Las ventajas de ser políticamente correcto

There are few examples to showcase the absurdity of the current political climate during the covid pandemic such as the Paycheck Protection Program (PPP). Put in place by the Trump administration and now continued under the Biden administration, the PPP has become the poster child for government programs rampant with fraud and mismanagement. Indeed, in a recent report, the Office of the Inspector General (OIG) repeatedly warned about the lack of program oversight and controls. However, government officials continued on with the program despite the OIG’s warnings.

What is the PPP?

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law. The intent of the CARES Act was to provide short-term relief for small businesses, individuals, and nonprofit organizations that were negatively affected by the shutting down of the economy to slow the spread of the coronavirus. The CARES Act appropriated first $349 billion for the Small Business Administration (SBA) Paycheck Protection Program in April 2020. Later in April, Congress appropriated an additional $321 billion for a total of $670 billion. Affected businesses can apply for a forgivable loan to cover operating costs and lost revenue. From 2000 to 2019, the SBA made about 1.2 million loans totaling $333 billion. Under the CARES Act, the SBA processed 5.2 million loans in six months, which was far more than all of SBA’s combined lending from 1990 to 2019. 

Six months into the program, on October 16, 2020, the OIG released the first in a series of reports. In Top Management and Performance Challenges Facing the Small Business Administration in Fiscal Year 2021, the OIG provides a good sense of the chaos with section title “SBA’s Economic Relief Programs Are Susceptible to Significant Fraud Risk and Vulnerabilities.” Anyone who has critically examined the government response to the covid pandemic should not be surprised by the fact that the PPP is a recipe for disaster. 

In October, the inspector general already sounded the alarm bell:

SBA moved quickly to establish the new nationwide program but eased controls required in its lending program to do so, increasing the risk of rampant fraud. Our preliminary investigative oversight revealed strong indicators of widespread potential abuse and fraud in the PPP.

In its preliminary report, the OIG found systemic issues with the PPP. OIG found indications of deficiencies with internal controls related to the eligibility of borrowers. 

• Tens of thousands of approved and disbursed loans were made to borrowers for amounts that exceeded the maximum allowed based on the number of employees and compensation rates as defined in the CARES Act.
• Tens of thousands of loans that matched a Do Not Pay data source record indicating potential loan ineligibility.
• Hundreds of businesses that exceeded the greater of 500 employees or the SBA size standard for number of employees in the industry obtained PPP loans that may have been erroneously approved.
• We found thousands of businesses obtained PPP loans with Tax Identification Numbers (TINs) that were not registered until after that date indicating the business was created after the fact.

Even more troublesome is the fact that OIG found that the data the SBA publicly reported as well as the loan-level PPP data was inaccurate and incomplete, concluding:

Without accurate and complete data, SBA cannot reliably and accurately inform SBA management and Congress about program effectiveness and measures needed to inform program decisions.

What is even more concerning is the fact that despite these early warning signs the SBA continued with the program without many changes to curb the widespread abuse of the program.

On January 11, 2021, the OIG published Management Alert Paycheck Protection Program Loan Recipients on the Department of Treasury’s Do Not Pay List:

Our review of Treasury’s analysis showed approximately $3.6 billion in PPP loans to potentially ineligible recipients.

In January 14, 2021, the OIG published another report entitled Inspection of SBA's Implementation of the Paycheck Protection Program, which can be summarized in the following quote:

SBA’s efforts to hurry capital to businesses were at the expense of controls that could have reduced the likelihood of ineligible or fraudulent business obtaining a PPP loan. As a result, there is limited assurance that loans went to only eligible recipients….We also found SBA’s PPP publicly reported and loan-level data was inaccurate and incomplete.

On March 15, 2021, just one week before the Senate passed the extension, the OIG published a flash report entitled Duplicate Loans Made under the Paycheck Protection Program:

We determined SBA did not always have sufficient controls in place to detect and prevent duplicate PPP loans. As a result, lenders made more than one PPP loan disbursement to 4,260 borrowers with the same tax identification number and borrowers with the same business name and address. These disbursements totaled about $692 million for PPP loans approved from April 3 through August 9, 2020.

Did Congress stop the program or demand more oversight? No. Congress extended the PPP. One can only conclude with the words of Hoppe again. “Government has the ability to be the savior twice over: the rescuer of a rescuer in distress.” It “rescued” us from the covid pandemic by severely limiting the economy, and then “rescued” us again from the economic free fall by compensating for the losses incurred by simply creating state paper money from nothing at zero expense. Government is the rescuer twice over, but government has the ability to socialize costs to the public while making itself look like the “blessed savior.” Rescue packages, however well intentioned, are not, and never are, free of charge.

