11/29/2008

The New Political Economy

by Charles Krauthammer

WASHINGTON -- In the old days -- from the Venetian Republic to, oh, the Bear Stearns rescue -- if you wanted to get rich, you did it the Warren Buffett way: You learned to read balance sheets. Today you learn to read political tea leaves. You don't anticipate Intel's third-quarter earnings; instead, you guess what side of the bed Henry Paulson will wake up on tomorrow.

Today's extreme stock market volatility is not just a symptom of fear -- fear cannot account for days of wild market swings upward -- but a reaction to meta-economic events: political decisions that have vast economic effects.

As economist Irwin Stelzer argues, we have gone from a market economy to a political economy. Consider seven days in November. On Tuesday, Nov. 18, Paulson broadly implies he's only using half the $700 billion bailout money. Having already spent most of his $350 billion, he's going to leave the rest to his successor. The message received on Wall Street -- I'm done, I'm gone.

Facing the prospect of two months of political limbo, the market craters. Led by the banks (whose balance sheets did not change between Tuesday and Wednesday), the market sees the largest two-day drop in the S&P since 1933, not a very good year.

The next day (Friday) at 3 p.m., word leaks of Timothy Geithner's impending nomination as Treasury secretary. The mere suggestion of continuity -- and continued authoritative intervention during the interregnum by the guy who'd been working hand in glove with Paulson all along -- sends the Dow up 500 points in one hour.

Monday sees another 400-point increase, the biggest two-day (percentage) rise since 1987. Why? Three political events: Paulson's weekend Citigroup bailout; the official rollout of Obama's economic team, Geithner and Larry Summers; and Paulson quietly walking back from his earlier de facto resignation by indicating he would be ready to use the remaining $350 billion (with Team Obama input) over the next two months.

That undid the market swoon -- and dramatically demonstrated how politically driven the economy has become.

We may one day go back to a market economy. Meanwhile, we need to face the two most important implications of our newly politicized economy: the vastly increased importance of lobbying and the massive market inefficiencies that political directives will introduce.

Lobbying used to be about advantages at the margin -- a regulatory break here, a subsidy there. Now lobbying is about life and death. Your lending institution or industry gets a bailout -- or it dies.

You used to go to New York for capital. Now Wall Street, broke, is coming to Washington. With unimaginably large sums of money being given out by Washington, the Obama administration, through no fault of its own, will be subject to the most intense, most frenzied lobbying in American history.

That will introduce one kind of economic distortion. The other kind will come from the political directives issued by newly empowered politicians.

First, bank presidents are gravely warned by one senator after another about "hoarding" their bailout money. But hoarding is another word for recapitalizing to shore up your balance sheet to ensure solvency. Is that not the fiduciary responsibility of bank directors? And isn't pushing money out the window with too little capital precisely the lending laxity that produced this crisis in the first place? Never mind. The banks will knuckle under to the commissars of Capitol Hill. They control the purse. Prudence will yield to politics.

Even more egregious will be the directives to a nationalized Detroit. Sen. Charles Schumer, the noted automotive engineer, declared "unacceptable" last week "a business model based on gas." Instead, "We need a business model based on cars of the future, and we already know what that future is: the plug-in hybrid electric car."

The Chevy Volt, for example? It has huge remaining technological hurdles, gets 40 miles on a charge and will sell for about $40,000, necessitating a $7,500 outright government subsidy. Who but the rich and politically correct will choose that over a $12,000 gas-powered Hyundai? The new Detroit churning out Schumer-mobiles will make the steel mills of the Soviet Union look the model of efficiency.

The ruling Democrats have a choice: Rescue this economy to return it to market control. Or use this crisis to seize the commanding heights of the economy for the greater social good. Note: The latter has already been tried. The results are filed under "History, ash heap of."


Charles Krauthammer is a 1987 Pulitzer Prize winner, 1984 National Magazine Award winner, and a columnist for The Washington Post since 1985.

From Townhall

Mark Sanford

Governor to watch Mark Sanford Governor of South Carolina (R)

GOVERNOR SAYS CITIZENS MUST PUSH CONGRESS TO EXERCISE BETTER OVERSIGHT

Don't Bail Out My State
South Carolina's governor says more debt isn't the answer.
WSJ

Heath Shuler


Congressman to watch Heath Shuler (D) North Carolina.

Politcians to Watch

Since the purpose of "The Fire Line" is to identify, recognize and support politicians that support our ideals, we will be posting about those public servants who we feel merit attention.

