by Steven Waechter | Jul 22, 2013
Former Michigan Congressman and Reagan Budget Director David Stockman’s new book “The Great Deformation†provoked a flurry of insult and ridicule when it first came out back in April. I’m late to the party because as a law school graduate I spend all of my spare cash on liquor; in fact, I have not yet read the book. Fortunately for me, book tour promotional speeches are readily available on Youtube, and Stockman has no instinct for holding back.
Here is the gist; the Bretton Woods Conference made the dollar the reserve currency of the world, it was gold-based until 1971 when Nixon decided to let it float free, allowing the US to run endless trade deficits with mercantilist, export-led industrializing countries in East Asia. Along the way, the US ran up an enormous government debt – selling bonds to the East Asian economies that were gradually undermining American industry – to expand the welfare state, fight a half-dozen wars, fund some peanut farmer’s idea of Synfuels, wind power, weapons systems that weren’t even used in the half-dozen wars, and what Stockman refers to as the HES – Healthcare, Education, and Social Services employment sectors – government jobs funding the consumers of Chinese goods.
Calling the Federal Reserve a “Bubble Machine,†Stockman digs into their low-interest rate policies and attempts to fine-tune capital allocation through the Tech Bubble, the Housing Bubble, and the Government Bubble that is, according to Stockman, about to pop.
I see no reason to doubt Stockman’s basic assertions; the stock market is playing with new highs even as the labor participation rate slips – only about 47 percent of adult Americans have full time jobs – and a full 100 million Americans receive some kind of food aid from the federal government.
What remains of American prosperity is Crony Capitalism in Stockman’s terms, where politically-connected operators get all the benefits of cheap money from the Fed, tax breaks only they can claim, and bailouts when things go bad; and the bulk of the people get nothing, not even jobs.
There is no escape, either. Stockman doesn’t hold back regarding Social Security, Medicare, the massive debt already on the books, and the massive tax hikes that will be required to keep the grist mill turning, assuming the next generation of tax oxen can even earn income – and Stockman doesn’t seem to think that they will.
The stunning loss of what he calls “Breadwinner Jobs,†which are jobs that actually pay the bills, has gone hand-in-hand with the loss of sound money and the growth of the welfare state.
The middle classes have been the main patrons of sectors ranging from real estate, insurance, retail, and even my field, the law. The nobility of Europe could commission artists for grand portraits and sculptures, but it took a growing bourgeois class with the money to buy houses worth decorating to spur the great easel painters of the Dutch Golden Age or the salons of 19th Century Paris. From art to coffee, the principle is inescapable; the indulgences might exist in some form regardless, but their proliferation takes middle class aspiration.
I think that our middle class is in trouble; Stockman believes this, too. With bills that we cannot pay, debts we cannot service, interest rates that cannot stay low forever, a large population of labor rendered unemployable by circumstances, and no indications of growth beyond the rather disturbing rise in the number of coffee shops around the Des Moines Metro area – patronized by students and a handful of investors who “feel wealthier†because the Dow is up – then the next meltdown will be far worse.
Do you deny that the middle class is shrinking? I have an exercise for you – right now, get in your car and take a drive through the nearest urban area. Count the number of times you see the following scene:
A super-discount retailer (Family Dollar, Dollar Tree, etc…) sharing a parking lot with a payday loan outlet, and a bucket-shop tax preparation shop (they specialize in helping low-income people claim the Earned Income Tax Credit) and some sort of no-frills dining. Depending on where you are, you might even see a blood plasma collection company and in the near vicinity there will be a “buy here pay here†auto lot, where used cars are sold on credit to people who cannot get formal bank loans.
Hardly the commercial trappings of a wealthy economy.
by Steven Waechter | Jul 1, 2013
It is axiomatic in history that the new worlds of the revolutionaries tend to resemble the social systems of the past. Tsar Alexander II freed 60 million serfs with the stroke of a pen, and seventy years later Joseph Stalin would re-impose serfdom under the guise of collective farms. He used bullets instead of ink. Similar stories can be told of the French Revolution, the Chinese Civil War, Oliver Cromwell, and probably all revolutions in some respect.
Alexander Hamilton wanted America to copy the British system, complete with political elites, state-supported monopoly corporations like the British East India Company, and all-powerful central government. It took two hundred years to overcome Jeffersonian resistance, but Hamilton finally won when TARP was implemented.
Perhaps it is no surprise that Barack Obama’s career-building commitment to the rhetoric of egalitarianism would lead to a stratified-by-force society resembling the old feudal model.
Get Fewer Hours, for Less Pay, and No Benefits
A friend of mine is facing the situation that has been making headlines lately; employers are cutting hours and eliminating their existing health care programs. Her employer (a farm-and-country retail chain) currently provides their employees with monthly cash payments earmarked for employee healthcare needs.
The company has been considering eliminating the cash payment, because paying the Obamacare penalty will be cheaper. Now, let’s examine this with the incredulous and caustic clarity that is my trademark – the company will stop giving money to employees for their healthcare needs, and give it to the government instead.