The only thing missing from the covid Ponzi scheme is for government to take the rampant misuse and abuse in the PPP to grab as much power as possible by creating more rules and regulations for businesses in the name of covid. Readers of Robert Higgs’s book Against Leviathan: Government Power and a Free Society. know that government bureaucrats have a tendency to take advantage of “emergencies,” like the covid-19 pandemic, to consolidate and grab even more power. Let’s hope that this will not become true or happen.

President Biden has just appointed a commission to study Supreme Court reform. However, I noticed that no one seems to be talking about reform to mean “re-form to better reflect the Constitution than under current precedents and interpretation,” reflected in the notable paucity of defenders of the Constitution as understood at the time it was adopted. That is why the commission could use some guidance from James Wilson for insight.

James Wilson signed both the Declaration of Independence and the Constitution. Earlier, his Considerations on the Nature and Extent of the Legislative Authority of the British Parliament argued that it had no authority to legislate for the colonies. At the Continental Congress, he was a member of the Committee on Detail, which produced the first draft of the Constitution. He also argued forcefully for ratification of the final version in Pennsylvania. In fact, his October 6, 1787, ratification speech before the Pennsylvania legislature received more coverage than The Federalist.

George Washington appointed Wilson to the first Supreme Court in 1789. Then, in a set of law lectures beginning in 1790, he became America’s first homegrown legal philosopher, spelling out the thinking behind the Constitution and early Supreme Court decisions. He articulated the purpose of government as to secure citizens’ preexisting rights and that the Constitution was crafted to create such a government. Remembering those ideas, now seriously compromised and threatened with further erosion, would be a reform actually likely to benefit Americans.

Wilson clarified our founders’ understanding of law: “The defense of one’s self, justly called the primary law of nature, is not, nor can it be, abrogated by any regulation.” What does each individual’s self-ownership, and right of self-defense that derives from it, mean for government? “All men are by nature equal and free. No one has a right to any authority over another without his consent.”

Wilson spelled out the implications of government consistent with that understanding of law: “The liberty of every member is increased … each gains more by the limitation of the freedom of every other member, than he loses by the limitation of his own. The result is that civil government is necessary to the perfection and happiness of man.” In consequence, government “should be formed to secure and enlarge the exercise of the natural rights of its members; and every government which has not this in view as its principal object is not a government of the legitimate kind.”

Since all must be better protected to expand everyone’s rights and liberties, law had to treat everyone equally. “In the enjoyment of their persons and of their property, the common law protects all.” No one’s liberty could be invaded; no one’s property could be violated. Instead, “private property and personal liberty … will be guarded with firmness and watchfulness.” This is what led America’s founders to agree with Wilson that “without a good government, liberty cannot exist.”

Because good government was considered central to liberty, “A good constitution is the greatest blessing which a society can enjoy.” And because “in this government, liberty shall reign triumphant,” Americans were bequeathed “that system of government which would best promote their freedom and happiness.”

Because some would override our free choices with their dictates, an important consequence follows: “Among the virtues necessary to merit and preserve the advantages of good government [are] a warm and uniform attachment to liberty and to the Constitution,” because “enemies of liberty are artful and insidious…. Against these enemies … the patriot citizen will keep a watchful guard.”

James Wilson was a great American statesman whose words reveal what was truly revolutionary about our experiment in liberty. His discussion of “those principles upon which we ourselves have thought and acted,” which echoed John Locke’s recognition that just government exists for the good of its people, not the other way around, is worth relearning. And just as for other Americans, the Supreme Court Reform Commission would benefit from proposals that recognize, with Wilson, that “without liberty, law loses its nature and its name, and becomes oppression,” because our liberties have grown far scarcer than the Constitution was designed to provide.

We often hear of this word “diversity.” In 2021, it seems this word is more important than ever when electing cabinet positions, bureaucratic appointments, or other facets of organizational structures throughout the country. Merriam-Webster defines diversity as:

the condition of having or being composed of differing elements : VARIETY

The ironic thing about diversity is it appears to create two “divergent” paths in which it can be obtained. Just last week, the Brookings Institution appeared to inadvertently fall into a “diversity trap” of sorts, when it published the article, "Diversity within the Federal Reserve System." It begins with:

A growing chorus has called on the Fed to diversify its ranks at all levels to reflect better the heterogeneity of the United States. So far most of these efforts speak to the diversity of the Fed’s principals, namely, the members of the Fed’s Board of Governors and the presidents of the twelve Federal Reserve Banks. 

