-1994, Canada’s deficit hit $42 billion, but in four years the Chretien administration produced a surplus so large that tax cuts were implemented which further stimulated the economy. Says Lee:

The whole of the fiscal turnaround in Canada…can be quite unambiguously attributed to cuts in government spending. Altogether, Chretien and Martin presided over more than $80 billion in surpluses and there is no doubt that this is the single most enduring feature of their legacy.

Canada’s behavior was exactly the opposite proposed by Keynesians and taken by governments so influenced by that ideology, with precisely opposite results. Instead of “spending ourselves rich” proposed by the Keynesians imbedded in the administrations of the United States and Canada’s other peer nations, Canada reduced government spending and thus stimulated the private capital market to invest and expand and grow. As Lee noted, “It is the specialty of economists to cause rational beings to forsake the self-evident in favor of absurdities…”

We are now witnessing the failure of Keynesianism on a grander scale than has ever been experienced – never before has the impotence of Keynesian policy been demonstrated so comprehensively…the undoing of Keynesian economic theory is now complete and unequivocal, and one of the greatest frauds ever perpetrated on the public under the guise of economic science has finally been put to rest. 

Did State Dept. Target Beck's Israel Rally?

BY RAVEN CLABOUGH

In anticipation of Glenn Beck’s Restoring Courage rally in Jerusalem last week, the U.S. State Department warned American citizens in the city to avoid the event, according to newly discovered evidence.

On the day of the rally, August 24, the State Department released this message:

The U.S. Consulate General in Jerusalem notes that, according to local security sources, Jerusalem is under a heightened Security Alert. The police have established roadblocks in various sections of the city and increased their personnel on the streets. Vehicle inspections are being conducted, and suspicious individuals and bags are receiving further scrutiny.

U.S. citizens in Jerusalem are advised to exercise extra vigilance and avoid large crowds during upcoming rallies and religious holidays, particularly in and around Jerusalem’s Old City.

On Wednesday, August 24, 2011, there will be a rally held near the south east corner of the Old City. The areas between Dung Gate and Lions Gate are off-limits to official U.S. Government personnel from 4:00pm until 10:00pm on that day due to recent clashes in that area.

There were indeed threats made against those who were behind the rally in Jerusalem — threats which necessitated a number of changes before the event began.

For example, the choir that was scheduled to perform canceled just days prior to the rally because they were told that they would be dismissed and never permitted to work again if they sang at the event. Therefore, despite the choir’s support of the rally, they gracefully bowed out, forcing the Beck team to piece together another choir quickly.

“I have to tell you some of the stories that I wasn’t able to tell you before and let’s start with this,” Beck explained. “Yesterday, if you watched the broadcast on GBTV, if you watched the whole event that unfolded at the Temple Mount, what you may not know is how many people canceled at the last minute, and not because they were, you know, ‘I’m not going to stand with him,’ none of that. The reason why they canceled is because they were under [a] death threat.”

Despite these circumstances, however, some analysts are pondering if perhaps it is bias that caused the Consulate to single out Glenn Beck’s rally.

Several days before the event, there was an elevated threat of terrorism in Jerusalem as a result of the Eilat attacks, which killed eight Israelis. However, two days before Restoring Courage, the security alert was changed to a general Level 3 watch with an “emphasis on Jerusalem and Southern Israel." But as noted by The Blaze, “The specific alert for the city of Jerusalem had been lifted,” thus — as the website observed — calling into question the Consulate’s warning.

According to the Jerusalem Post, there may be a level of ideological bias at work in the case of Beck’s rally, as there has been evidence of such in recent years. The Post claims that the U.S. Consulate of late has “gone native,” displaying a pro-Palestinian bias. The paper asserts that because the Consulate is located near Palestinian territories, it has worked more closely with Palestinians and therefore developed a bias in favor of their events and causes.

The Blaze reports:

The Post and others have noted a multitude of Consulate-sponsored Palestinian outreach and cultural events over the past year that appear to outpace any similar offerings for the Jewish community in Jerusalem (or the Christian one, for that matter).