The employees lose their health program and are now individually liable for the Obamacare penalty if they fail to obtain health insurance on their own – fewer resources and greater obligations, a pincer strike on their standard of living.
FTE’s
Obamacare minstrels have been pointing out that the law goes into effect for companies with over 50 full-time equivalents – or “FTE’s,†so a company with 10 full-time employees and 100 part-time employees would have 60 FTE’s and would have to provide insurance but only for employees that work over 30 hours a week – in this case, 10 employees.
Fewer benefits, fewer hours, less income, and more obligations; employees lose at every bloody turn. To make up the difference, employees will scrounge for second and third jobs, as well as government support.
It used to be that you found a job and worked hard, so you would not have to rely on public support. Now, you will be dependent on the government whether you have a job or not.
We’re All Day Laborers Now
Corporate America is in a process of firing all of their employees and replacing them with temps. Much like some serfs were Villeins and some were Cottagers (the difference was that some retained land and others were landless laborers providing service to the lords for subsistence), there are several types of temp employee.
Some are just like standard employees, except that they have to reapply for their job every 3 to 6 months, while others are full-fledged employees of a temp agency, and are sent out on contracts to whatever employer has engaged them.
Check the job boards for your home town; temp agency jobs might be the bulk of what is available.
Revolutionary Destruction
Causing strain on social and economic relationships has been a tactic of ideological struggle between countries, factions, movements, religions, and all radicals since the beginning of time.
Causing stress within families can justify enormous social work bureaucracies; causing stress within the workplace can break down the economy and make employers and employees view each other as enemies and potential litigants; and so on with teachers and students, citizens and police, and any thing else you can think of to insert more arbitrators, sensitivity counselors, HR consultants, labor activists, and social workers into the workings of the nation.
I haven’t even included the doctors opting for early retirement. So, what will the part-time employee with no health coverage whose tax refund was eaten up by the Obamacare penalty and has no spare cash because scheduled hours were reduced do for healthcare? There will be Medicaid, and emergency rooms – but hospitals will be understaffed.
Perhaps you should become good friends with your local veterinarian; it helped on “The Walking Dead,†and it might come in handy as we slide into post-industrial feudalism.
by Steven Waechter | Jun 12, 2013
A sizeable chunk of my legal career has been spent neck-deep in the morass of the foreclosure wave that has wreaked havoc across the land several years ago. If you wonder what has made me cynical about both the economy and the competency of government, it was my year doing foreclosures.
First of all, I am not the big expert, and this is in no way legal advice; I worked long enough to learn how the process works and how it ties in to real estate market and the economy as a whole. I think I have put the picture together reasonably well, and I have learned a few things about our national obsession with real estate.
Banks Do Not Hold Mortgages
The fact that mortgages are syndicated and securitized – a high-end way of saying that they are sold off and bundled into bonds, because I have the diplomas and still harbor an urge to use them – has reached public knowledge for the most part.
The bank might sell the note and mortgage to a mortgage servicing company or hold them in their own servicing division, but either way the “beneficial ownership†is sold off, often to Fannie Mae, Freddie Mac, or into an Asset-Backed Pass Through assembled by an investment bank – the mortgage-backed securities which made headlines in 2008 and are now being bought up by the Federal Reserve at $45 billion per month. The banks stay involved only as servicing agents.
This is why a foreclosure case’s name is so long; things like “XYZ Bank NA, as Trustee under agreement dated May 1, 2004 for Asset Backed Certificates Series C-2004 v. Joe and Jill Serfdomfaller,†are common.
Because the banks have no real stake in the mortgages any more, it is financially beneficial to them to cut costs in their servicing departments. This has driven massive outsourcing in the sector, and there is no real incentive to actually deal with anybody. Like chess pieces protecting the king, the bank’s employees are there to prevent you from getting to someone who can actually help you.
There is No Free Market in Home Mortgages
The government has busied itself with housing programs since the 1930’s, and if you attended public school you are probably inclined to believe that these efforts were all for the benefit of the populace themselves. I briefly believed that back in college, but working as a foreclosure attorney snapped me back to reality.
Congress chartered the Federal National Mortgage Association (FNMA), commonly called Fannie Mae, to purchase mortgages from banks. The idea being that by buying the mortgages, the banks would be re-capitalized immediately and could write more mortgages.
Originally, Fannie Mae was a government-owned enterprise, but was privatized to pay for the Vietnam War. Of course, a privatized, government-sponsored mortgage buying company would look a bit monopolistic, so Congress chartered Freddie Mac as a companion company, to buy conforming loans as well as mortgage-backed securities.
Alongside the two Congressionally-chartered government-sponsored enterprises (GSE’s), were other programs like the Federal Housing Administration, or the FHA, and it provides insurance to both home builders and home buyers.
Most importantly, FHA provides mortgage insurance at a cheaper rate and with easier terms than private mortgage insurance, requiring less than 4 percent down payments, and thus skewing towards higher-risk borrowers.