This does not mean that they will always vote exactly the way we wish, but have shown themselves to basically believe in capitalism and the free markets and an adherence to constitutional principles.

We ask our members, especially those in the politician's area, to keep track of them and their positions and votes and let us know how they are doing, both good and bad.

We will be breaking down these politicians where they serve, IE Congress, Senate, Governor, Mayor etc, and you can see who they are under the appropriate heading on the side bar menu. Let us know who deserves to be there and why.

11/28/2008

WHO WE ARE


“A wise and frugal government… shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government.”

— Thomas -Jefferson, First Inaugural Address, March 4, 1801


What is “The Fire Line”



The name Fire Line comes from the television and radio commentator Glenn Beck. Mr. Beck in describing the current state of our country said there is a need to create a fire line around people and institutions to protect what we believe to be the best of America. Simply put the Constitution and the free market capitalist economic system needs protection from the raging fires of change simply for the sake of change. This is particularly distressful to us considering recent assaults on these basic American principles are not the result of their failures, but rather the failure to properly use and understand them.

It is not that we do not believe in change, we very much believe that the evolution of government and economies is not only an inevitable consequence of mankind’s advancement, it is necessary for the growth of the human experience. However, we are equally sure that all changes in our government that may be needed are readily available through the use of our Constitution.

Our founding fathers were not only great patriots and libertarians they were visionary. They fully appreciated the need to allow our Constitution the ability to expand and change and made provisions for it in Article 5. This has been used numerous times in our nation’s history to adapt to a changing country. From ending slavery (Amendment 13) to authorizing income taxes (Amendment 16) to woman suffrage (Amendment 19) to giving eighteen year old the right to vote (Amendment 26) our Constitution has always been a living document.


“But a Constitution of Government once changed from Freedom, can never be restored. Liberty, once lost, is lost forever.”
-John Adams

The idea that in our modern fast-paced world, with its instant communications, supersonic transportation and global economy, that our Constitution and free market economic system is somehow outdated is misguided. We would argue that it is more needed now than ever. Nations, like people, need a foundation to support them in times of trial and as a source of continuity in a world of constant instability. Like a person adrift in trying times, a nation needs a home to return to for guidance and strength.

The Constitution of the United States is our home, it is our strength, it is our past and it must be our future. We fear that the Constitution is not only losing its place as the bedrock of what America is, but also what it stands for. The slow erosion of dependence upon it for our political guidance is undermining the very liberties and freedoms that we as Americans espouse as holding so dear. This is not a partisan issue, but rather an American issue. The country that generations of Americans sacrificed to create and maintain to love and to cherish is being increasingly eroded by a combination of apathy, neglect, and an effort by some to destroy American principles of governance in order to establish their idea of what is best for America.

We do not believe attempts to change government through Constitutional guidelines is bad. It is essentially proper and just and in keeping with American principles. However, we believe that many changes to our government are not the result of sound Constitutional principles, but instead are manipulative subversion for political, partisan or selfish gain circumventing lawful practices in the guise improving our system of government. This manipulation is passed off as somehow being for the people, when in fact it is further destroying the very freedom of the people that our founders fought so hard to insure.

“I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”
-Thomas Jefferson

American Capitalism

Of late capitalism has gotten a pretty bad reputation, fairly so for the most part. But, it is not free-market capitalism that has failed, but rather the perverted and manipulated current version of it.

The basic premise of our economic system is pretty straightforward in principle. Let the consumer determine market forces through what they, the consumer, determine worthy of purchase of either of goods or services. Entrepreneurs will fill the need of the consumer for profit and will succeed or fail based solely on their ability to fulfill the consumer’s needs. In so doing the entrepreneur will create jobs and commerce which will grow the economy.

“The Constitution only gives people the right to pursue happiness. You have to catch it yourself.”
-Benjamin Franklin

As America grew, American business grew. Eventually, business grew to the point where many lost touch with their roots. This disassociation coupled with greed eventually led to abuses of both consumers and employees. This was not a failure of the American economic system per say, it was the natural outcome of normal human failings. Greed and selfishness after all are not exclusively American by nature but a globally recognized human condition easily identifiable and seen in other forms of government. Eventually, in order to protect the citizens from abuse, government (as is its proper place) stepped in to regulate business.