For instance, The Post points to the Consulate’s assistance in helping to set up a performance by a Muslim musical group NativeDeen in Palestine:

This visit, arranged by the Consulate which, I can confidently presume is participating financially in this "entertainment and cultural event," is taking place, I emphasize, in "Palestine." Is that a country? A real country?

We are all well aware that President Obama is on record in favor of an independent state of Palestine as is Secretary of State Hillary Clinton and also Israeli leaders. However, as far as I am aware, it doesn't yet exist. I am also fairly sure that promoting a religiously-motivated music show is the prerogative of the US government...

Still, the U.S. Consulate asserts that the warning that targeted Beck's rally was in response to “recent clashes in the area.” 

Obama's China Trade Solution: Give Them Our Hi-Tech

BY WILLIAM F. JASPER
The China Daily US Edition reported on September 7 that "China will 'vigorously' expand its imports of key products as the nation strives to cut its trade surplus amid growing protectionism against the world's largest exporter."

 "We will especially encourage imports of products the nation is short of, especially advanced technology and key equipment," said Chong Quan, China's deputy international trade representative, at the China Import Forum organized by the government's Ministry of Commerce. This theme, that the United States should attempt to balance its trade deficit with China by selling the communist regime currently restricted hi-tech items, has been an ongoing trade argument by Beijing for many years. Despite having ransacked America's manufacturing base — with the indispensable aid of U.S. administrations both Republican and Democratic, as well as many of America's top business leaders — China's Communist Party leadership remains upset that it is still prevented from buying many of our most advanced technologies that have strategic military applications.

Now, however, with the U.S. economy in recession and foundering deep in debt, the cash-rich Beijing regime is feeling its oats. And it is pressing the U.S. government to drop security restrictions on the military-related technologies it desires most."If they continue their restrictive policies, some countries will have cause to regret when they find they have lost their share of the burgeoning China market," Yu Danhua, foreign trade bureau chief of Ningbo in Zhejiang province, told the trade forum. The primary target of that comment, of course, is the United States.

Earlier this year an editorial in the official Chinese Communist Party publication Global Times laid out a lobbying strategy to remove the restrictions. "China should require the US to cancel or at least temporarily lift its limitations on high-tech exports," wrote Zhao Zhihao, a professor of sociology at East China Normal University. "It should focus on breaking through such limitations in bilateral negotiations at different levels," he said.

The January 6 editorial, entitled "Sino-US trade war more about technology than money," continued:

In order to achieve such a goal, powerful media publicity is needed to impose pressure on Americans. The topic of lifting the limitations on high-tech exports should remain in newspaper headlines. It should be listed high on the agenda of various bilateral talks.

As long as this problem remains unsolved, Sino-US relations will not make substantial progress.

Professor Zhihao and the Red Chinese leadership have a long shopping list of restricted items they want to get access to — soon. The editorial continues:

Currently, the US's export control policy covers about 2,500 products, most of which involve manufacturing technology, such as space crafts components, high-tech communication apparatus and mechanical equipment. China is a key target country when it comes to export control policy.

Technology is what China most urgently needs in Sino-US trade. But the US isn't willing to include its superior products in transactions, which naturally leads to an aggravated trade deficit.

It appears that the Beijing trade strategists have friends at the Obama White House and in America's corporate boardrooms who are anxious to help them meet their goal. Speaking at the St. Regis Hotel in Washington, D.C. on February 24, 2010, President Barack Obama told leaders of the Business Roundtable:

[W]e're launching a National Export Initiative where the federal government will significantly ramp up its advocacy on behalf of U.S. exporters. We're substantially expanding the trade financing available to exporters, including small and medium-sized companies. And while always keeping our security needs in mind, we're going to reform our export controls to eliminate unnecessary barriers. So some of the sectors where we have a huge competitive advantage in high-tech areas, we're going to be able to send more of those products to markets overseas.