If a mortgage goes into default during the mortgage insurance period, then the bank will foreclose, and then deed the house to HUD (FHA’s parent department) in exchange for the entire balance of the bad loan. That is how HUD gets so much real estate.
The Federal Reserve Pushes Debt
Not only do we have two government-sponsored companies buying mortgages, along with a government agency designed to encourage higher risk lending, we also have the Federal Reserve pumping the system full of cash, both with a very low Funds rate, but also now by directly purchasing both US Treasuries and mortgage-backed securities at a combined level of $85 billion per month.
The structure of the mortgage industry – mostly assembled by government action – was thus inflated by the Fed in the last decade with low interest rates and is now being re-inflated with lower interest rates and asset purchases. Altogether, bank depositors aren’t that important in the housing market any more. So long George Bailey.
Modifications Were a Joke
Think about it this way; if a mortgage for $200,000 goes bad, and the house is only worth $100,000 at the time, then the bank, FNMA, the investors, or the FHA is likely to lose $100,000 almost instantly in the foreclosure – they lose the “asset†of the $200,000 mortgage on their books, and replace it with a $100,000 house.
Because of this, any cash they can squeeze out of a borrower before the inevitable foreclosure on these bad loans (mostly written off already by this point) would go straight to the bottom line, saving money for the banks, the investors, FNMA, or the FHA as the case may be.
HARP, or the Home Affordable Refinance Program, had more success. It was designed to help underwater borrowers refinance without having to default. This would help them take advantage of the lower interest rates, and avoid the loss of asset equity that was hitting the financial system so hard.
In Defense of Strategic Foreclosure
In almost all circumstances, borrowers would have been better off defaulting rather than modifying. Instead of paying their $200,000 mortgage on their $100,000 house at 8 percent, they could pay a modified 3 percent, but still would have to throw money into the black hole without acquiring any equity from it.
I had a case like that; it was a couple in their mid-fifties, with no savings left, and their modified mortgage payment was still about $1,300 a month. This, in southern Iowa where a 2-bedroom apartment can be had for $600 a month. That was $8,400 a year they could have saved in cold, hard cash, to use to begin rebuilding their lives and avoid living so tenuously – especially at their age.
When you are under that much financial strain, guilt and sentimentality will do no good for anybody. If you are broke, admit it. If – or more likely when – they default again, with no cash reserves they are very likely to fall permanently into the dependent classes, in terms of housing, food, income support, and medical care.
Debt, on Top of Debt
That sums up the American economy in the words of David Stockman, and I see no reason to doubt him at this point. The idea that we don’t have to manufacture, mine, drill, or grow more in order to produce more wealth, but can simply purchase more assets with borrowed money, is a dangerous mindset that cannot last forever, a lesson we should have learned in 2008 but apparently haven’t.
If you think this is a glorious recovery, then answer me this: Where is all the wealth being produced by our allegedly recovering economy? The prices of inflation-sensitive assets are going up, but so are trade deficits, food stamp rolls, and the number of people outside of the workforce entirely. I think I am currently a “freelancer,†but that is just a white-collar unemployed guy.
This former foreclosure lawyer is more likely to live in a shack and raise goats than buy a mortgaged suburban house, because debt and freedom cannot harmoniously coexist. Maybe we should pay members of Congress in goats instead of money…
by Steven Waechter | Jun 3, 2013
Well, another class of high school graduates are killing time until they begin their college experience. In four, five, or six years, many of them will graduate from college, and move to Dallas County so they can work as temps at Wells Fargo.
Meanwhile, town squares across Iowa are emptying out. I’ve spent some time exploring small towns in rural Iowa, and there are common threads that threaten to further damage the prospects of the young, and may even threaten the existence of many towns across the state.
And so it goes; young people leave to try and buy jobs that don’t matter (and often don’t exist in large numbers), buildings stand unused, and eventually the towns just collapse into stagnant malaise.
What Muscatine Has To Say
Muscatine is a unique town; the downtown fell into disuse as businesses moved to the ring road, but Muscatine kept some relatively large manufacturing and agribusiness installations, as well as banking and insurance industries. This meant that there was cheap, unused store space downtown, and a population with enough disposable income to support a restaurant culture which is unique in my experience.
Italian, Mexican, and Korean (called the Yakky Shack, it was a personal favorite of mine) can be on the menu for any given meal. Avenue Subs, just around the block from my former law office, is truly unique. Their sandwiches cost more than the chain sandwich restaurants, but the place was always busy at lunch time.
If you can re-create their menu reasonably well, you could open up in any mid-sized Iowa town and I’d bet you would do very well – if you can keep start-up costs down.
What Can Communities Do?
I am often accused of “having no answers,†and “being negative and critical,†and “being mean.†Well, I am an intensely unpleasant person in many ways, pessimism is the lubricant of victory, and I don’t believe in the government’s ability to solve social or economic problems – which translates into “having no answers†when you live in a society enamored by Statism.
In towns and counties across the state there are established businesses, and many of them have working relationships with chambers of commerce or local economic development corporations.
