Thomas Sowell’s Random Thoughts

People who are impressed by how many of Barack Obama’s advisors have Ivy League degrees seem not to remember how many people with Ivy League degrees mismanaged the Vietnam war and how many people with Ivy League degrees mismanaged economic policy during the Great Depression of the 1930s.

The fact that sales at Starbucks are going down, while sales at McDonald’s are going up, shows that people are adjusting to economic adversity by cutting back their spending. Only in Congress do people adjust to economic adversity and growing deficits by spending more money.

Federal Reserve chairman Ben Bernanke seems to be pretty popular thus far. My own preference is for Federal Reserve chairmen who are unpopular. When Paul Volcker was chairman of the Fed back in the 1980s, he was hated like poison, but his policies finally broke the back of the inflation that had been out of control for years– not without some painful costs, but few benefits can be gotten without costs.

It is fascinating to see that politicians whose interventions in mortgage lending have created a disaster in financial institutions are now moving on to intervene in the automobile industry.

Wal-Mart has done more for poor people than any ten liberals, at least nine of whom are almost guaranteed to hate Wal-Mart.

Ronald Reagan had a vision of America. Barack Obama has a vision of Barack Obama.

One of the signs of how easily we are bullied by small and vocal groups is how many universities, among other institutions, dare not even refer to the Christmas vacation but instead refer to “the winter holiday.”

As American incomes have risen over the years, liberals have kept changing the definition of “poverty.” Otherwise, the dwindling numbers of people who could be called “poor” would take away the liberals’ main claim to influence and power.

An e-mail from a reader whose job requires him to take urine tests, to make sure he is drug-free, wonders why he is taxed to provide money to people on welfare who are also on drugs. He thinks they should have to take urine tests too, before they get his money.

Recent covers on Time magazine and Newsweek– as well as the stories inside– suggest that these magazines are as giddy as teenagers are over some rock stars, when it comes to Barack Obama.

Always worth reading. (Read the Whole article)

Inflation explained to a 10 year-old

Inflation Is… A Letter to a Ten-Year-Old


Well, let’s pretend that you’re not happy with the allowance that your parents give you. You don’t have enough money to buy all the bubble-gum, hamburgers, comics or toys that you want. Let’s also suppose that you had a Magic Machine that could print all the dollars you wanted. (This is called “counterfeiting” and people go to jail for doing this. But just pretend that you could print as much money as you’d like.) Since you would have all the dollars from this Magic Machine you could spend as much as you like and would not have to worry about asking your family for a bigger allowance. When you’re on a limited allowance you have to watch your pennies pretty carefully. But if you had a Magic Machine, you could be less careful with your dollars. You wouldn’t have to choose between a new book and a pad of drawing paper. You could buy both and even more! This would be fine and dandy for a time.

But suppose your friends all had these Magic Machines or that you had so many dollars that you gave a lot of them to your friends. Well, if enough of you had loads of money to spend at the local candy store pretty soon something interesting would happen. The candy store owner has only a certain amount of bubblegum to sell. But suddenly, with you and other “rich” kids, there’s a big demand for bubblegum! If he had only 5 packages of gum for sale and there were ten of you who wanted to buy it, any one of you might be willing to pay $10.00 or more for one package of gum. (Remember that back when you had only your allowance, you’d never pay that much for a little pack of gum!) Because of the bigger demand, the owner of the candy store might decide to ask a higher price for the gum — and you will pay it because each of your dollars has lost some of its value. You may seem “rich” but your money has lost a lot of its buying power because there are others who also have lots of money and are “rich.”

In very simple terms, this is what our government has done. Through many decisions made by the officials in the government, there has been an increase in the number of dollars printed. There are just many more dollars—paper dollars that don’t buy as much as the old dollars did. (You’ve probably heard adults say, “Gee, the dollar doesn’t go as far as it used to.”)

If it can be explained that simply to a ten year-old, why can’t elected officials understand it?

Of course, given the fact that elected officials do worse on a civic literacy exam than the average citizen, maybe that’s not so surprising.

Sales Tax Map

I saw this map and couldn’t believe what it showed:

I travel to new England a couple of times a year to visit family and get annoyed at the 6% tax rate in Connecticut and 6.28 in Vermont. I was stunned to learn that those rates don’t put either state in the top 15 states for sales tax rates. Better a sales tax than an income tax, of course, but still…

Hat Tip: Club for Growth

Socialism is already here

George Will layeth the smacketh down:

The seepage of government into everywhere is, we are assured, to be temporary and nonpolitical. Well.

Probably as temporary as New York City’s rent controls, which were born as emergency responses to the Second World War and are still distorting the city’s housing market. The Depression, which FDR failed to end but which Japan’s attack on Pearl Harbor did end, was the excuse for agriculture subsidies that have lived past three score years and 10.

The distribution of a trillion dollars by a political institution — the federal government — will be nonpolitical? How could it be? Either markets allocate resources, or government — meaning politics — allocates them. Now that distrust of markets is high, Americans are supposed to believe that the institution they trust least — Congress — will pony up $1 trillion and then passively recede, never putting its 10 thumbs, like a manic Jack Horner, into the pie? Surely Congress will direct the executive branch to show compassion for this, that and the other industry. And it will mandate “socially responsible” spending — an infinitely elastic term — by the favored companies.

In America, socialism is un-American. Instead, Americans merely do rent-seeking — bending government for the benefit of private factions. The difference is in degree, including the degree of candor. The rehabilitation of conservatism cannot begin until conservatives are candid about their complicity in what government has become.

As for the president-elect, he promises to change Washington. He will, by making matters worse. He will intensify rent-seeking by finding new ways — this will not be easy — to expand, even more than the current administration has, government’s influence on spreading the wealth around.

Will does a great job showing the failures of both parties in expanding socialism; Democrats (rightly) get more blame for it, but the GOP is far from innocent on this count.

How the Community Reinvestment Act promoted today’s financial troubles

The Clinton administration has turned the Community Reinvestment Act, a once-obscure and lightly enforced banking regulation law, into one of the most powerful mandates shaping American cities—and, as Senate Banking Committee chairman Phil Gramm memorably put it, a vast extortion scheme against the nation’s banks. Under its provisions, U.S. banks have committed nearly $1 trillion for inner-city and low-income mortgages and real estate development projects, most of it funneled through a nationwide network of left-wing community groups, intent, in some cases, on teaching their low-income clients that the financial system is their enemy and, implicitly, that government, rather than their own striving, is the key to their well-being.

It doesn’t specifically address today’s financial troubles, but that’s because this article was published when Bill Clinton was still President. Note that $1 trillion figure listed above is much larger than the $700 billion requested by the Bush Administration, even without factoring in inflation.

The Importance of Fannie Mae and Freddie Mac

But the Fannie fiasco matters for a less obvious reason. There are other accidents waiting to happen in the social entitlements whose costs also will jeopardize American long-term growth. Social Security and Fannie aren’t often spoken of in the same breath — as programs go, we associate Social Security with the swinging-and-60-plus crowd, not the Swinging ’60s.

What Social Security and Fannie have in common is that both have lived important segments of their lives off-budget. Tax increases are likely to pay for Fannie and Freddie. These increases will remind voters that being off-budget doesn’t mean a program won’t eventually penalize the taxpayer. Burned by Fannie, voters may get ready for entitlement reform.

And how the trouble traces its roots back to the 60s.