Ron Morley's Freedom Blog : Federal bailout

Constitution? What Constitution?

Ronald D. Morley — Tue, 31 Mar 2009 19:33:00 GMT

The President of the United States fired the President of General Motors Corporation over the weekend. This would have been unthinkable even a decade ago. But, things have changed and, apparently, this doesn't bother most of the American people or the great majority of the mass media's talking heads. However, it is troublesome for several reasons. Where is the Constitutional power granted to the President of the U.S. to make such decisions? There's nowhere that I can see that there's a clause which, even given the twisted reasoning lawyers are so proud of, gives the Executive the power to reach into the board rooms of private corporations and pick and choose who will be allowed to head up those organizations. Surely no one can argue with a straight face that the Commerce Clause grants the President this sort of power. If it does then there is no limit on the powers of the Federal government and no one is safe from the exercise of arbitrary government power. For if the President can fire the head of General Motors, then there is nothing to prevent him from firing the head, or, indeed, any employee, of any business in America. An extremely dangerous precedent has been set over the weekend and a large number of the American people, if not an outright majority, are applauding the move; indifferent to the potential harm that such power can do to everyone in the country. Instead, the State's propaganda machine continues to spout the party line: the move was “necessary” in order to give President Obama's plan to save the domestic auto industry a chance to succeed politically; Rick Wagoner was too “old school” General Motors to be able to make the changes to the company that the President has deemed necessary for the corporation to be considered for nationalization, er, excuse me, more "bridge loans"; the firing “sends a message” to the automakers that it is “no longer business as usual” to quote one commentator on NPR yesterday.

The only person who seems upset by President Obama's firing of Mr. Wagoner is Michigan Governor Jennifer Granholm, who seems almost offended by the move. This is ironic in that Governor Granholm was one of the prime cheerleaders for a Federal bailout of the Detroit automakers. Apparently, the good governor of my state overlooked the fact that granting the Federal government unconstitutional powers by way of allowing it to “lend” money to individual companies, would lead to further abuses of power. Was she really so naive as to think that the Federal government would not impose all sorts of new rules and regulations upon the companies that it was moving to “save”? Did she really imagine that the Federal government would not seek to exercise that power in such a way as to strike fear into the hearts of any in the business community who might oppose it? If that's the case it's no wonder that the State of Michigan is in the severe economic trouble that it finds itself. Of course, even the good governor's objections to the President's action is not based on Constitutional or other legal grounds, but on the fact that Rick Wagoner is a “good man” who was, according to the governor, leading GM out of its troubles.

There is an extremely dangerous mindset growing in this country – that only the Federal government can solve the nation's economic ills and that it must be granted virtually unlimited powers in order to be able to accomplish this goal. Almost no one is heard objecting to the vast expansion of power over the nation's economy that has occurred over the last few months. There is no longer any debate as to whether or not the Federal government has the Constitutional authority to undertake any particular action. No, the debate is now only over how much money a certain program is going to cost and what group it will favor when put in place. We are seeing the culmination of the many precedents that we've allowed our presidents, ever since at least the days of Franklin D. Roosevelt's tenure, if not earlier, to set in the direction of increasing the amount of power wielded by the occupant of the house at 1600 Pennsylvania Ave. The President is now looked upon as the one person upon whom all of the nation's hopes, fears, and troubles lie. To paraphrase (and greatly condense) an article from Reason Magazine sometime last year, Americans are so used to placing all blame or, conversely, all accolades upon the President for whatever is happening that the Presidents over the years have found it more and more easy to argue that they “need” all the power in order to match the supposed responsibility they have for everything that is going on. The cultural trend away from persons accepting responsibility for their own actions and, instead, placing that responsibility on some third party is finding its logical conclusion here. If individual Americans are not accountable for their own actions then they do not need power to decide how to live their lives: that power should, by rights, be given to the person who is primarily accountable for everything that goes on – the President of the United States. It is not right, constitutionally, morally, or ethically, but it is now a fact of life. The government of the United States, in the person of the President, has asserted that it has the right to dictate the smallest details of the operations of businesses and the manner in which individual citizens may live.

