Too Big To Fail

Some ideas are wrong. Even if, at first blush, it seems like something you want to do.

In the past two months, we've spent more than 300-billion dollars attempting to fix the financial markets. And we're looking at spending more than another 300-billion dollars in the next few weeks.

Since then we've heard that our automobile industry needs help. Another 25-billion dollars. And the leadership of the national legislature, Senator Harry Reid and House Speaker Nancy Pelosi, are talking about adding billions more. There are estimates of increasing our national deficit by more than two trillion dollars.

Let me tell you a little secret: when companies go bankrupt, their assets don't disappear.

That may be puzzling for some. How can a thing be destroyed and still exist?

It is true that this kind of question boggled early scientists. Take a log. Burn it. Weigh the ash. Where'd all the weight go? It was reasonable to assume that what actually made a log a log was constituted of elements that only weighed as much as the ash that was left after burning it. And to listen to folks like Congressman Barney Frank talk about the auto industry, it's this kind of "sleight of hand" that's taking place in describing the need to save the auto industry.

So, for Senator Reid, Congressmen Pelosi and Frank, it's easy to deceive others into believing that if we allow the auto companies bankruptcy, all that will be left will be a pile of ash.

If only that were true.

I remember a mortgage I had with a savings and loan institution back in the 1980's. That S & L failed. Hooray! I had a free house!

But that isn't how it works, is it? Even though the institution that I had my mortgage with failed, the asset value of the failed S & L still existed. (I didn't even get a brief holiday on mortgage payments.)

So what happens when a company goes bankrupt? Whether its a bank, or an insurance company or, an auto manufacturer?

It's a recognition that the return on the value of the assets don't pay for the cost of those assets.

In the socialist dialectic is the trivialism, "To each, according to his needs. From each, according to his ability." The first corollary of socialism is, property is a form of theft. How does property rise to the level of theft? Because it fails to meet the re-distributionist promise of "to each, according to his needs."

If you've ever read any of the German philosophers or economists, you've been exposed to this kind of re-definition of words in common use. (Gawd, I read "Critique of Pure Reason".) There is a constant attempt at creating equivalence between different concepts. This attempt at creating equivalence usually ends with a necessary equivocation. It requires administration of the Afpel Test. (The Afpel Test is stated thus: if I really, really, really believe a thing to be true, it must be true.) Equivocation is defended based upon the intrusion of a concept called "duality". Under duality rules, a thing may be a thing and not a thing at the same time.

And nobody says this better than a German metaphysician.

The problem of socialism is the problem of definitions. If you start with the idea that property is a form of theft, socialists have a problem telling you what a thing is worth. What an asset is worth. What a "bad" mortgage is worth. There is a process that defines such things.

And that is the market.

Whether it is an automobile brand, fer instance "Chevrolet", or a mortgage located in the bad part of town in Detroit, the quickest way of finding out the value of either asset is to hold an auction, invite interested parties to the bidding, and sell the assets.

Wow. That was easy.

So what is holding up these auctions?

There is an uneasy feeling among socialists that if they begin to act like capitalists, the jig, as they say, will be up. And, of course, there is their version of a Contract With America. Their contract is made up of promises to different "victims" groups. If you're a non-victim you probably don't even know how many victims groups there are out there. The largest of these victim groups we will refer to as "the unions".

The failure of socialism is the same failure that socialists use to describe the failure of capitalism: greed. But I would argue, that some greed is better than another. (Wudya expect? I'm an avowed free marketeer!)

As I relate in my Econ 101 posts, Joe was driven to increase his production of carrots in order to achieve a surplus of carrots. And with that surplus he was able to improve the quality of life through trade and barter. His life was richer. But that pre-supposes a thing. The product of his effort is his property.

Joe is a capitalist bastard. Under socialism, Joe must turn over the surplus of his needs so that others may have what they "need". (When we begin the examination of Economies of Scale in the Carrots and Bicycles series, we're going to find out that there are different productivity increases that rely on the addition and subtraction of various inputs in the Product Transformation Curve. This will allow us to examine the productivity returns on the basis of what inputs are used. These changes in productivity will allow us to allocate the value of the inputs in terms of a generalized statement of profit.)

Socialists have a different starting point than you and I. You and I see the value of our work as resulting in a direct benefit to ourselves as individuals. Socialists see your making more money or owning more land or having a better car or having a nicer house as proof that private property is a form of theft.