Some of these business interests and organizations have either direct control of vacant retail space or contacts with property owners with retail, warehouse or light-industrial space to offer but with no available takers.
So, how about a community-level angel investor network? Why don’t we put young entrepreneurs together with established business owners or property owners to help them raise start-up capital – cash, space, or equipment – for their own small businesses.
What businesses? That’s the beauty of it – I don’t know. I think the sandwich shop idea would work well in any town of about 5,000 + people, especially if you can get space within walking distance of the largest employer in town, the school, or the college.
Maybe internet commerce, custom clothing, fresh foods, computer game design, who knows.
But, College is Important for Jobs Skills…..
No, it is not. The idea that your young go-getter will be more entrepreneurial after spending half a decade with tenured academics is laughable. If you need to learn accounting, take accounting at community college part-time for a fraction of the cost.
Why can’t Iowa become the youth start-up capital of the country? Why must we continue to shuffle the young and the (presumably) ambitious into expensive colleges only to graduate with the pressure of debt and depleted financial resources pushing them towards the work-a-day life that could disappear in the next round of layoffs?
I’m Just a Lawyer, but…
Now, I am perfectly willing to admit that I am not the exemplar of my own advice – think of me as the desert hermit the protagonist seeks out for guidance. That is probably why I was attracted to the law, and most of my legal career has involved debtor-creditor law, so I know how debt can screw up a life or a business venture.
This is how the Chamber of Commerce can help. They can assemble angel investors with cash, equipment, or space available. They can arrange discounts for accounting and legal services for things like taxation and payroll. They can send experienced businesspeople into the schools to speak on business creation, promote self-employment, and whatever else they can think of to encourage young Iowans to consider independent livelihoods without the need for debt financing.
If you fail, then start over with a different idea. If you succeed, then you owe me lunch.
by Steven Waechter | May 3, 2013
Having nothing better to do, I decided to spend Monday morning on the DMACC campus for a spring career fair. I wanted to wander around and ask questions to people to try and gauge their perception of the job market, but I had no intention of simply administering a poll. No, I was going to make people defend their statements by asking why they held that belief, like Socrates but without the profoundness.
I asked jobseekers if they were feeling optimistic or pessimistic. I asked recruiters about what kind of people they are looking for, both in terms of skills and personality.
Optimistic, They Think
Personally, I believe that optimism is stupid and should be hated, but I appear to be alone in this sentiment. Not one person admitted feeling pessimistic when asked directly, but when asked why they felt optimistic the responses were not very convincing. Most of them professed to be “upbeat†people, none of them based their professed optimism on confidence in finding employment.
One guy challenged me to explain how a person could get out of bed without being optimistic; I explained that getting out of bed has more to do with an urgent need for urination than a sunny disposition.
With only minimal coaxing I got a number of people to divulge some worries they held about finding work that paid sufficient wages to get on with their lives. This was the sentiment from some cosmetologists and a video store clerk who found my line of questioning strange but entertaining.
One young lady had experience in call center collections. I always wondered what people with lip rings ended up doing for a living, and now I know.
One quite profound comment I received was from a jobseeker who was leaving when I spoke to him. He was feeling pretty good about the day, and explained that it was because he actually got to speak with real-life people about getting a job, which is a novelty in a world where everything is now done online.
What the Recruiters Had to Say
Not just wanting to badger the jobseekers, as lunch approached and the crowd thinned out I began focusing on the recruiters – I was willing to be obnoxious but did not want to be disruptive, so waiting until the recruiters had nothing to do seemed like the polite way to go about things.
I asked the recruiters about what kind of people they are looking for, both in terms of job skills and personality.
In terms of available jobs, IT professionals, nursing at all levels, and financial advisors appear to be in growing demand in Iowa; I would speculate that this is due to the aging population needing health care and financial services in greater numbers.
Sales positions were a bit harder to come by, warehousing and light manufacturing appear to be evening out, and accounting positions are open but require some specific knowledge of one area of accounting, which could make job hunting difficult for some of the accounting professionals.
Type-A personalities
I spoke at some length with a recruiter about what sort of personality her company seeks. Her comments boiled down to “a networking, outgoing, team player with a Type A personality.†It sounded to me that everyone needs to be a sales rep even if they aren’t a sales rep. She agreed with that sentiment.
Sorting personalities is largely bull wash, but there are clear differences between people who prefer boisterous activity to pensive reflection. I vaguely remember going to some sort of leadership conference in college where we were sorted into Blue, Orange, Gold and Green personalities. I don’t remember the test, but I do remember being in the smallest group.
I ran the Introvert-Extrovert angle by some other recruiters. They all agreed with the first recruiter, which I found annoying because I am the more pensive, less diplomatic, scowling type who prefers libraries to call centers – “an atmosphere as restful as an undiscovered tomb,†as Professor Henry Higgins put it.
The National Career Readiness Certificate Strikes Again
Iowa Workforce Development was there to push the NCRC, which I didn’t expect although it didn’t surprise me. The NCRC is being rolled out through the Skilled Iowa Initiative under the supervision of the Lieutenant Governor.