Many people will say that I'm being overly-pessimistic, that the Federal government will not make it a habit to fire corporate executives, or set business policy, or interfere in matters of citizen's private affairs. Those who maintain that idea are sorely lacking in historical perspective and understanding of the nature of the State. A few examples of how Federal power has expanded over the decades should be sufficient to show the trend. When the income tax was first put in place, in 1913, it was limited to 1% on income above $3,000 (a large income for the period) rising to 7% at $500,000 and the people were assured that there was no reason to think the rates would ever increase. As of 2008 the lowest tax rate is 10% for those making less than $8,025 per year to 35% for those making over $357,701 per year and those rates will have to increase in order to pay for the Obama regime's “economic stimulus” packages. Indeed, we've already been told that $250,000 per year is to be considered as making too much money. (Figures from: http://en.wikipedia.org/wiki/Income_tax_in_the_United_States) The New Deal brought with it the minimum wage, first set at $.25/hr. it covered only workers directly engaged in interstate commerce or those producing goods sold in interstate commerce, the minimum wage has grown to $7.25/hr. and covers virtually every worker in America. (figures from: http://www.dol.gov/ESA/minwage/chart.htm) The Federal Occupational Safety and Health Administration is another example of the growth of Federal power and interference in the lives of citizens and ways in which businesses may operate; with precise standards set for such things as the height above the floor for fire extinguishers, the construction of ladders, and the placement and types of myriads of safety equipment – even though there is no constitutional justification for the agency. The ubiquity and power of the Federal government is such that most people don't even stop to think whether or not that government has any right to operate as it does – they simply acquiesce and attempt to carry on as best they can. To believe that the Federal government, especially in light of the furor over the retention bonuses paid to AIG employees, will not continue to expand its power in what was once called “the private sector” is the equivalent of believing that the local McDonald's will suddenly appear with three stars in the Michelin guide.

Now that President Obama has established that he has the authority to fire the heads of corporations we can expect to see yet more interference in the operations of private enterprises, in particular those which have accepted the poison pill of Federal bailout funds. Furthermore, I will not be surprised to see the definition of “Federal aid” expanded to include taking advantage of so-called “tax loopholes”. The reasoning will be relatively straightforward for Washington. We have already been told, repeatedly, that paying Federal taxes is patriotic. It follows, therefore, that failure to pay the maximum Federal tax one may be eligible for is unpatriotic. Taking advantage of “tax loopholes” is to avoid paying the maximum tax to the Federal government. Therefore, taking advantage of “tax loopholes” is unpatriotic in that it amounts to taking money from the American taxpayer. As we know from the actions of the Federal government up to this time, taking money from the American taxpayer gives the Federal government the right to determine how a business may operate. Thus, the power of the Federal government, which will become ever more hungry for tax revenue, will be extended. And, again as the recent AIG case attests, one cannot rely on Congress not to at least attempt to change the rules retroactively; so that what is permissible today will be illegal tomorrow, in spite of the Constitutional ban on bills of attainer and ex post facto laws.

President Obama has nearly completed the job of destroying the U.S. Constitution in the arena of what was formerly considered “private activity”. He is doing for Federal regulatory agencies what the G.W. Bush regime did for Federal law enforcement and espionage agencies with the PATRIOT ACT – extending the power of the State and destroying the foundation of civil liberties that this nation was founded upon. The truly sad part is that the American people are largely applauding him as he does so.

Paulson Declares victory, sets stage for next economic crisis

Ronald D. Morley — Fri, 14 Nov 2008 00:15:00 GMT

The latest word from Treasury Secretary Henry Paulson is that he believes “we have stabilized the major financial firms” and that he does not anticipate any more failures of large companies. He has effectively declared victory in the so-called economic crisis that this nation is facing, a crisis largely the result of the overextension of credit. So what is his next goal? Why, to make sure that consumers begin borrowing again, because the economy needs to get moving again. So, he's decided that the $700 billion which were supposed to be used for the purchase of so-called “toxic mortgage-based assets” from troubled banks, will instead be used to encourage banks and other financial institutions to begin making more loans to consumers. In other words, he wants to start another round of loaning money to people who cannot afford to borrow it, simply to avoid something loosely defined as “turmoil in the markets”; which is evidently something to fear, at least for the entrenched political/economic power brokers in Washington, D.C. and on Wall Street.

We are being told that consumers must start spending in order to prevent the economy from falling into a depression. The truth of the matter is that the Federal government has made such a hash of the marketplace that it is impossible for anyone to be able to predict what is apt to happen next. And that is why banks are being so reluctant to resume their practice of lending to those on the fringe of economic viability as they don't want to pile up a bunch of potentially bad loans. Unlike the mortgage crisis, in which the banks are at least able to take possession of a physical asset, the house, of someone who defaults on their mortgage, they cannot do that with credit card-based debt. Those loans are what are known as unsecured loans, there are no assets at risk for the borrower should she default on her credit card payments. When a bank has to write off a credit card account as non-performing they have no way of recovering any of the money which they loaned the consumer. They cannot seize the flat screen TVs, the vacations, the PCs, etc.. that were purchased with the now worthless credit card.