You, as a member of this society, are a victim of this theft. (Well, mebbe not you, but take a look around your town. You'll soon find a victim of this theft.) So the Socialist impulse is to create a society where all of us have the same opportunity. The opportunity to have a bunch of stuff.

And who are the most represented victims of this form of theft in America? Union members. In their "us versus them" mentality, any surplus created by any form of economic activity is surplus that should go to labour. The fact that the Chairman of the Board of General Motors makes more than the guy working on the production line is proof to these people that private property--and by extension, the recipients of the surplus of this bountiful system--is a form of theft. Theft from the worker who labours on the line, stuffing the pockets of the Fat Cats with dough. It ain't fair!

Sure. But let's take a quick look at the market for labour. Particularly, the market for labour in the automobile industry:

(Thanks to Rodger at Are We Lumberjacks, who stole it from somebody else.)

Minimum wage in Oregon is $7.95 an hour. Since we have government picking winners and losers for us, if you choose to enter the job market, the state is going to guarantee you an hourly rate of at least this amount. (The fact is, few people worth hiring are paid this amount, but remember, this is a government statement of what people's labour is worth. Let's just take them at their word for the moment.)

What we see is that the average wage of workers is quite a bit higher than the wage level mandated by the state. (Would this average drop if we removed the minimum wage? I would assert most assuredly so. But, the unemployment rate would drop. Hmm. Too many goals.)

What this snapshot of wages should allow you to address is one of the reasons why the Big 3 automakers are having a problem making any money. Did you know that the price of labour in manufacturing a car is higher than the price of all the other inputs? Buy a new car for $20,000 and more than half of that is the labour cost.

The funny thing about mandates: they cost us all a lot more money.

Just as the energy companies are having to pay for their success with silly government mandates for "green" energy, the automobile manufacturers have had to pay for their success with silly mandates, too. Because politicians can implement their opinions in a very unique way. If their opinion is, we need to have higher mileage standards for automobiles, they just pass a law. In the real world, this is called Engineering Made Easy.

The practical implications of mandating automotive efficiency standards on manufacturers is lost on these people. What does Nancy Pelosi know about making a payroll? Barney Frank? Harry Reid?

It doesn't matter to these people. And, they'll tell you that to your face.

See, even though Nancy has beaucoup bucks, she got hers by doing the right things for America. When the head of Wells Fargo makes beaucoup bucks, he's getting his by ripping off the common man. She is entitled to her wealth. You are not. Even if you're making less than the guys on the line of the Big 3 automakers. They make more because they belong to a union. (Carrot and stick.)

So, how do you cash in? By joining a union.

Problem is, the unions are killing the Big 3. But not to worry. Barney Frank sez we're going to use TARP money to bail out the Big 3. Because we can't afford to lose that many union jobs.

I love it when government picks winners and losers. The winners here? The big automobile union. The loser here? Everybody else. (And you know what's funny? They're borrowing from your children and grandchildren to help their constituency out. Hilarious, no?)

We can't afford a war being waged against us by foreign terrorists. But we can afford spending three to five times as much to save an endangered species. The Automotive Union Worker.

Change!

Praise for the Governor's Green Energy Plan

(The Unagovernor, Ted Kulonczynski, has a Vision for Oregon's Energy Future. Thanks to his efforts, all Oregonians will be saved. Please read the following to find out how, exactly, this "plan" is going to work.)

Governments don't make money.

Corporations make money.

Governments aren't motivated by greed.

Corporations are motivated by greed.

When you repeat the above often enough, it isn't surprising that you tend to forget some basics about how much you depend upon the voluntary contributions to your life made by the men and women who work for corporations; and you forget the coercive power of the government to take away from those men and women the money they earn making your life better.

Which is why our Governor is going to lead us! Because governments don't make money, nor are they motivated by greed. Only government can establish a policy for energy for Oregon.

Up until this moment in time, we've muddled along, energy-wise. With a majority in the House and Senate, the Governor promises Oregon that we are going to be able to fix this problem.

What is that problem again?

Oregon doesn't have an energy policy.

Me? I'm not surprised, really. Oregon also doesn't have a space policy. It doesn't have a policy for shoes. It does have important policies for toilets and gasoline. Now you need to flush your toilet twice, whereas before the state's policy on toilets was put into place you only needed to flush once. As for the state's gasoline policy, anything that mandates you buy 25 percent more of a thing to reduce the use of it by 10 percent, well that's a winning policy move.