This is the first, more common usage of diversity. The goal is to ensure a variety of races, genders, or other minority groups are represented. True to definition, by having various physical features, variety could be achieved. Brookings looked at the directors of the Federal Reserve banks as they are the ones responsible for choosing the president of the twelve banks across the country.

To little surprise:

We find a staggering homogeneity among them, with only recent signs of diversification. They are overwhelmingly white, overwhelmingly male, and overwhelmingly drawn from the business communities within their districts, with little participation from minorities, women …

They mention other areas of the economy such as “labor, nonprofits, the academy” with the routine push for diversity requiring more minority representation, based on physical features of the candidates.

To provide better context to the reader, as an author and a black male, I understand “diversity” from my own life experiences; however, it is important we don’t fall into such a diversity trap. While having more people of color, females, or even transgendered would bring a different physical look to the Fed, there remains the unseen and overlooked area of diversity, i.e., “intellectual diversity.” This form of diversity appears to have been ignored entirely, supplanted for aesthetic traits.

Last year, I wrote several articles about Judy Shelton, including "Why the MSM Hates Judy Shelton." While her potential appointment was the responsibility of Congress, one could suggest she may not have gotten nominated to the Fed board because she is a woman. However, studying her history such as questioning the manipulation of interest rates by the Fed, and other such ideas which go against the current mainstream economic dogma, one could argue her rejection by Congress could largely be attributed to her economic views of the free market.

While a racial/gender diverse Federal Reserve might mark a lot of societal checkboxes, and even be inspirational for those in marginalized groups, we should focus on intellectual diversity and how much it appears to be lacking in the Federal Reserve system. Whether the Fed is run by all white males or a mix of males, females and a multitude of races means absolutely nothing as long as the ideas of liberty, freedom, and Austrian economics are excluded from diversity inclusion.

We must ask ourselves: Would you feel better if your oppressor was the same race and gender identification as you? We are told diversity at the Fed is an issue that should be addressed, but it’s superficial, meant to appease popular opinion under the guise that forced inclusion matters. Nowhere are we discussing the diversity of opinions, economic understanding, or beliefs in a free society. Until a high-ranking Fed official speaks out against the Fed proposing ways to wind down its power, it doesn’t really matter who sits atop the Fed’s ivory tower, and diversity is nothing but a ruse.

On March 18, Joe Wiesenthal of Bloomberg Markets had MMT economist Stephanie Kelton on the show. If you’re not familiar with MMT, they think governments should print more money because deficits aren’t a big deal. At one point in the show, Wiesenthal asked, “If we don’t need to worry about deficits, why do we have taxes?” Kelton’s response was illuminating.

Now, the traditional excuse for taxes is, paraphrasing Oliver Wendell Holmes, that they are the “price of civilization.” Skeptics point out that historically societies with very low taxes were often far more civilized—think the Dutch Golden Age, Islamic Golden Age, Victorian England, the pejoratively named “Gilded Age” in American history—that thirty-year golden age when almost everything useful was invented. And yet throughout that latter period federal receipts were one-fifth what they are today.

Why so much civilization? Because much of what governments do today was done by charities or businesses competing for customer dollars instead of seizing their budgets in taxes. When doctors, firefighters, and schools have to satisfy customers, things get quite civilized.

Still, even if we accept a “night-watchman state” argument for, say, national defense or salaries for Supreme Court justices, it gets tricky if government can simply print up the fresh money to pay for all that civilization.

Kelton’s answer? Taxes would still be needed, because they make us poor. And because they can punish people she doesn’t like.

Specifically, Kelton likes that taxes “remove dollars from our hands, so we can’t spend them,” leaving more purchasing power for the government. So taxes make the people poor, and that’s a selling point to her, presumably because she thinks governments are really good at lifting people out of poverty. Anybody who’s spent time in America’s inner cities, where government money is pretty much the only money, might disagree.

Ah, but it’s not just about spending our money more wisely than we ever could. Kelton adds two secondary reasons she loves taxes: to punish particular people by redistributing their money, and to punish people for doing things she doesn’t like. Such as failing to buy energy-efficient appliances (no, really). In other words, social engineering with carrots for your friends, sticks for your not-so-friends.