The Business Roundtables members have been busy providing the "powerful media publicity" that Professor Zhihao said "is needed to impose pressure on Americans" to support the technology export changes desired by China's communist leaders. This is the same business lobby that has helped Beijing strip mine America's industrial base throughout the past several administrations. Now in the few remaining hi-tech areas where the U.S. still retains "a huge competitive advantage," President Obama has pledged to use taxpayer funds to finance the transfer of those technologies (along with the attendant jobs those technologies entail) to China as well. This follows closely the parallel track by President Obama and Secretary of State Hillary Clinton in their recent efforts to ship our cutting-edge technology to Skolkovo, the new Russian Silicon Valley being built by Dmitry Medvedev and Vladimir Putin. (See:"Breathing Pixie Dust" - Investing in Russia)

Is this a viable answer to our trade deficit? "Lifting security restrictions would not balance trade, which posted a $227 billion U.S. deficit last year," commented economist William R. Hawkins in a March 2 piece for AmericanThinker.com. "It could, however, change the balance of power as Beijing desires, since anything sent to China will be copied for local reproduction," he added.

Mr. Hawkins quoted comments by Michelle Van Cleave, who was in charge of coordinating the hunt for foreign spies from 2003 to 2006 under the director of national intelligence. In an interview on CBS' "60 Minutes" for the February 28, 2010 episode, "Caught on Tape: Selling America's Secrets," Ms. Van Cleave was asked, "When it comes to espionage against the United States, is China now the number one threat that we face?"

"I would be hard pressed to say whether it's the Chinese or it's the Russians, but they're one, two, or two, one," she replied. "The Chinese are the biggest problem we have with respect to the level of effort that they're devoting against us versus the level of attention we are giving to them."

Asked what the Chinese want from America, Van Cleave told CBS' John Pelley:

Virtually every technology that is on the U.S. control technology list has been targeted at one time or another by the Chinese. Sensors, and optics, and biological and chemical processes. These are the things, information technologies across all the things that we have identified as having inherent military application.

William Hawkins notes that "Beijing would like to acquire this information wholesale by legal purchases. Chinese officials from President Hu Jintao on down have demanded for decades that the United States lift its security restrictions on the sale of technology to the People's Republic."

The Obama administration appears even more willing than the Carter, Reagan, Bush I, Clinton, and Bush II administrations to lift restrictions on sensitive technology to the People's Republic of China (PRC), in effect saving them the time, trouble, and expense of obtaining it through theft and espionage.

President Obama's assurance that he would be "always keeping our security needs in mind," notwithstanding, there is little in our trade policy experience to suggest that either our national security or our national economic wellbeing will be enhanced by further opening the floodgates to what remains of our leading-edge technologies.

This past May, Treasury Secretary Tim Geithner, Secretary of State Clinton, and some 200 additional U.S. officials attended the Beijing Summit on Strategic and Economic Dialogue. Although many of the media reports on the summit stressed areas of contention between China and the United States, Secretary Geithner praised his PRC hosts on a number points, including their movement toward "leaving the terms of technology transfer and production processes to agreement between enterprises." This would seem to be a signal from the Obama administration that it will be facilitating more hi-tech transfers from the enterprises represented in the Business Roundtable to Red Chinese "enterprises," which are, in fact, adjuncts of the People's Liberation Army (PLA) and/or other structures under the direction of the Chinese Communist Party.

Where is Congress in all of this? Apparently AWOL, as it has so often been on matters of strategic trade and its implications for both jobs and national security. However, Congress can be moved to staunch the loss of vital technology if voters are alerted and decide to take a determined stand against the administration's National Export Initiative to China.

Feds May Seize Liberty Dollars

Kurt Nimmo

Coin World reports that the feds are looking to seize liberty dollars from collectors and those using the coins instead of inflation-ridden Federal Reserve notes.

Officials with the U.S. Attorney’s Office said on August 24 that the coins are contraband. The Secret Service, the federal agency responsible for confiscating counterfeit money, did not provide any definitive comments concerning under what circumstances Liberty Dollars would be seized, according to Paul Gikes of Coin World.

The coins are illegal even if they are not used for barter, the feds insist. Jill Rose, chief of the August 24 that the Liberty Dollar medallions are confiscable as contraband if they are being exhibited for educational purposes or held privately.