And Oregon businesses have a distinctive record of success when it comes to providing families and businesses with the electrical energy it needs; affordably, dependably and safely. The problem, of course, is that these businesses are corporations. And corporations make money. And corporations are motivated by greed.

Governments are good. They don't make money and they aren't greedy.

Since governments are good, and they don't make money, what would motivate a guy like our Governor to take on the energy companies in the state? (Well, other than the fact that they make money and are greedy?)

Energy companies have a real problem. You want cheap, dependable electricity. And the demand for that cheap, dependable electricity is growing. How do energy companies meet that demand for more, cheap, dependable electricity?

Here's where the Governor and his minions come in.

There are several abundant technologies that exist that would provide us with plenty of cheap, dependable electricity. There are several technologies that are planned. Given the choice between the existing technologies and the planned technologies, to which technology would you think an energy company would be drawn in order to provide you with cheap, dependable electricity?

What exists and is abundant? Well, first, in the Northwest, you'd have to look at hydro-electric electricity. We could easily increase electrical production from the dams along the Columbia River, but BPA has voluntarily reduced the amount of electricity it generates from the Columbia River dams in order to come, at last, to a resolution of claims between the tribes of the Columbia, environmental groups and sports fishermen.

So, some could say that our energy policy has been determined in part by Sports Anglers.

I'm not real sure that the concerns of Sports Anglers should be paramount in determining the supply of electricity for Oregon, but it is the path we have taken. So there you go.

Another abundant source of electricity in the Northwest is nuclear power. Huh. Nuclear. Just say it out loud. Nuclear. The word is sheer evil. Add to it the words corporate and greed and the fact that when operating at full-capacity, our one nuclear reactor at Ranier produced a quarter of all the electricity used by the state. One generator. One quarter of our electricity.

So, two generators would produce half of our electricity. Four would produce all of our energy.

So, what are our plans to produce all of the electricity we need from four plants?

Well, in the Governor's plan, there are none. Zero.

So, no more hydro, no more nuclear. Why? Well, they work. They create a lot of energy. But who would build them? Corporations. And corporations are all about the money and the greed. So what is left?

Well, the last option relies upon complex molecules found in the ground. And these complex molecules all have one atom in common. Carbon.

Up until now, the debate over how to produce energy in Oregon has been fraught with silliness. Sports anglers? Bejeebus. Give me a break. After the hysteria over returning salmon has died down a little, it turns out that the biggest determinant in the number and size of returning salmon has more to do with the decadal oscillation than dams. But facts never were any good when confronted with a good narrative. Dams kill fish. Therefore, we must destroy the dams.

But what led us to destroy the Trojan plant? Two-headed fish.

That's right. Two-headed fish. And Dog Boys. And cancer. And, just like the two-headed fish that never mutated into existence, and the Dog Boys who never mutated into existence, and the cancer victims that never mutated into existence, the Governor says we must now rely upon planned technologies that will never come into existence.

But we love a good story.

Solar energy for Oregon? Like I said, we love a good story. So, ask yourself, if PP & L and PGE are evil corporations that only care about making money and greed, why aren't they slamming the landscape with solar generating plants?

Because, dear reader, the technology makes a better story than it does a source of energy.

Amid the current political hysteria is heard the chorus "Change!" And we've elected magickal politicians to do our bidding. And these magickal wizards are going to pass laws that magickally change the way we've been doing things--relying upon making money and greed--to a new way of doing things that is Change! No more greed. No more hydro. No more nuclear. No more coal.

Solar! Wind! Wave!

The problem for corporations isn't that they are good at providing us with cheap, dependable electricity. The problem is, they are too good.

If we were still reliant upon Leyden jars for electricity, none of this would be an issue. But modern science and modern organizational techniques have dragged us to this place where we have corporations that are manned by experts, expert at providing us with cheap, dependable electricity. And they do it so well, that they create a surplus of electricity that they make available to markets. All you have to do is agree to the price that's being offered, and they'll hook you up.

As far as I know, there is no law that requires you to purchase electricity. There is a law that requires you to buy a toilet that you have to flush twice. And, in the city, within whose limits I live, I am required to have weekly garbage service. But I have not come across any statute, ordinance or codicil that requires me to purchase electricity. My electrical destiny is my own!

I can generate my own electricity. And, I've looked at purchasing an LNG generator for more than just a few years. There are reasons why I've not. The cost per kilowatt hour is not competitive. And that's before we begin looking at maintenance costs. But will that always be the case? Perhaps not, under the Governor's plan.