The effort is two-pronged, in that they must convince people to take the test, as well as convince employers to value the results in their hiring efforts – not to mention informing employers that the NCRC is a thing that exists, because most of them still don’t.
Final Thoughts
Perhaps the whole thing was absolutely pointless. Maybe all I did was waste time, irritate many, and perhaps amuse a few people who aren’t used to being accosted by a random guy asking inane questions, but I encourage all of you to try it sometime because it is sort of fun.
The people I spoke with seemed intelligent, capable people who were eager to work. The recruiters seemed happy to speak to me as well as to jobseekers. Whether it will translate into actual people obtaining actual jobs, I may never know.
Nobody seemed terribly confident. People professed to be optimistic but didn’t know why, recruiters thought people should be optimistic but couldn’t explain why, and the various workforce organizations thought that they had the answers – new tests, new skills, and new strategies – but couldn’t explain why these medicines would work in the actual economy.
I left more convinced than ever of one thing; the American economy doesn’t work for a large number of people. In such an economy, the only real opportunities are the ones you make yourself. There was a time when most Americans had independent livelihoods, and I think it is time to re-examine self-employment.
Despite what you hear from politicians, the government hates self-sufficient people – they are too difficult to tax. It is much easier to tax a Bud Fox (Wall Street) than a Charles Ingalls (Little House on the Prairie,) which explains so much about our nation if you stop and about it.
We need as many people as possible to be as independent as possible from the mainstream economy; not just independent from government support, but people who don’t need to work for others to earn a living. In such a world, the career fair becomes absurd as a concept, not just made absurd by a little Socratic questioning.
by Steven Waechter | Apr 1, 2013
To kick off the IWEA conference at HyVee Hall, both the Governor and the Lieutenant Governor took turns at the podium to celebrate Iowa’s commitment to wind power. I was there to take notes and to take a look around.
The Governor’s comments were short, citing Iowa’s adoption of wind energy standards, the lease royalty income for landowners, the jobs associated with the wind energy sector, Iowa’s exporting of wind-generated power, and used a comment on the importance of the STEM curriculum (science, technology, engineering, and math) to introduce Lieutenant Governor Kim Reynolds, for whom STEM is something of a pet project.
Knowledge-based Economy
The Lieutenant Governor’s comments centered around education; preparing the young for the jobs of the “knowledge-based economy,†which I put in quotes because she said that exactly, and this happens to be one of the phrases that triggers irritation in your favorite derelict lawyer – turned political dissident.
The idea behind the knowledge-based economy comes from the plan for the post-Cold War America. As the Soviet Union wound down, the plans for a global, integrated economy that were shelved shortly after the Second World War were revisited.
America, which up until then had relied on its overwhelming industrial output for its wealth, decided that the new comparative advantage would be in the “knowledge economy.†Governments, businesses, and foundations associated with education began planning academic curricula for the new economy which they imagined would take effect.
Because Americans would be far too rich from tech stocks and mortgaged houses to bother with the dirty fingernails of manufacturing, those who needed income would have to cater to the needs of the newly wealthy and the best jobs for the new service economy would only be open to the educated.
Thus, we were saddled with an educational model designed for an economy that was to be designed in accordance with political speculations and not real human needs, and the entire thing blew up. NAFTA turned factory workers into store clerks and Mexican subsistence farmers into illegal immigrants, college turned young Americans into Helots, and the jobs of the “knowledge-based economy†have not materialized except inside the government and government-supported industries. (See “Think College is Critical? Bureau of Labor Statistics Projections Suggest Otherwiseâ€)
Public-Private Partnership. Read: State Corporatist Socialism
The final comment by the Lieutenant Governor was a pitch for the public-private project called the Skilled Iowa Initiative. I checked out their website and apparently the entire initiative is to promote the National Career Readiness Certificate.
Brought to you by the people from ACT, it allows you to prove that you can read and add, which you used to be able to prove by graduating from the second grade. Then again, you can’t get “Platinum Certification†from the second grade.
Wind-Industrial Complex
As I walked through the main hall and examined the exhibitor booths, the thing that jumped out at me was just how much of the wind energy industry that really isn’t the wind energy industry.
Construction companies, community colleges, environmental consultants, computer services, and even law firms are in on the act. The IWEA appears to have close relationships with the Nyemaster firm – who had a booth there – as well as the Brown Winick firm – the IWEA website indicates that a couple of their directors are partners at Brown Winick – both of Des Moines.
Hippies often like to cite Dwight Eisenhower in regard to defense spending, particularly his comment that “In the Councils of Government we must guard against the acquisition of unwarranted influence – whether sought or unsought – by the Military-Industrial Complex.â€
If you watch his entire Farewell Address – which is about 15 minutes and available on You tube – you will see that Ike was warning about the situation we have right now; an economy too heavily dominated by the public sector, where government subsidy is substituted for private sector growth, and when private interests grow dependent on certain government programs and thus become vociferous lobbyists for continuing their own line items.