In order to regulate the ever-growing businesses in America the federal government in turn grew. This is not the only reason the federal government grew, but it has had much to do with it. At last, we have ended up with two gigantic monoliths in American society, “big business” and “big government.” How these two entities have interacted and intermingled is one of the most fascinating stories of twentieth century America.

“In the general course of human nature, A power over a man's subsistence amounts to a power over his will.”
-Alexander Hamilton

However, we are now in the twenty-first century and it is obvious that this tug of war between government and business has not been resolved and in fact has made matters worse because the line between the two is blurring to the point where we see less and less separation. We do not know the answer, but one thing we are sure of is that the merger of these two gigantic entities, “big government” and “big business,” is not only not the answer, it is an affront to American principles.

A bedrock principle of a capitalistic society is the ability of any enterprise to succeed or fail based solely on that enterprise’s merit to the larger community. A good product or service will always be consumed if it meets the requirements of the consumer. Should an enterprise fail to meet consumer requirements or should bad business practices cause it to be a non-profitable, self-sustaining enterprise; then, that business should fail.

When failing enterprises, for whatever reason, are propped up by government it circumvents and destroys the very fabric of free enterprise. It stifles competition and rewards failure. It limits innovation and perhaps most important of all, it discourages entrepreneurship. Why should the individual with a dream peruse that dream when the government ultimately determines the winners and losers in the arena of commerce rather than the superior product, idea or service?

We believe that government has a role in protecting citizens from unscrupulous business practices, but has little or no role in circumventing basic free enterprise principles. This is more than an economic issue - it is an individual freedom issue. The ever-increasing encroachment of government into business strikes at the very heart of the freedom of the individual. Once a government controls rather than just monitors and protects against unscrupulous commercial enterprises, it controls an individual’s very sustenance. Not so much the power over a person’s physical nourishment, but the nourishment of the human spirit. The drive and innovation of the individual is squelched when he must look towards a monolithic government for approval rather than to his fellow citizens and neighbors which are and should be the true judge of the success or failure of an individual’s ventures and endeavors. This is the very heart of free enterprise and the very underpinning on which the origin of our nation was established.

“A well-instructed people alone can be permanently a free people.”
-James Madison

Our Goal

Our goal is fairly simple although the challenge is great. “The Fire Line” is committed to three basic undertakings all with the goal of creating that fire line around those people and institutions needed to protect American’s Constitution and free market system of capitalism.

First - We want to be a source of information, a link to other web sites and institutions that we feel promote constitutional and free market principles - a simple resource for individuals to come and find information on other organizations that share our ideals.

Second - To establish a network of people to seek out and identify individuals at all levels of government who share our ideals. To study their statements, their stated positions and most importantly their public record to determine if they are indeed a promoter and defender of the constitutional and free market principles. Once recognized, our goal is to endorse, support, promote and encourage these public servants in any way our resources allow. They are the true “fire line” which we must use to protect and restore our American principles.

Third - To educate our children, our grandchildren and all of our fellow citizens on the greatness and enduring need of maintaining the Constitution and free market principles.


I believe there are more instances of the abridgement of freedom of the people by gradual and silent encroachments by those in power than by violent and sudden usurpations.
-James Madison

Conclusion

It is our intention to be a non-partisan organization with the limited goals outlined above. As such, we will take no positions on any issues, which may distract us from what we believe is the overriding issue of our time, the protection of the Constitution. We recognize this will mean that we may support people, which may be at odds with individual member’s fervently held moral or ethical beliefs on both sides of very divisive issues.

Our nation has faced such challenges from the beginning, yet we have persevered and grown. In some cases overcoming to endorse one side of an issue, sometimes agreeing to disagree on an issue, but always ultimately persevering and relying on our love of country and our form of government in order to overcome those differences. We do not ask anyone to give up their fervently held beliefs. We only ask that one weigh those beliefs against the issue of protecting the foundations of our nation and to support “The Fire Line” where and when you can.

We believe America is truly at a crossroads and truly believe that the Constitution and free market principles are worth preserving and protecting and we ought to unite to do so. We have the right under that Constitution to speak and meet and let our voice be heard. And, we should not lose that - under the mistaken belief that others will take care of us!

“The sacred rights of mankind are not to be rummaged for among old parchments or musty records. They are written, as with a sunbeam, in the whole volume of human nature, by the hand of the divinity itself; and can never be erased.”
- Alexander Hamilton

If you would like to help establish “The Fire Line” or have any questions contact us at TheFireline@comcast.net

Thank you, and God Bless America