How can the Governor screw up energy in Oregon? Well, the same way the state screws up everything they attempt to improve: mandates.

And, again, it is the energy companies' own fault that these kinds of mandates are going to be passed. First, they're corporations. And we all know that corporations are bad. Second, they make money. (This is actually the most important thing, as we will see later.) And thirdly, they are greedy.

The moral failure of our energy corporations is primae facie evidence of their evil. That they produce an abundance of electricity cheaply and dependably is of no importance. Because?

Because it's the "wrong" kind of electrical generation. And for the Governor and his minions to take care of us all, we're going to need to make sure the evil corporations provide us with an abundance of electricity from the "right" kind of electrical generation. So, we're gonna pass laws.

Again, the unicorns of the "right" kind of technologies are going to be paraded around in hearings in the state senate and house. New chimeras of "green" are going to be found and mandated. And all of this is going to be going on in the open, right in front of you, and you're not going to be able to do a single thing about it.

Because you believe the story. That the unicorns and chimera of "green" energy are going to provide jobs and save the planet. And providing jobs and saving the planet is a good thing, no?

Now the good news for all of us is this: today we must blame the energy companies for providing us with abundant, cheap and dependable electricity. For it is only their success that makes these proposed mandates possible. If they were already close to bankruptcy, the investment costs in "green" technologies would never be possible. Through mandates, the Governor will be able to achieve what no panjandrum was ever able to achieve. The mad investment of billions of dollars on a product that no one is willing to pay for. And the energy companies will attempt to meet the mandates of the government for a while. Because, after it's all said and done, these evil corporations exist only for making money and greed; and it will be shown that the men and women who labour to provide you with abundant, cheap and dependable energy will attempt to carry-out the mandates of Our Dear Leader, as long as they are able.

Able? Able to what? Well, to make money. As energy costs soar, and jobs continue to decline, there will be a point at which no rational actor would attempt to participate in the market to provide energy. It is at that point that PGE and PP & L will pull-out of their operations in Oregon, just as PGE was forced to pull out of its investment at Trojan.

(Click on pic for cool site on Trojan!)

So, don't say "that will never happen". It has happened. And it will happen again.

When common sense is replaced by Vision, all kinds and types of diseconomies are created. Why is the Dow Industrial Average hovering around 8500? Because the markets know that the housing market is overvalued by trillions of dollars. And our government is not allowing those companies, those mortgage companies, banks and home owners who should fail to fail. Governments can mandate. But markets adjust.

Should the government invest in "green" technologies? Sure. I'm a big believer that one of the roles that should be played by our research institutions is to waste time and money on ideas that may or may not make sense. Really. A college professor with a nutty idea should get money to do research. Companies--those evil corporations--should spend their own money chasing down wild, fantastic ideas. I have no idea where the next great idea is going to come from. Neither do you. And, certainly, neither does the Governor and his minions.

But there is a huge, vast difference between throwing millions of dollars at dubious research and mandating the expense of billions of dollars to implement technologies that aren't proven. This is the difference between nonsense and common sense.

The Governor has thrown down his gauntlet. It will be unicorns and chimera for him.

What decision will you make?

Carrots and Bicycles: What Are Surpluses?

So far, we've looked (click on link and scroll down) at the origins of markets, the origins of supply and the origins of demand.

Markets occur when goods and services are offered for sale and buyers arrive. A market doesn't exist if either of these two conditions aren't met. There has to be someone willing to produce a surplus for sale. There has to be a willing buyer for that surplus.

These are the preconditions that must exist for there to be a market for anything.

When I listen to politicians I am amazed with the ease with which they overlook this necessary precondition. Especially in Oregon.

How does a class of persons, politicians, become immune to such common sense reliance upon necessary conditions? I am going to suggest that this immunity to common sense comes from years of insulation from the need to make payroll.

When you need to make a payroll, whether it's simply for yourself--as a sole proprietor--or as the head of a business with multiple employees; and the closer you are to the men and women of your company, the greater the personal importance you feel for being able to meet your contractual obligations to those men and women. There are exceptions to this rule. You don't have to be in charge of a small company to have a personal connection to the people who work with you. I happen to think that Jack Welch was such an exceptional CEO.