Rose was the lead prosecutor in the Bernard von NotHaus case. Von NotHaus is the creator of the Liberty Dollar. He was convicted by the feds in March on multiple charges involving the alternative currency that competes with fiat money distributed by the privately owned Federal Reserve. During the trial it was determined that Liberty Dollars are counterfeits, contraband and subject to seizure.
Von NotHaus was convicted by a jury after the feds successfully argued that Liberty coins are counterfeits because they include the words “Trust in God,” similar to the words “In God We Trust” on Federal Reserve coins. He faces up to 15 years in jail, a $250,000 fine, and may be forced to give $7 million worth of minted coins and precious metals – weighing 16,000 pounds – to the government.

The prosecution and conviction of von NotHaus was politically motivated. He is the founder of NORFED, the National Organization for the Repeal of the Federal Reserve and the Internal Revenue Code.

Following the verdict against von NotHaus, the government characterized him as a domestic terrorist.

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” said U.S. Attorney Tompkins. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats throughinfiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.” (Emphasis added.)

The Liberty Dollar raid was indistinguishable from “similar raids conducted by Soviet and Chinese communist officials against private businesses operating in those countries,” writes Jacob Hornberger.

“Unfortunately, in the post-9/11 world in which we now live, anything goes as far as federal power is concerned. The heavy-handed, perhaps even fraudulent, Soviet-style attack on NORFED is proof-positive of that.”

According to Rose and the government, the Liberty Dollar is “a pyramid scheme imbedded with fraud” that had nothing to do with barter or trade. “Barter is an equal and knowing exchange,” which the Liberty Dollar is not, Rose and the government claim.

Coin World had previously published comments from the U.S. Attorney’s Office in Charlotte stating that while mere possession of Liberty Dollar medallions was not a violation of federal statutes, actual use or intent to use them in the manner for which von NotHaus was convicted would be considered a violation.

Glen Kessler, assistant special agent in charge in North Carolina for the U.S. Secret Service, told Coin World that the Secret Service is “duty-bound to confiscate” Liberty Dollars.

George Ogilvie, the public affairs officer for the federal agency, told the publication the Secret Service had no comment on the matter.

It now appears the feds are moving to criminalize mere possession. Collectors are now at risk, especially if they oppose the Federal Reserve and are politically active.

Redeeming Newt

By Peter Ferrara 

President Obama, on the campaign trail already this month, has taken to attacking a "do-nothing" Congress. Apparently, he thinks he is going to reprise Harry Truman's shocking come from behind victory in the election of 1948, where Truman surged to narrowly win at the end with that do-nothing Congress theme.

Newt Gingrich is so right in urging his own "Leadership Now" theme for the Republican House majority. He argues that the House should not wait for the debt reduction Super Committee before passing legislation to address federal spending, the deficit, economic growth, and jobs. The House should show leadership now by passing legislation that will achieve these goals most effectively, demonstrating to the public what conservative Republican victories in the elections next year would accomplish.

The House got off to a good start on this theme in passing the Ryan budget on time early this year. It would have cut federal spending by $6.2 trillion over 10 years, reformed both individual and corporate taxes by closing loopholes and lowering rates, eventually balanced the budget, and even ultimately paid off the national debt. Of course, the Democrat majority Senate failed to adopt that or any other budget as required by law (which it has failed to do now for at least two years).

But the Republican controlled House persisted, passing Cut, Cap and Balance, which cut federal spending by over a hundred billion for next year alone, capped federal spending for the future at its long term, postwar, historical average of 20 percent of GDP (about one-fifth lower than current federal spending), and included a balanced budget amendment to the Constitution requiring balanced federal budgets each year -- just like in almost every state.

Once again, however, the Democrat-controlled Senate failed to pass Cut, Cap and Balance. You see, the issue is not really a do-nothing Congress, but rather a do-nothing Senate. To ensure that the public gets that distinction, the House should pick up Newt's Leadership Now theme, and pass legislation based on some of his ideas.

Tax Reform First

In demonstrating a Leadership Now mentality, the House should pass both individual and corporate tax reform. It should close loopholes that allow Obama political machine cronies like General Electric to get away with paying no federal income taxes, and lower the tax rates to get the economy booming again.

