The Emperor Has No Clothes!

Butler Shaffer is a free man. He has also been called an anarchist. Butler Shaffer earns a living by teaching at a law school, where it is certain he is unlike few if any other law professors on the planet. Why, because he recognizes that the ultimate source of sovereign power is the individual, not the state.

In a recent essay published at Lew Rockwell's site, Butler Shaffer pointed out the intellectual and political bankruptcy of the Republican Party. According to Shaffer, the GOP, the "Grand Old Party," is now on a crusade to create "resistance to Obama's socialist agenda over the next four years," and to "stop Obama's plans to bring socialism to America."

Yet, Shaffer asks, where were the Republicans "when their GOP president, George W. Bush, was engaging in wars that put billions of dollars into the pockets of their corporate friends, and led the same president to state, to members of Congress, that he would declare martial law if they did not pass legislation bestowing hundreds of billions of dollars of largess upon Wall Street banking interests? Is the GOP so hopelessly bankrupt that some of its members must resort to a distinction without meaning that condemns state socialism while ignoring its own contributions to the state-sponsored economic destruction emanating from a Republican White House?" Shaffer asks is the Grand Old Party "henceforth to be known as the "Grasping Omnipotent Plutocracy?"

Shaffer points out the "fundamental distinction" between the mythical "free market" and the currently dominant "business system" is the "socializing the costs of doing business, while privatizing the profits." The Bailouts, projected to eventually cost in the neighborhood of $7.7 trillion are evidence. What makes a large financial institution or auto manufacturer for that matter worthy of a Bailout? This last question is being asked now that the Democrats are getting into the plunder and pillage mode to protect their power base funded in large measure by the precious union contracts that are bankrupting American car companies. What disqualifies individual home owners from a Bailout? Clearly the only meaningful distinction is membership in the Plutocracy.

And what pray tell does this really mean to each of us? Shaffer shows the math is simple. Each of us, every man, woman and child in the United States is now on the hook for about $25,000 in additional debt. Divide the cost of the bailout by the population of the country: $7,700,000,000,000 by 300,000,000 and you'll find The Rainmaker has understated the number a tad. Hopefully you enjoyed the party over the past few months.

The Rainmaker doesn't mean to quibble with Butler Shaffer, in fact we have no disagreement with him at all beyond the fact that he doesn't carry the analysis far enough.

In fact, Butler Shaffer is correct and the Republican Administration's actions are socializing risk while privatizing profit. But, Congressional Democrats have worked hand in glove with the Administration. Now, the same folks who designed and are executing the Bailout for the Bush Administration have been tapped by the incoming Democratic Administration to serve as our economic stewards for the at least the next four years. Clearly there is a consensus in Washington among the Republicrat and Demopublican factions of the Plutocracy to change nothing.

And, the hits just keep on coming. There will eventually be another $3 trillion of debt associated with the current wars. And, beginning in 2010 the Medicare system is cash flow negative, which is a $36.6 trillion problem. Then in 2017 Social Security goes under water at an unfunded cost of $7 trillion. There is also the nontrivial matter of unfunded pension liabilities guaranteed by the government and other miscellaneous obligations that add up to another $600 million. There is also the national debt accumulated over the past fifty or so years, which was about $8 trillion back in July. All those numbers on the entitlements and pensions are according to Fortune Magazine in their special report on the U.S. economy published November 24, 2003.

Thus the real financial fiasco is thought to total at least $55 trillion and, brace yourself, your share is in the neighborhood of $180,000 rather than the mere $25,000 suggested by Butler Shaffer for the fall follies in Washington. And, the politicians aren't done yet.

Neither are you. A few days ago we pointed out that government can't give anything to anyone without eventually taking it from someone else. That someone else is you, your children and your grandchildren. Where will you and each member of your family come up with that $180,000? Many of you will say tax the rich and of course to some degree that will happen, but the rich ways of gaming the system to limit their exposure. Others will say tax the corporations and that will happen. But ultimately those corporate taxes will be passed along to you as higher prices. One way or another the government is coming to your home and your family looking for that money.