The story of American exceptionalism is the story of how America developed businesses and markets to provide the greatest surpluses in the history of history. (I was going to write "the world" or "mankind" but found that without the world or mankind there wouldn't have been any history at all. So those types of statements are, in fact, superfluous.)

When we looked at Joe and his need to create a surplus of carrots in order to take his goods to market and transform those carrots into apples, we weren't looking at a magical transformation. The transformation takes place as barter or as transaction. Without these surpluses, markets can't exist, since then, all production is subsistence production.

Let's restate.

Markets occur when surpluses occur. Subsistence, according to Merriam-Webster, is "the minimum (as of food and shelter) necessary to support life."

If you with your apples, I with my carrots, and Joe met, and you had no surplus apples, I had no surplus carrots, and Joe was out, too, no market exists. No matter how much I wanted your apples, I had nothing of value to trade, since the product of my efforts weren't able to rise above the needs of mere subsistence.

When you read Marx, or Engels, or pretty much any of the loud guys in the Democrat party, you hear the desirability of this subsistence condition. The phrase used to describe the benefits of socialism--or the Russian case of exceptionalism referred to as "Communism"--is "to each, according to his needs."

The Sixties gave rise to new forms of social discourse. Most notable among these new voices are those we refer to as "hippies". It is an article of faith in today's Left, that the hippie ideal (which is simply the latest incarnation of a long series of similarly fated for failure ideal social movements) means we will all be able to live in harmony with others as long as we give up greed. And, whether the hippie is Jerry Rubin or Barack Obama, that means spreading around the wealth.

Wealth.

What is wealth? We find that wealth has been defined for millenia as abundance. One of the earliest exposures to wealth, and the value of wealth, is related in Genesis 41:8-32.

When Joe decided to grow additional carrots in his garden, we took a look at the product transformation curve of his garden and realized that there were things he could do under current technologies of garden production to increase his yield. When we introduced a change in technology, we saw that Joe was able to increase his garden production beyond the limits of that previous transformation curve. He moved his production from supply curve S1 to supply curve S3.

What has changed about Joe? Has he become "worse" as a man because he has planned to increase his production? The hippie will tell you yes, unless Joe intends to share his new found surplus with others. For Joe to have more raises Joe to the level of "rankist". Joe, being more productive than he was before, has himself been transformed into a new type of social evil.

Now, I happen to like Joe. I think Joe is a good man. And I believe that the product of Joe's work is Joe's alone. (This makes me, too, a rankist.) Because of his surplus, I will be able to have a better life. And Joe will have a better life.

But, I am not a hippy. And this puts me at odds with most elected policy makers in the State of Oregon. Whenever you hear the word "vision", please be aware that this vision thing they talk of is their vision of creating a world where we all live according to our needs. And that all the surpluses we create are nothing more than the fodder of redistribution to those who have less.

How else to explain our Governor's foray into market planning?

Here are the latest statements from our Governor on energy and transportation:

Energy

Governor Announces Climate Change Agenda for 2009
Legislation will combat climate change through renewable energy and energy efficiency efforts, green buildings and electric cars

(Salem) – As part of his 2009 legislative agenda, Governor Ted Kulongoski today announced a series of climate change legislation to be considered in the 2009 legislative session. Joined by Peggy Fowler of Portland General Electric and Mark Edlen of Gerding Edlen Developers, the Governor presented his agenda at the Center for Health and Healing at Oregon Health and Science University, highlighting green buildings and electric cars as two fundamental components to the climate agenda.

“We have made great progress in the fight against climate change over the last five years, but that was just the beginning,” Governor Kulongoski said. “This next session we must be bolder, more strategic and even more visionary if we want to reach our greenhouse reduction goals and truly pull ahead of the pack, leading our country and the globe on green living and green working.”

The Governor’s climate change agenda for 2009 centers around four key areas: Greenhouse Gas Reductions; Energy Conservation and Efficiency; Renewable Energy; and Sustainable Transportation. Each area contains concepts that reduce greenhouse gas emissions, encourages alternative power and vehicle use, drives innovative energy technology development, provides energy efficiency information to consumers and protects low income energy users.

“We have reached another historic moment in our understanding of the environment – and the economy,” the Governor said. “The unregulated and unmitigated emission of CO2 and other greenhouse gases into the atmosphere is changing our climate, threatening our ecology, keeping us dependent on foreign sources of energy, and – if nothing is done – is a missed opportunity to reinvent our national and state economies.”