Once again, the Federal government is acting in a way which will simply exacerbate the current economic difficulties that we find ourselves in. Rather than allow the market to take its natural course, go through a period of re-adjustment (known as a recession), and emerge with assets better distributed, to companies and individuals better able to use them than were the previous owners, the Feds insist that all troubles must be resolved in an extraordinarily short period of time. Thus, the State will put in place some sort of “program” to encourage the accumulation of yet more consumer debt, at a time when the economy cannot afford it. Rather than encourage savings, which will act in the long-term as an economic stimulus by providing a solid foundation for the economy to grow on, the State insists that “market turmoil” can only be avoided if consumers act now to continue to pile up their credit card debt. I would not be surprised to see Secretary Paulson propose that interest on credit card debt be made deductible from Federal income taxes, in the same way that mortgage interest payments are. After all, if such encouragement works for overly stimulating the housing market, there's no reason why it shouldn't work for credit cards. Remember, the goal of the State is to avoid “market turmoil” which could result in those currently feeding at the public trough being displaced. Thus, it is imperative, in the eyes of the State, that consumers continue to spend themselves into such debt that they will forever be in thrall to the banks, even if that enslavement results in yet another financial crisis in the near future.

Yet another Federal "bailout" in the works

Ronald D. Morley — Wed, 12 Nov 2008 10:29:00 GMT

The Federal government is about to stage yet another “bail-out” of a business which is “too important to fail.” This time the target will be Detroit's Big Three automakers, beginning with General Motors. We are hearing the now familiar drumbeat of predictions of horrible economic repercussions if any of the U.S.-based automakers are allowed to fail. The American people are being told that millions of jobs are at risk of disappearing and that it is essential to our economy that there be a U.S. automobile industry. Finally, we are being told that allowing these companies to go through the traditional and legal process of seeking chapter eleven bankruptcy protection is inappropriate given the turmoil our economy would supposedly be thrown into should one or more of General Motors, Ford, or Chrysler to go out of business.

President-elect Barak Obama has stated that he is in favor of “loaning” the Detroit automakers at least $25 billion. Nancy Pelosi, the Speaker of the House, is in favor of calling a lame-duck session of Congress specifically to consider just how much more taxpayer money is to be given to yet another set of special interests. President Bush has said that he would consider signing a bill giving the obviously incompetent management of a major industry more money. Michigan Senator Carl Levin is proposing that the Paulson Wall Street bail-out bill be amended in order to allow the automakers access to their share of the $700 billion that was originally intended to go solely to Wall Streeters.. Finally, the leaders of the United Auto Workers is campaigning hard for government assistance in order to save high paid manufacturing jobs, which are supposedly fundamental to our nation's economy.

None of this makes any economic sense, though it makes a lot of sense when one considers the politics of the situation. Once again, a set of special interests is to be allowed to feed at the public trough because they were incompetent and drove their companies into financial ruin. Incompetence, greed, and unwillingness to change are going to be rewarded on a scale that would have been unthinkable prior to September of this year. And, again, the Constitution is to be ignored; apparently it no longer matters what the Constitution says if the “emergency” is grave enough – the power of the State to deal with the situation is to be expanded at all costs, and issues of Constitutionality are simply ignored in the rush to feed Leviathan's ever-increasing appetite for power.

The incompetence is present in management, labor, and government. Management has had over thirty years in which to take steps to manufacture small, high quality, fuel-efficient vehicles, yet it has failed to do so, repeatedly. Likewise, the UAW has done its best to maintain pay rates that are simply unsustainable in the face of more efficient, less costly overseas labor. The Federal government is also not blameless in this as its ever-growing list of regulations governing everything from safety, to fuel efficiency, to the type of materials that may be used in the interior of vehicles has helped drive up Detroit's cost to a level that has made an entire industry uncompetitive on a global scale. Yet, all three of these groups are about to be rewarded for their incompetence and, worse, the bail-out will do no good as it will not address the underlying problems of the industry, though the parties involved will loudly trumpet the minor changes that will be made as major breakthroughs that will save the businesses, and the jobs, and will result in the Statist Utopia that the Federal government has been promising ever since the implementation of the New Deal in the 1930s.

What is going unsaid in all of this is that the bailout is going to be done by the upcoming Obama regime in partial repayment of its political debt to the United Auto Workers for its support during the recent presidential election campaign. It is more important to Barak Obama and the rest of the “Social Justice” wing of the Big State Party, known colloquially as the Democratic Party, to pay their political debt than it is to allow the market to function as it should. Rather than allowing these inefficient companies to go bankrupt and make their assets available to other business that could make better uses of them, yet another large chunk of the American economy will be nationalized. Another sector will be taken over by State bureaucrats who will dictate the details of its operation in a manner reminiscent of the central planning done in the former Soviet Union. The State will gain yet more power over the lives of its subjects and the Constitution will fade further into the background, a document supposedly revered by our political leaders, but, in reality a piece of paper that is increasingly viewed by them as an impediment to the further expansion of Leviathan's power and reach. It is particularly ironic that the Federal takeover will be done almost immediately following Senator Barak Obama swears to “preserve, protect, and defend the Constitution.”