Tax rates -- not just tax cuts -- are the key factor in determining economic growth and prosperity. The tax rate, particularly the marginal tax rate (the rate that applies to the last dollar earned) determines how much the producer is allowed to keep out of what he or she produces. For example, at a 25 percent tax rate, the producer keeps three-fourths of his production. If that rate is increased to 50 percent, the producer keeps only half of what he produces, lowering his reward for production and output by one-third. Incentives are consequently slashed for productive activity, such as savings, investment, work, business expansion, business creation, job creation, and entrepreneurship. The result? Fewer jobs, lower wages, and slower economic growth.

By contrast, if the tax rate is reduced from 50 to 25 percent, producers will be allowed to keep three-fourths from their production, increasing the reward for production and output by one-half. That would sharply increase incentives for all of the above productive activities, resulting in more of them -- plus more jobs, higher wages, and faster economic growth.

Moreover, these incentives do not just expand or contract the economy by the amount of any tax cut or tax increase. For example, a tax cut of $100 billion involving reduced tax rates does not just affect the economy by $100 billion. The lower tax rates affect every dollar and every economic decision throughout the economy.

Furthermore, marginal tax rates do not just affect the incentives of those to whom the rates currently apply. They also affect those to whom the rates may apply in the future. For example, consider a small business owner. If he invests more capital in his business to expand production, or hires more workers to increase output, that may result in higher net taxable income. It is the tax rate at that higher income level -- not at his current income level -- that will determine whether he undertakes the capital investment, or hires more workers.

Ryan's budget included income tax reform with a 25 percent top income tax rate for family incomes over $100,000 a year, a 10 percent rate for incomes below $100,000, and generous personal exemptions leaving the first $40,000 a year for a family of four free of any income tax. It also included corporate tax reform, which addresses an enormous problem troubling the American economy.

The U.S. corporate income tax rate is virtually the highest in the industrialized world, with a federal rate of 35 percent. State corporate rates take it close to 40 percent on average. Even Communist China has a 25 percent rate. The average rate in the heavily socialist European Union is less than that, and formerly socialist Canada is cutting its 16.5 percent rate down to 15 percent next year.

The U.S. corporate income tax rates leave American companies uncompetitive in the global economy. Ryan's budget proposed a federal corporate income tax rate of 25 percent. The much lower individual and corporate rates from Ryan's tax reforms would cause a new economic boom with millions of new jobs and higher wages due to the resulting incentives for productive activities, as discussed above. Yet, with the closed loopholes, CBO has already scored Ryan's tax reforms as restoring federal tax revenues to the long run, postwar, historical average over the last 70 years of just over 18 percent of GDP. And that doesn't fully account for the economic growth that would result.

The Republican-controlled House should execute Leadership Now by passing Ryan's individual and corporate tax reforms this year. Let the do-nothing Democrat Senate sit on them. Then let's see what the voters have to say about it next year.

Spending and Entitlement Reform

The Republican House should also take the lead on spending cuts now, without waiting for the deficit reduction Super Committee, by passing Appropriations bills that implement all of the discretionary spending cuts of the Ryan budget. Those cuts were based on the popular plan of returning all non-entitlement, non-interest spending for all federal agencies and departments back to 2008 levels.

Gingrich raises a popular entitlement reform opportunity based on the enormously successful 1996 reforms of the old Aid to Families with Dependent Children program (AFDC), enacted while Gingrich was Speaker of the House.

Those reforms sent the federal financing for the program back to the states in fixed, finite block grants, with states empowered to redesign new welfare programs for the poor -- based on work. If a state's program cost more than its federal allotment, then it had to pay all of the extra costs itself. If its program cost lest, then it could keep the resulting savings.

With new incentives for the states, two-thirds of those on AFDC left the program for real private sector jobs. Their incomes rose by at least one fourth as a result, leading them out of poverty. And costs for the taxpayers dropped by half or more in real dollars compared to prior trends.