The major elements of the Governor’s climate change agenda include developing net-zero energy use building codes, expanding the Business Energy Tax Credit to new more efficient vehicles, development of energy performance certificates for homebuyers and a regional cap and trade program to reduce greenhouse gas emissions.

“We must continue to be aggressive in creating the tools we need to solve the global warming crisis – and in doing so, strengthen our economy and preserve our quality of life for our children and grandchildren,” the Governor said. “My agenda is broad. It is ambitious. It is comprehensive. And the time to put it into action is now.”

For a complete description of the Governor’s entire 2009 climate changes agenda, click here.

Transportation

Governor Receives Transportation Report from Advisory Committee
Committee delivers recommendations for comprehensive statewide transportation investment, creating jobs, strengthening the economy and reducing carbon emissions

Salem – Today Governor Ted Kulongoski received a report from his Transportation Vision Committee outlining a comprehensive transportation plan for consideration as the Governor develops his agenda for the 2009 legislative session.

“One of the most important investments we can make during a slow economy is in public works projects, such as transportation,” Governor Kulongoski said. “An investment in transportation creates jobs immediately. The state is committed to doing its part and I look forward to working with our congressional delegation to make this investment in transportation infrastructure a national priority so we can get Oregonians back to work.”

Last year, Governor Kulongoski convened three workgroups composed of business leaders, legislators, local and state officials, transportation stakeholders and sustainability and land use experts to develop recommendations for a comprehensive transportation package for the 2009 legislative session to meet immediate needs and create a framework for future action. The workgroups focused on three areas: Governance; Public Awareness; and Vision.

“Oregon’s transportation system is not currently equipped to respond to the needs of a global economy, increases in population, rising energy costs, and our obligation to reduce greenhouse gas emissions,” the Governor continued. “To address this challenge, we need a comprehensive strategy that reaches statewide, creates jobs, provides for continued investment over the long-term and helps reduce carbon emissions.”

The Governor outlined five core principles to guide the development of the committee’s recommendations: economic development; local decision-making; sustainability; transparency and oversight; and statewide distribution.

“After a year of work and hundreds of volunteer hours from experts across the state, we've presented the Governor with a report that charts a new course for transportation in Oregon,” said Pat Reiten, Chair of the Governor’s Transportation Vision Committee. “It departs from our traditional approach, which has led to fragmented and underfunded transportation programs, and puts us on path toward a sustainable transportation system that includes all modes to move people, goods and services safely and efficiently, and funds our system for the long-term.”

The report delivered to the Governor today includes recommendations for reducing vehicles miles traveled in urban areas, a dedicated fund for non-highway transportation investments, a new transportation utility commission, and dollars for rural counties hit hardest by the scheduled sunset of the federal forest payments. The committee also recommends a series of funding options, including bonding, a new vehicle title fee, and a path to transition away from the gas tax as the central funding source for transportation.

“I appreciate the work of everyone involved in this report,” the Governor said. “I did not issue an easy charge. This kind of review and comprehensive look at our transportation infrastructure was long overdue. I look forward to reviewing the recommendations and having a lively but respectful discussion with the legislature and the public about the need to make key investments to strengthen our economy and create thousands of family-wage jobs.”

The Governor will use this report to inform his transportation agenda for the 2009 legislative session, which he is scheduled to present to a joint hearing of the Senate and House Transportation Committees on Monday, November 10, 2008.

For a link to the report, click here.

For those of you keeping track, did you notice the word vision in either of these two statements?

How silly is this? Well, of course it's silly. But your Governor is deadly earnest. And there are the votes in the House and the Senate to implement this vision on all of us. Can we rely upon Republicans in the House and the Senate to oppose the Governor?

I don't think we can.

And here's why.

Our elected Republican leaders have lost the talent to oppose silliness. Let me borrow from Max:

"It seems clear that if Republicans are to regain some of their luster, then they need to focus upon their conservative base. Fearlessness and humor can overcome fear and anger. Given a choice, people will favor the former more often than not.

"Republicans can never win if they continue to insist upon trying to be more 'progressive' than the liberals."

The Governor and his Democrat allies in the state legislature cannot sell their vision without the complacent acceptance by Republicans. Want to implement the Governor's Energy Plan? Then show us where the surpluses are going to come to afford this unneeded and unnecessary plan.

Want to implement the Governor's Transportation Plan? Then, show us where the surpluses are that we will be able to afford an attempt to implement this plan.

