Browsing the blog archives for March, 2010.

Top 10 liberal misunderstandings

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I spent an evening with WE THE PEOPLE OF BRUNSWICK COUNTY (www.wethepeopleofnc.com) last week. I addressed a number of topics, including what I see at the top 10 liberal misunderstandings that must be countered when we engage our friends, neighbors, and co-workers between now and November. I’m sure my list is incomplete, but here goes: 

  1. It’s Bush’s fault. I agree that Bush made some mistakes, particularly near the end of his presidency, but Obama is amplifying those mistakes. Everything’s on his watch now.
  2. Capitalism fails from time to time and must be countered with government intervention. Those who complain about the inadequacies of capitalism and demand more government fail to see how individual choices and current government intervention contribute to the crisis at hand. Healthcare is a great example. While Washington has been deeply embedded in healthcare for decades, we are told that millions of Americans (with cell phones and cable TV) just can’t afford health insurance. Yet we are also told that capitalism—more specifically the evil insurance companies—is the obvious problem. Really?    
  3. The government can be trusted. While private industry must meet its contractual obligations, Washington can change the rules that govern its obligations at a whim. Your social security benefits can be changed at a stroke of a pen.
  4. The “rich” can pay more taxes to fund whatever new programs we need. The money just isn’t there. The Wall Street Journal did the math last year, but many on the left just don’t seem to get it.
  5. The government can print money to fix the deficit. They don’t seem to understand that every dollar printed eventually devalues the currency. Wealth cannot be created by a printing press.
  6. Government can be efficient if managed properly. The IRS, Amtrak, and the USPS are but a few examples of long term government inefficiency.
  7. The issues are often too complicated to understand, so how can we (capitalists) be so sure that Obama’s proposals (socialism) won’t work? Sure, many of the problems we face are complex, but it’s not too difficult to understand the basic causes. This defense is just an excuse for ignorance, regardless of who uses it.
  8. All politicians (and both parties) are the same. Perhaps you could have made a case for this a few years ago, but it’s hard to watch the healthcare debate and actually believe this is true.
  9. I don’t care because I’m a net beneficiary of bigger government. This sad argument comes from zero liability voters (thanks to Andrew Wilkow for this descriptive term) who don’t pay net federal income taxes anyway. This group is approaching 50% of the population and many don’t see that income redistribution mandated by Washington is simply legalized theft.
  10. “We have to do something.” Really? Should government take action just because there is a problem? What if the action won’t solve the problem, makes it worse, or creates another one? Liberals instinctively think that government can solve most of the challenges we face, so they often intervene even when there is not clear solution. Conservatives favor limited government because we know that most societal problems cannot be remedied by government action.

I am convinced that most liberal arguments boil down to a short list of flawed arguments or assumptions about the role of government, how wealth is created, and the importance of personal property rights. I hope this list helps you organize your own defense of liberty and you help the liberals in your life find make sense of the world…

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Toyota Update

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It’s time to update my earlier blog on the Toyota situation. By now we’re all familiar with James Sikes, the California driver who alleged uncontrollable acceleration with his Toyota Prius.

I was highly suspicious of Sikes when I first heard the story. The setup was just too clean—nobody else in the car, acceleration on a relatively open stretch of road, his inability to shift the car into neutral, and a Toyota dealer that supposedly “turned him away” when he requested a fix several days earlier. I hesitated then (and still do now) to say that he fabricated the incident. I don’t know for sure, but I’d certainly bet on it, and I rarely gamble.

This case might seem déjà vu to some of you. The 1986 Audi sudden-acceleration scare turned out to be baseless. Audi, however, suffered staggering sales declines during the period because of the hype.

The number of formal complaints to the NHTSA about uncontrollable acceleration has skyrocketed since Transportation Secretary Ray LaHood targeted Toyota for national disgrace a few months ago. In other words, dozens of cars that have been driven for months or years without incident now accelerate on their own. Unless we believe that the cars are responding to our government’s desire for turmoil at Toyota, then we must conclude that most of these claims are probably unfounded.

The feeding frenzy on Toyota is in full swing. Dana and Douglas Weller of Seattle are now suing Toyota for excessive depreciation of their 2009 RAV4. Following that logic, homeowners should be able to sue Congress for excessive housing depreciation as well.

What role has our government played in this scandal? A big one. Before all’s said and done, Toyota will suffer massive losses in sales and its brand image far beyond what the market would have dealt out without LaHood’s intervention. Opportunists in our country know they will find a sympathetic government if they join the bandwagon of complaints against this evil company whose greatest sin has been to produce affordable, quality vehicles without union control.

Toyota recently issued a statement challenging Sikes’ claims. Sikes, however, says he “just wants to be left alone.” I’m happy to see Toyota fighting back. If I ran the company, I’d give Sikes two choices—retract his story or face a defamation lawsuit from Toyota. Sikes’ story has contributed to massive losses for the company. If he’s right, then Toyota should bear the responsibility. If not, then the company has every right to set the record straight.

Unfortunately, this is what you get when our government owns major stakes of two failing competitors. LaHood and others have a perverse incentive to beat down Toyota, Honda, Nissan, and the rest of the pack. Let this be a lesson. If you don’t like government bullying, then consider what would happen to private insurance companies if healthcare reform included a “public option?”

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Getting Rid of Bad Teachers

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By now everyone has heard about the fate of Central Falls High School in Providence where 93 teachers, guidance counselors and administrators were fired two weeks ago. Eleventh graders at the school had a 7% passing rate on a standardized math test this year. Fewer than half of the students graduate in four years. The school is clearly underperforming. Firing the teachers was not the Board’s first choice, but occurred after talks with the union broke down. The Superintendant was clear about his expectations and intentions well in advance, so the firings came as no surprise.