Those same reforms can and should be extended to Medicaid and all other federal means-tested welfare programs. Those programs are estimated to cost $10 trillion in total government spending over the next 10 years. The Republican House should act now to pass legislation effectively sending all those programs back to the states with block grants providing the discretion for the states to each enact a completely new welfare system based on work, as Gingrich suggested. That kind of Tea Party federalism would be enormously popular, as would the potential savings of $5 trillion over 10 years. Based on the 1996 reforms of AFDC, the poor would benefit enormously as well.

Gingrich also proposes legislation to increase revenue from oil and gas exploration and drilling through sharply increased federal leases and permits. That could raise $150 billion over roughly 10 years, with more coming from increased economic growth due to more abundant supplies of low cost energy for businesses. Gingrich also proposes to sell federally owned land and other unused and environmentally insignificant federal assets.

Gingrich is also pioneering the application of proven business efficiency and waste cutting methodologies known as Lean Six Sigma to government programs and agencies. Instead of waiting for the dangerously centralized Super Committee to develop plans for remaking the entire federal government, Gingrich argues that all 435 members of the House in almost 200 committees and subcommittees should be involved in developing ways to apply Lean Six Sigma business principles to government management, with potential cost savings of over $5 trillion. Gingrich argues that another $700 billion to $1.2 trillion over 10 years could be realized by applying the fraud detection techniques utilized by credit card companies to root out fraud in Medicare and Medicaid.

Regulation

The Republican House has another immediate opportunity: to pass legislation to counter the job-killing regulatory blizzard the Obama Administration is dumping on the American economy. The EPA is effectively imposing the cap and trade tax to counter imaginedhuman-caused global warming, at an ultimate cost of trillions to the economy through soaring energy and electricity costs. The EPA's plan would ultimately involve phasing out the coal, oil and natural gas industries entirely. The House should pass legislation to strip EPA of authority to impose such highly unpopular global warming regulation.

House Majority Leader Eric Cantor (R-VA) seems to understand the opportunity here, promoting legislation to overhaul the federal government’s entire regulatory process through the Transparency in Regulatory Analysis of Impacts on the Nation (TRAIN) Act and the Regulations from the Executive In Need of Scrutiny (REINS) Act.

If the Republican House can act expeditiously to pass all of these ideas, and send them on to the do-nothing Democrat Senate, then Republicans can take these issues to the people next year, clearly defined.

Compounding Disaster

By Ross Kaminsky 

The ever-reliable supporters of big government at CNN offer thisinteresting insight: Political antagonism toward deficits may exacerbate the long-term impact of natural disasters by lessening the federal government's ability to help.

This, like the approach to every other issue that becomes the subject of liberal cogitation, assumes that humans are too stupid to change their behavior when their environment changes.

To wit, if states know that there isn't a free bucket of federal money awaiting should something bad happen, they will prudently build up their reserves, creating "rainy day funds" for disasters like Irene. The same goes for individuals who, whether self-insuring like states or purchasing insurance policies, will better prepare for disasters rather than relying on the forced charity of residents of other states to subsidize their bad luck or intentional risk-taking. Furthermore, the discipline imposed by self-insuring or by the provisions of a private policy will improve not only the financial preparations for disasters, but also the physical preparations for them. (How many of you have added an alarm system to your house or car to lower your insurance premiums and your own risk?)

I like the part of the story in which the Federal Emergency Management Agency, commonly known as FEMA, says it won't immediately honor what certain Senators think are its responsibilities but are not yet funded. Here's the relevant section of the piece:

FEMA is making its own adjustments. To make room in its budget for cleanup efforts after Irene, the agency is delaying some rebuilding projects in Joplin, Missouri, where devastating tornadoes struck this year.

"For any projects that have not come in for approval, we're not going to be able to fund those at this point. We're going to postpone those," FEMA Administrator Craig Fugate said at a White House briefing Monday, referring to some efforts in Joplin.

Missouri's two U.S. senators released statements blasting the bureaucratic move.

"If FEMA can't fulfill its promise to our state because we have other disasters, that's unacceptable," Republican Sen. Roy Blunt said in a statement. 