Every day, in Oregon, we continue to subsidize infrastructure costs in Multnomah, Washington and Clackamas counties. Each and every one of us. Instead of building roads--and maintaining existing roads--billions of dollars are being spent on the highest cost transportation choices available. Ladies and Gentlemen, I give you light-rail.

There are plenty of reasons why light-rail will never be affordable. But the simplest one is that you, I and Joe simply aren't in the market for light-rail. Yet, you, I and Joe pay for it. And we pay for it every day.

Want more, cheap energy? Well, you can't have it. Mention coal-burning generation and the Left gives you this picture.

Smokey smokestacks. DEQ acolytes fill your head with horror stories of haze.

Haze.

Silly. What they are talking about is an insignificant increase in "pollutants". But, since there is an increase, and they are pollutants, they are bad. You would never notice the increase in pollutants since they are so slight. But, they are measurable. And it is that measurable increase that stands in the way of your having more, cheap energy.

We consume massive amounts of surplus every day chasing the Vision of transportation put forth by our political class. And the Governor is declaring that we will begin consuming massive amounts of surplus every day attempting to achieve his vision for energy. We are expending that surplus at an alarming rate. As unemployment rises and business investment declines, our political class lights up another pipe and passes it around.

The Leftists among us have become entirely wedded to the concept of Man Made Global Warming, because of the regulatory levers that will be created to avoid the Catastrophe of Man Made Global Warming. Little has been said or done to study the positive effects that Global Warming will have on our ability to produce surpluses. The bulk of exposition has been that of Vice-President (and Nobel Prize Winner) Al Gore's movie, "An Inconvenient Truth". Giant glacial calves, rising sea levels, disease, famine, flood. The Vision of the Left provides good competition to the disasters related in the Bible.

Fifty years ago, if you claimed that you could manipulate climate, you'd be laughed out of the room. Today, if you claim that man cannot affect climate, you're going to be laughed at by Leftists. We have scenarios, man!

Let's go back to our starting point. What defines a market?

"Markets occur when goods and services are offered for sale and buyers arrive. A market doesn't exist if either of these two conditions aren't met. There has to be someone willing to produce a surplus for sale. There has to be a willing buyer for that surplus."

We have a concrete example of the complete incompetence of our state government, at the nexus between policy, energy and transportation: ethanol.

How bad is ethanol? So bad, that no one would buy it. So bad, that no one would supply it.

You spend more on gas, more often, today, than you did before the state mandated ethanol. We spend more of the surplus we create on a bad replacement fuel. But, we in Oregon have no choice. Are we worse off? Are we better off?

We are clearly worse off. We consume more gasoline qua gasoline when it is mixed with alcohol than we did when we purchased straight gas. The technology branch of the Leftist Vision will insist upon the higher octane rating of ethanol as opposed to gasoline. They will point you to studies that purport to show that there is no appreciable loss of mileage due to use of ethanol.

But you need only take a look at the loss of mileage of your own car to note that you're buying more gas, more often, to get the same number of miles. Or, if you don't believe me, talk to the guy at the pump. Yeah, that guy with an oily rag in his back pocket. He's not confused by the reduction of miles driven as prices broke the four-dollar-a-gallon mark. He knows from talking to his customers that they are buying 15 to 25 percent more gas per mile.

And who, voluntarily, was providing ethanol to market in Oregon prior to the mandate? Besides some small boutique efforts, nobody. Because ethanol doesn't make sense. So how do we create ethanol? With the infusion of billions of state and federal dollars labelled for use for environmental and business investment goals. Without these subsidies, which are paid for from the surpluses of our economy, we would not have ethanol.

Why is this important to Joe? Because Joe had planned on planting additional carrots so that he could have some apples. What Joe hasn't realized yet is, that his government has plans for his surplus carrot growth.

If you've lived off the surplus, you probably don't see the wrong here. If you're a government employee, or a public school teacher, you want more of your society's surplus. This is a good thing.

But then, you don't have to make a payroll.

The Importance of Articulation

Stole this from Max. Watch the vid. Read this post. Oh, and read this post by Max.

I started out posting a comment to an article on MaxRedline's site. As it lengthened, I realized that I should post here, and provide a link to this, instead of a lengthy comment. If folks wanted to read my thoughts at length, this is the place for that. Right?

I've been watching the Texas Book Fair on C-SPAN2.

I'm not surprised by some of the commentary being offered about the then upcoming political campaign. Senator Obama is viewed as articulate. Senator McCain? Not so much.