“Weighed in the light of a broader considerationâ€
What have we done, besides building another state-sponsored pressure group? Turning off the tax credits would provoke hostility from the entire structure of energy consultants, lawyers, and lobbyists.
But, then again, who would want to upset the apple cart; these are “industrial jobs†after all, and landowners are earning royalties, and we now export wind-generated electricity (the United States is also the largest exporter of military hardware), so when electric bills go up to cover the installation costs of these turbines ( as reported by the Cedar Rapids Gazette, “Alliant Energy seeks 13.8 percent rate increase,â€) well, that is just progress.
by Steven Waechter | Feb 12, 2013
In my senior year of high school I took advanced physics with Mrs. Osborne; one of my favorite classes with one of my favorite teachers. Being an advanced-level course, only kids who wanted to be there had signed up for it. The teacher knew that we wanted to be there, and actually wanted us to be there as well. The class was very instructional and free of behavioral problems. Amazingly, the teacher treated us like full human beings – which is not always the case in public school.
The moral sentiment at work was that of voluntarism – not to be confused with volunteerism, which is when career politicians or community leaders want you to work for free. Voluntarism is the manifest free will; when you do something because you want to do it.
In my opinion, only voluntarism can save the academic future of most youth, and thus education reform is largely a waste of time.
Compulsory state education does not have the tools needed to enact this lesson on a societal scale. How can you introduce voluntarism into state-run, compulsory education? You can add a handful of electives for a handful of students, but how can an institution that depends on force adopt the benefits of free will?
The philosophy behind education has also changed; many Americans still equate education with Laura Ingalls Wilder and prairie schools, and a time when education was geared towards teaching specific skills designed to help the students understand the world and be more self-reliant in it.
Teaching to increase self-reliance is not the same thing as preparing for the jobs of tomorrow. In times past, the philosophy of education acknowledged – as the pediatric human resource gulags of today no longer do – that children are actually people.
A Dutch Master’s Take
Any person who is concerned about the state of education in this country would do well to consider “The Geographer†by Johannes Vermeer. (You can see a representation of it from Wikipedia here)  A man is stooped over a map on a table and holding a compass. His other hand is resting on a book – he is propped up by knowledge in a sense. He is peering out the window, and the cabinet behind him is casting a rather long shadow. Perhaps the man was so carried away by his study that he lost track of time, and is now noticing the sun moving lower in the sky. Such was his delight with his work.
The late art critic Robert Hughes said that the job of art was to “ make the world whole and comprehensible …. Not through argument but through feeling, and then to close the gap between you and everything which is not you, and in this way pass from feeling to meaning.â€
Now, this is far too much existentialism for anything run by the government to digest, let alone copy. There is nothing for government to gain by having self-reliant people in a whole and comprehensible world.
Besides, the students don’t need to understand, they merely need to be trainable for wage-serfdom masquerading as opportunity. Understanding the world and having the tools to be self-reliant in it appear to be severe disadvantages today, much to our eventual detriment.
National Career Readiness Certificate
Brought to you by the same people who produce the ACT’s, the NCRC is a test designed to measure applied mathematics, reading for information, and searching for information.
It will also test “soft skills,†like teamwork and tolerance, to make sure that the propaganda was absorbed properly and to weed out the self-reliant, self-confident, potential whistleblowers of tomorrow.
According to an Iowa Workforce Development presenter, the NCRC will soon be widespread – if not mandatory – for Iowa high school students. According to someone in the Governor’s Office, it isn’t. He also implied that I was falling for a conspiracy theory for thinking so, which annoyed me.
What is wrong with testing kids for employable skills?
Well, here is what is wrong with it; a fortune in taxes has gone to build schools, staff them with teachers, and bus children to the schools for 13 years at the end of which they receive a diploma, which is apparently so utterly disconnected from any intellectual capacity that the diploma-laden youth must take a standardized test to prove that they can read. Will no one throw the flag on this?
Voluntarism
Even teachers who hate everything I have to say will tell you that when a student is interested in something – and it doesn’t really matter what – performance increases across the board.
The excitement dripping from Vermeer’s work captures the essence of learning and curiosity conducted in solitude and peace, by someone who in doing so was quite transported. Government education policy cannot copy this; they can only make room for it.
They won’t.
What Vermeer celebrated in paint, America can suppress with psychoactive drugs. So, children will be sent to school, set to work on things which don’t interest them, and if they don’t sit down and shut up for their boring lessons, then their compliance will be compelled through pharmacology.
So much for manifest free will.
![Casinos, Bonds, and Cigarettes]()
by Steven Waechter | Jan 4, 2013
Back in 2001, Iowa decided to securitize its portion of the multi-state tobacco lawsuit settlement. “Securitize†means to borrow against it. They issued almost $700 million in bonds through the Iowa Tobacco Settlement Authority, with the settlement money itself as the asset backing the bonds. Most of them are even tax-exempt.
Such is the nature of public finance; the settlement was a windfall of revenue that didn’t have to be taxed from the citizens, but instead of just riding the wave, the government used it as collateral to borrow money. Never put off spending that can be done today.