The lesson here is that Missouri and other states shouldn't rely on the federal government in the first place if their goal isn't to make war (whether on foreign soldiers or on American entrepreneurs). After all, if the federal government can't even do well those few non-military things it's actually supposed to do, like immigration, why do we want or expect it to do a good job with things it was never supposed to do, like being involved in flood insurance (or health insurance for that matter)?

Like the famed blind squirrel, Ron Paul gets it right when it comes to FEMA, arguing that it completely perverts the idea of insurance through the National Flood Insurance Program. Since when is it the responsibility of a Coloradoan to subsidize the risk taken by someone who doesn't just build a beach house in a hurricane-prone coastal region, but who then uses other people's money to rebuild it when big bad hurricane Wolf blows it down?

Sure, when private markets provide flood insurance, the price is higher than the government-issued and taxpayer-subsidized program we have now and would thus likely pressure the real estate values of homes whose owners need the insurance. But that's life. Among the rights granted in our Constitution, one does not find the right to have others assume your risk. Such socialization of risk (as seen most famously in the TARP program, other bank bailouts, and the Obama Administration's destruction of decades of law in the reorganizations of GM and Chrysler) is anathema to the Founders' explicit aims. After all, the conception of the role of the state to protect "life, liberty and property" as originally drafted for the Declaration of Independence wasn't about government making Mr. Smith protect Mr. Jones' property. If Jones' property is more likely to be destroyed in its particular location, then it is worth less than it otherwise would be without that risk… and it shouldn't be Smith's problem.

FEMA's most famous adventure was their disastrous handling ofHurricane Katrina. While President Obama called FEMA's response to Hurricane Irene "exemplary," perhaps the reason it seems so is that governors along the East Coast took the lessons of Katrina to heart and did their jobs as chief executives rather than relying on Big Brother. FEMA seems like it did a good job because it was asked to do so little -- so far. However, with requests for federal aid coming from states along our Atlantic Coast, FEMA will have plenty of opportunity to show whether it is still the dysfunctional bureaucracy we've come to know and, to put it kindly, be somewhat skeptical of. But, like a Yugo, even if it performs OK, that doesn't mean it's a good idea.

And to the extent that FEMA's role in the Irene disaster ends up being handing out checks, it inevitably drifts into another vote-buying scheme for whichever administration is in power at the time, leading bureaucrats into the irresistible temptation to make Smith feel good about the government by using Jones' money. As  Milton Friedman said, the least careful way that money is ever spent is when someone (like government) is spending another person's money on yet another recipient. When A is spending B's money on C, neither A nor C care how much or how wisely that money is being spent. That's actually putting it kindly, as both A and C have the incentive to spend as much of B's money as possible, thus adding government budget disaster to natural disaster.

Instead of complaining about the limitations of the federal government when it comes to disaster relief, the obvious lesson of Hurricane Irene is that even for storms that ravage a half dozen states in a weekend, local response and responsibility is preferable to relying on a federal organization. FEMA, like all federal bureaucracies and despite what I assume to be the best intentions of most of its employees, is run by people who are unlikely to understand local subtleties in any given disaster area. And, as we're seeing now, disaster response by a federal agency allows federal politics to interfere in what are truly the most localized problems where localized knowledge and incentive to help one's friends and neighbors should be of great benefit.

For example -- and understanding that the scale of the disasters was different and that New Orleans had more than its share of problems prior to Hurricane Katrina -- four years after Katrina, New Orleans was still  waiting for the federal government to take care of its lingering school problems. In a way, Katrina did the educational system in that city a favor, "wash[ing] away the old, failed system of public education." Yet the public school system there, despite the mostly beneficial addition of many charter schools, is still far behind schedule and over budget on rebuilding as they live in a world where fiscal responsibility is deadened by the opiate of OPM (other people's money.)

In Joplin, Missouri, on the other hand, where fully a third of the city was erased by a tornado in May, schools opened on time just three months later, including a high school that the city creatively fashioned from what used to be a department store. As a commenter on the left-leaning Huffington Post website opined, "I agree those in Joplin helped each other out after the devastating tornadoes. They did not wait for FEMA or the federal government to intervene. They got to work. I do feel for those people in Irene's path. But self reliance and common sense go a long way too."