You might wonder why I've gone off the edge with my Carrots and Bicycles posts. Had an interesting experience. Last weekend, at the 19th Hole, four of us sat for awhile enjoying the fruits of our day's labour. One of our quartet was visiting from another state. My other two gangstas were gentlemen who regularly read my postings--as regular as my postings are.

I have to give credit to North Coast Oregon for its link to my website. Our local paper is in the tank for the Leftist/Progressive movement. What North Coast Oregon does is provide links to local bloggers, whether they write about their grandkids or government. One of my local gangstas knows that I write these articles. The other doesn't. So, when our out-of-state guest started talking about why Obama was okay, I was able to sit back and listen to their responses to his assertion. And I learned something reassuring. Having some ability to articulate fundamental starting points in any discussion with a Leftisit/Progressive is a powerful place to begin such a discussion.

Somehow the notion that government programs are costless has gotten into the Lefty/Progressive head. What I heard developing during this discussion was the role of government in choosing winners and losers in our economy, and whether that was actually a policy choice we should be adopting as a nation.

I watched eyes light up as we began talking about the fundamentals of economic activity: who chooses to do what?

The question was finally asked: Why is okay to tax an increase in carrot production (if that production is intended to increase someones wealth), but you think its okay if someone simply chooses to grow gardenias for personal enjoyment? Imagine, taxing the flowers that you grow in your garden!

It is, of course, the Left's objection to purposeful, independent wealth-making that separates those two classes of horticultural endeavour. You may consume as much of our society's resources as you so choose, as long as it isn't for a wealth-producing cause.

Why else would we need government to pick winners and losers? I am haunted by President-elect Obama's declaration that he was going to used carbon tax to tax coal-fired electrical generation out of existence. But these are the great thinkers who are articulate, who cannot see that even the use of a garden to grow gardenias requires us to use energy to do so. That is, unless, we go out into our gardens and use our bare hands to dig our subsistence plots, relying solely on the vagueries of Mother Nature to provide our plots with the necessary condiments to promote the growth of our gardenias.

Garden hoes and rakes don't pop into existence magically. Although politicians--like our Governor Kulonczynski--seem to think that if they Vision a thing hard enough, miracles will occur.

Learning the fundamentals of how free markets work, and why they are preferable to other forms of market organization, is essential if you are going to take on the Unabomber visions of the Lefty/Progressives. Recognizing the sheer madness of the Left isn't enough.

You need to be able to articulate those differences. They are fundamental. I'd ask you to remember this quote from Edmund Burke, a dead guy:

"Nations are not primarily ruled by laws; less by violence. Whatever original energy may be supposed either in force or regulation, the operation of both is, in truth, merely instrumental. Nations are governed by the same methods, and on the same principles, by which an individual without authority is often able to govern those who are his equals or his superiors, by a knowledge of their temper, and by a judicious management of it; I mean, when public affairs are steadily and quietly conducted: not when Government is nothing but a continued scuffle between the magistrate and the multitude, in which sometimes the one and sometimes the other is uppermost--in which they alternately yield and prevail, in a series of contemptible victories and scandalous submissions. The temper of the people amongst whom he presides ought therefore to be the first study of a statesman. And the knowledge of this temper it is by no means impossible for him to attain, if he has not an interest in being ignorant of what it is his duty to learn."

There are reasons why Free Marketeers exist. Learning to articulately defend our free marketeers has evidenced itself too often, especially among that group that self-identifies as Ron Paul supporters. No economic system is without peril or flaw. But gaining an understanding of our economy's methods for storing and transmitting wealth will reduce the fervour of the gold and silver bugs.

It is up to you to gain currency and usage of important economic fundamentals. This is not important if you are a Lefty/Progressive. A Lefty/Progressive would never let facts get in the way of a good Vision.

I'll state it again. I am not a Libertarian. There is a role for governments to play in regulating our daily affairs. What I oppose is this complete rejection of the value of individual rights and choices. We have a Constitution to guarantee those rights. Unless you develop the tools to articulate your objections, the departure from those guarantees will continue. (By the way, there's a great book out there that is well worth your reading. But it if you have to. It's called "New Ideas from Dead Economists".) The math isn't hard. And it's an enjoyable, humourous read. Do yourself a favour. Read, write and speak. You cannot gain articulation without practise. And practise sorta implies that you're going to make mistakes. Make them now, when you're young!