More than seventy percent of the money Iowa receives from the tobacco settlement goes to debt service on those bonds – these, like most government bonds, are coupon bonds, meaning that the accrued interest is paid periodically, usually every six months. The remainder goes to health-related things such as smoking cessation, but the bonds themselves financed “various capital projects.†I’m not sure what that entails, so far I haven’t found any list of specific projects.
If the tobacco industry finally succumbs to things like smoking cessation programs, those bonds will find themselves unsupported. Not to worry though – they are state-issued securities and failure to deliver will negatively impact Iowa’s credit. Because of this, the legislature would almost certainly pick up the tab with taxpayer money.
So, smoke up – there are bonds to cover.
In the meantime, you can click here to track the sale of Iowa’s Tobacco Settlement Authority Iowa Asset-Backed Series C bonds, my favorite resource for municipal bond information. Of course the fact that I have a favorite resource for such information suggests that I need a more fulfilling career, or perhaps a meaningful relationship.
Ash Trays and Slot Machines
Should you choose to smoke inside a casino, you will be supporting other types of bonds as well. The Iowa Events Center, for instance, was constructed with funds obtained from the sale of bonds that are supported with revenue from the casino at Prairie Meadows.
All of Iowa’s casinos – how many are there now? – contribute revenue in some manner to state and local government coffers through various direct and indirect means, everything from taxes, licensing, and even leases for facilities, not to mention sales and fuel taxes from the nearby communities, although casinos run by indigenous peoples can be an excellent source of untaxed cigarettes.
Economic Placebo
Casinos have become the first, last, favorite, and perhaps only tool in the box of economic development officials, and cities across the state still want more of them.
There was a time when every person with the sniffles was given antibiotics, despite the fact that while antibiotics fight bacteria, they are useless against viral illnesses. Today, casinos are the alleged cure-all of choice: Factory closes down, build a casino; young people move away, build a casino; county supervisor dozes off during a meeting, build a casino.
Some jobs will be created, some taxes will be collected, and some concerts and shows will be held to keep people busy, but the underlying problems will remain unresolved. No goods or services are created in a casino, and no assets are being bolstered. Money is simply changing hands.
It is also hard to imagine large numbers of people coming to Iowa for the casinos. I’m sure some people do, but I would think that most of the patrons are from the areas near the casino itself, and thus the money is really just churned around the community, with government taking a healthy chunk after each rinse cycle.
Gambling has traditionally been treated as a vice, and one that was more often illegal than it was celebrated. This vice has now been legitimized as a source of revenue – the beast must have flesh to survive – and it is hard to imagine a serious push to reverse course, although there might be some resistance if the Iowa Finance Authority tries to open a cathouse.
Image © gavran333 – Fotolia.com
by Steven Waechter | Nov 28, 2012
The tax credit for wind energy is back on the agenda, and Iowa’s own Chuck Grassley and Terry Branstad are taking leadership roles in fighting for the extension, going so far as to appear together at a press conference about it.
Wind energy is my favorite target at the moment, because it combines socialist economics, corruption, aesthetic vandalism, junk science, and cynical political machinations – all melting together into a hideous soup of wasted money and ruined skylines.
Tough Love
After the last election, targeting two of Iowa’s best known Republicans for criticism is perhaps a risky business, but for those who think I – with my dislike of leftists – shouldn’t be doing it, I offer the following historical analogy:
In the days of the Roman legions, the centurions were legendary for their swift discipline. One centurion developed a habit of breaking his staff over the backs of soldiers who had acted disobediently. “Give me another,†he would say to his aide when it happened, and it happened so often that “give me another“ became his nickname . In this way, withering cruelty became not a malicious attempt to destroy, but deep concern for long-term wellbeing.
Well, give me another.
Political Venture Capital
Wind energy is an odious political scam. First of all, the industry cannot survive without government subsidy, namely, the tax credits. The wind industry makes profits not from the power grid, but from their tax returns.
It is also ridiculously expensive and underproductive. When Alliant Energy built the Whispering Willows wind farm in Franklin County, they petitioned utilities regulators for a rate hike to help cover the cost. The market had reached a price for electricity, generated by coal, but at that price the wind farm was not economically viable – it wouldn’t produce enough electricity to cover its cost.
They built it anyway. Even though the money in the wind industry is earned on the tax return and not the power grid, they didn’t want to eat an operating loss, so rates have to increase. Consumers in central Iowa found themselves paying more money for the electricity they used – still mostly generated from coal – to pay for a wind farm erected so the utility could earn a tax credit.
The utility sells the power and claims the credits; the landowners earn fees for having these modern art sculptures on their land; the turbines produce just enough electricity to power a massive, metaphorical conveyor belt carrying money from the pockets of poor customers to the rich and the politically-connected… Because that is progress these days.