The Rainmaker thanks Roger for the following thought provoking observation written by Scottish history professor Alexander Tyler in the late 18th century on the subject of the end of the Athenian Republic:

"A democracy is always temporary in nature; it simply cannot exist as a permanent form of government. A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury. From that moment on, the majority always vote for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship. The average age of the world's greatest civilizations from the beginning of history has been about 200 years. During these 200 years, those nations always progressed through the following sequence:

1. From bondage to spiritual faith;
2. From spiritual Faith to great courage;
3. From courage to liberty;
4. From liberty to abundance;
5. From abundance to complacency;
6. From complacency to apathy;
7. From apathy to dependence; and,
8. From dependence back into bondage."

If you have any doubts about what is happening in these United States, read "Dependent on DC," by Charlotte Twight.

Can the American Republic be the exception Tyler's theory? That is up to us. Do your really expect to get the change you can believe in from the Obama Administration? If so there is also a bridge you might be interested in buying.

Or, is it perhaps time to follow the example of John Galt and vote with our feet before it is too late?

Where the Jobs Are

Have you ever read Ayn Rand's "Atlas Shrugged?"



It's an amazing book about the productive members of society becoming discouraged and fed up as their labor is appropriated to carry the rest of society.



There are interesting aspects of our society today that indicate we are getting closer to the reality Rand found so disturbing that she wrote a book about what might happen if the producers who earn their way decided they have had enough.



Eventually the producers withdraw from society and move to Galt's Gulch, founded by the infamous John Galt, one of Rand's heroes in "Atlas Shrugged." Remember the graffiti from a few decades ago asking "Who is John Galt?" Others wrote "Where is John Galt?"



As Wikipedia describes Rand's social commentary:



"Rand's heroes must continually fight against the 'Parasites', 'looters', and 'moochers' of the society around them."



"The looters are those who confiscate others' earnings "at the point of a gun" (figuratively speaking)--often because they are government officials, and thus their demands are backed by the threat of force."



Yesterday the Washington Post carried a story describing the increasing levels of unemployment in virtually every productive sector of the economy as reported by the Bureau of Labor Statistics. It's not a pretty picture on the whole.



For example in July of 2007 there were 7.63 million Americans who earned a living through construction, but in July of this year only 7.17 million jobs were available in that sector. The total employment declined 6% in one twelve months.



In the manufacturing sector the total employment declined 2% from 13.8 million jobs in July 2007 to 13.5 million one year later.



15.3 million Americans worked in the retail sector this July, down 2% from the 15.48 million who had jobs a year earlier.



Only 200,000 Americans lost their jobs between July 07 and 08 in the transportation industry; a mere 4/10 of 1% decline.



Both the financial sector (banking/real estate) and professional services sector (lawyers, managers and administrators) had an even smaller relative decline of 2/10 of 1%; losing 120,000 financial services jobs and 400,000 professional jobs and ending up at a total employment of 8.21 million and 17.91 million respectively. Perhaps Bear Stearns really was an anomaly.



There was however some good news, at least if you aren't an Ayn Rand aficionado. In the 12 months ending July 2008 four of ten sectors experienced job growth according to the Bureau of Labor Statistics:

• The biggest percentage gain--4%--was in Education, gaining 120,000 jobs and ending at 3.08 million workers.


• Next in job growth performance during the year was the health care sector with a 3% gain, ending July with 370,000 new workers for a total workforce of 13.33 million Americans.


• The government sector (federal and local) hired an additional 350,000 Americans, realizing 2% job growth.


• The leisure and entertainment sector, which includes hotels, also posted a 2% gain. As of this July 13.68 million Americans work in this sector, 210,000 more than last July.

So why would Ayn have a problem with 1,050,000 new jobs? It's simple really, except for the 210,000 new hires in leisure and entertainment, the other 840,000 lucky new hires in the remaining three growth sectors don't really produce anything.

Ayn would call them parasites, looters and moochers. All these areas (even the medical sector due to Medicare and Medicade) are highly dependent on tax transfer payments from the working stiffs, entrepreneurs, investors etc. who cause real growth.

Ayn presumably wouldn't have a problem if the taxes paid by the construction workers, manufacturers, retailers, transportation workers, financial workers and professionals paid their taxes voluntarily, but of course that isn't the way the world works. She would also have problems with the fact that the benefits, especially retirement benefits accorded government workers (think: Thrift Savings vs. Social Security, retire after 20 years vs. retire after 45+ years if ever, etc.) are so much better than what the rest of society can expect. But, that's another story.

If you want to know where the jobs are, there is the answer. The bottom line is you are less likely to get laid off if the paycheck is funded by taxes collected, as Ayn would say, at the point of a gun.