 My favorite version (tongue in cheek) of the story can be found at the Party for Socialism and Liberation website:

http://www.pslweb.org/site/News2/1499632738?page=NewsArticle&id=13738&news_iv_ctrl=1261

There you will find all of the reasons why the firings were justified, but I will focus on a few key points.

The main problem with government run schools like Central Halls is the government role and the structure it creates, not the teachers. Like any profession, there are good teachers and bad ones, but the system does little to distinguish between the two. Unions and most educators alike argue against “running a school like a business” because “the kids are too important.” Instead of emphasizing real outcomes, they concentrate on inputs such as certifications, degrees, years of experience, and following proper procedure in preparing lesson plans. There’s nothing wrong with any of these inputs per se, but they miss the point. In the end, it’s all about the progress kids make at the end of the year.

Educators often oppose the use of test scores and other outcomes for evaluating teacher effectiveness, arguing that teachers can’t control what goes on at home. This is both true and an obvious hindrance to good teaching. Teacher evaluations should be based on actual test scores, with an emphasis on the progress their students make—the difference between proficiency on day-1 and day-180 of the school year. Those who teach kids in poor neighborhoods shouldn’t get a complete pass because of the trying circumstances they must endure. Blaming the problem on “low funding” just doesn’t cut it.

Most of all, I am struck by the defense proffered by the fired teachers. I saw a photo of one holding a sign that read “We care about our students. Our students care about us. We are family!” Frankly, caring is just not good enough. This decision is about performance, and many teachers don’t seem to get it. We expect our mechanics to fix our cars, not care for them. We expect our doctors to cure our maladies, not just view us as a family member. Sure, caring about kids is a great thing, but it’s not sufficient. Schools should be managed for the benefit of the kids, not the teachers.

There’s another lesson here. Join a union and you get the union, for better or worse. I suspect that some of the fired teachers are doing a good job, but they were part of the collective. The good teachers in the group are now enduring the wrath that should have been directed at their poor performing colleagues.

I must close by giving tentative credit where it’s due. While I favor a reduced (or eliminated) federal role in education, Secretary Arne Duncan is one of the few competent Obama appointees. Obama and Duncan are arguing that the firings are necessary, at least for the time being. Frankly, I expect Obama to capitulate to union pressure on this issue in the coming months. I am guessing that some sort of “compromise” will be forged and many of these teachers will be “un-fired” before new ones are actually hired. The amount of federal education money flowing into education budgets is staggering, and this funding gives politicians and bureaucrats in Washington a lot of indirect control over what happens at the local level. For the kids’ sake, I hope that the Board in Providence stands its ground.

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Washington’s Financial Planners

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Last week Vice President Joe Biden proposed two new rules designed to help Americans avoid bad 401(k) and IRA investment advice: “If the rule is adopted, it would put in place safeguards preventing investment advisors from slanting their advice for their own financial benefit. [1] Investment advisors also would be required to disclose their fees, and [2] computer models used to offer advice would have to be certified as objective and unbiased.”

Biden’s proposal seems to make sense at first glance. What’s the problem with financial planners disclosing how they earn their money? It’s like reading the package before you purchase a product in the grocery store. However, there at least four serious problems with the certification requirement.

First, who exactly is going to certify computer models as objective and unbiased? In the end, Washington must either do the certifying or it must oversee those who do. With a financial track record that includes the likes of social security, Medicare, Amtrak and the post office, why would any reasonable person expect to receive better financial advice when bureaucrats are injected into the mix?

Second, a certification requirement could introduce a liability nightmare. Individuals whose investments lose value could claim that they acted on advice inconsistent with certified models. Financial advisors could find themselves at the mercy of juries often hostile to Corporate America and Wall Street.

Third, a certification requirement would likely result in a smaller number of highly similar computer models. There are sound investment principles of risk-reward and diversification, but financial advice is an inexact science, and there is no holy grail. In the end we must educate ourselves, make our own choices, and accept responsibility for the consequences. Well-intentioned government oversight would only limit our access to a wider array of financial recommendations.

Finally, the logic behind both provisions is that conflicts of interest among financial advisors impair the recommendations they make to their clients. But Washington has its own conflicts of interest. Bureaucrats might favor models that encourage investments in companies in which the federal government has financial or political interests like General Motors or General Electric. They might frown on models that “bet against the Fed” such as diversification into gold and silver.

Like most leftwing meddling into the economy, this proposal assumes that government is honest, fair, efficient, and objective, while those in the private sector simply cannot be trusted. Moreover, it assumes that the profit motive, by definition, creates a conflict of interest. To be frank, I don’t care how much my financial planner makes. All things equal, I want him to have some skin in the game and profit proportionally to the quality of advice he gives me. The profit motive creates more of an incentive for performance than it does any conflict of interest.

There’s an irony here. You may recall that President Bush’s proposed social security reform included an option to invest a small percentage of one’s social security contributions into a limited array of market investments. The left rejected and defeated this proposal, arguing that social security should be secure and guaranteed, and the government should not become entangled with investments in the stock market. Besides, individuals are free to set up their own IRA’s and invest as they wish. Biden is singing a different tune now.

The problem with Biden’s proposal is the same as with many of the ideas that come from the left—(presumably) unintended consequences. More times than not, the increase in the bureaucracy and the perverse incentives created when Washington inserts itself into the private affairs of individual citizens far outweighs any benefit derived from the regulation. If Biden wants to promote a secure retirement, he would be well advised to fix social security and keep his hands off of private investment decisions.

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