Grassley stated at the recent news conference that “We have a 20 year investment in this… it would be terrible to throw a way a 20 year investment if it will mature in a short time.â€
We have been waiting for the wind energy industry to mature since the days when pioneer farmers could order a windmill from the Sears and Roebuck catalog. Most of them were dismantled after rural America was electrified. Now, the fantasy is that the same technology that was felled by electricity will be the future of electricity.
Central Dreaming
Nothing becomes outdated faster than a fantasy about the future. This is never more true than when the fantasy has its birth in the minds of politicians; a future brought to you by the same people who bring you inflation, wars, and prisons.
The general public is also rapidly becoming too poor to cover higher utility bills, but wind energy fits into the political rhetoric of our time and so they charge forward. Wind energy doesn’t make power cheaper, reduce our trade deficit, strengthen the dollar, or generate tax revenue – but it can get you elected.  It employs only a handful of people, especially when compared to the coal industry – which politicians have threatened to kill. The turbines themselves are insanely ugly, and provide a far too convenient backdrop for political photo opportunities.
I understand that this is politics. I also object to the fact that this is politics. The experience of subsidized public housing should have been enough to dispel the urge to make fantasy into reality, but it wasn’t. We will all pay the price. Literally.
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by Steven Waechter | Nov 14, 2012
Well, Barack Obama will be President for a second term. It is now time to take a look around, and prepare for what is likely to happen next. Based on my observations and what I’ve learned over the years, these are my predictions:
No Housing Recovery
Commentators have been calling the bottom of the housing market – and screaming with increasing urgency that it was time to buy – since 2007. The Fed has cut interest rates to nearly zero, and through quantitative easing has flooded the financial system with new money. This will continue for the near future, especially since QE-infinity was announced earlier this year. There remains no recovery in the housing market, and there won’t be a recovery.
Bad monetary policy has left the productive bits of the economy in an absolute shambles, and now there simply aren’t enough jobs to allow a recovery in the housing market. This will get worse, not better.
Mass Layoffs
This one will happen sooner rather than later. In an economy that is as sedate as ours the likelihood of reduced unemployment is already pretty slim, and if you consider the looming Obamacare mandates, tax hikes on income, dividends, and capital gains, as well as another four years of an administration that has a penchant for change (breeding uncertainty), I predict that there will be large job losses coming in the very near future.
Growing Poverty
This one seems to fall into place as well, especially for those laid low by the layoffs which I think are coming. But, even those who keep their jobs will experience marked decreases in their standard of living. In an economy where consumption is king and production – or any sort of value-added economic activity – is outsourced, taxed, regulated, or outright banned, the remaining employment opportunities take on a sort of wistful irrelevance. Many will be nominally employed, but at the same time wholly unable to support themselves, let alone able to assemble savings.
Spike in Utility Rates
All forms of energy are likely to get more expensive over the next four years. Obama has explicitly stated that he intends to bankrupt the coal-generated electricity industry in favor of renewable energy kitsch which can only be financially feasible with massive increases in electricity prices. Expect some coal plants to be shut down in the next term, and expect to pay far more for electricity.
High Prices for Oil and Grain
In a past article, I pointed out that since 1990, the United States has run trade deficits in excess of $9 trillion. This despite the fact that in 1990 the supply of dollars (the M2 metric) was only $3 trillion. In an economy where we can buy foreign goods by printing money, there is no reason to manufacture much of anything. This dynamic will continue for the time-being, and we will import shiploads of consumer goods and pay for it with nothing but inflation. This will lead to even higher prices for oil and grain, which are inflation-sensitive commodities whose production cannot be outsourced.
Feeding grain to livestock is a value-added activity, however, and in an inflationary economy the price of grain will go up, and the ability of the public to buy meat will be reduced, so I am predicting a continued decrease in the number of farmers who bother to raise livestock, as well as a decline in the overall size of the livestock herds in the country.
College Tuition Spikes; Enrollment Begins to Fall
Obama’s attempts to reform the student loan industry had nothing to do with controlling the costs of college. The government runs most of the student loan industry, and interest rates have been kept very low for Federal loans. This is all designed to get more kids into college, regardless of what it costs, and with no real limit to the amount of credit available to the college-bound, there are no incentives for colleges to control costs.
The luster has begun to rub off of the whole college experience in my estimation. A college degree has become little more than a very expensive lottery ticket, and new college graduates will not see any discernable increase in their employment opportunities, incomes, or future prospects.
Even with the endless propaganda urging kids to attend college, the decision to attend college will not make financial sense for a large number of American kids, and we will begin to see a decline in enrollments, especially in full-time, traditional enrollments.
((To Continue Reading, Click Here To Go Straight To Part 2))
The post Predictions for the Next Four Years (Part 1 of 2) appeared first on The Conservative Reader.
Former Michigan Congressman and Reagan Budget Director David Stockman’s new book “The Great Deformation†provoked a flurry of insult and ridicule when it first came out back in April. I’m late to the party because as a law school graduate I spend all of my spare cash on liquor; in fact, I have not yet read the book. Fortunately for me, book tour promotional speeches are readily available on Youtube, and Stockman has no instinct for holding back.
