economy

So the “Occupy” movement is currently the darling of the media and internet. Criticism, support and comparisons abound. Some compare it to the Arab Spring, but until they are walking into bullets or disappearing in a large government building somewhere there’s really no comparison. There are also many who have billed it as a progressive tea party, which of course makes the tea partiers mad.

But from my perspective, I don’t see any more coherency in the Tea Party message than in the Occupy message. The were just as many contradictions there (“Government out of our lives, and hands off Social Security!”) as there are in the various Occupy displays. But the Tea Party was able to affect elections and congressional votes, and that’s what counts. I doubt the Occupiers will have that success, but if they do it will be just as pointless in the long run.

Both groups miss the point of what’s wrong with our country. The problem isn’t less or more capitalism or government. The problem is we have eliminated great gobs of free market capitalism. There is a huge difference.

Capitalism is about ownership and profit. Free market capitalism (FMC) is about competitive ownership and profit by free players in an framework ruled by supply and demand. Economic freedom comes from free market capitalism. Plain ol’ Capitalism oppresses just as well as any government (because ultimately they becomes one and the same.)

In the two governing groups, we know where Democrats stand when it comes to FMC. Generally they will do whatever they can to try and engineer reality for the greater good or to solidify their own control. But when you look close, Republicans have done just as much to destroy FMC for the smaller good or to solidify their own control.

Whereas Democrats are always pushing policies that benefit large, established government; Republicans are always pushing policies that benefit large, established businesses. Republicans love increasing the power of monopolies via Intellectual Property, Patent, and copyright laws. They love big banks and telecom companies and tweaking the rules under the direction of the big players. They love big agribusiness and subsidies. They pass laws that benefit those businesses, talking about how these capitalist measures will increase jobs and benefit everyone. The problem is, they won’t. When you institutionalize big business, it’s no better than institutionalizing big government.

Laws that benefit big business (capitalism) are just as destructive to equality, employment, and Democracy as laws that benefit big government. What we need is more free market capitalism.

The first response to this will usually be from progressives and how free markets (lacking in regulation) actually caused our current crisis’. Up next I’ll discuss why the opposite is actually true. Regulation created this mess.

Not that Obama has violently overthrown the bourgeoisie with his rag-tag band of suicidal Democrat proletariat workers, it’s not uncommon to hear that we are now in a “socialist country”. I would submit that this is not the case.

First of all, a socialism and/or communism generally have a policy of seizure and redistribution that applies to people who have already been born. In our case, most of of the money we’ll be spending (over the long haul due to interest) will be paid by future generations (either directly or via inflation). This is not socialism. It’s a pretty brilliant new conflict theory, but not socialism.

Second, socialism generally has a plan. Our government is clearly making this stuff up as it goes along…although like soc/communism there are people getting mega-rich in the process.

So while I don’t think we’re anything close to a socialist nation, I do think we are definitely entering an era of a “Command/Control” style economy.

All cats are animals, but not all animals are cats. Similarly, socialist economies are generally command/control economies, but not all command/control economies are socialist. So it’s a fallacy to to think that just because our government is increasingly legislating the minutiae of our economy, that this style must be socialism.

But they are legislating the minutiae of our economy. And it won’t be long before everything is defined in the lawbooks.

Want an example? Check out the laws on credit/debit cards. That’s right, the same political entity that told King George to go jump, who wrote the Bill of Rights, expanded our country and enshrined our freedom in Constitution and Law…is now writing a law that will make it possible for merchants to require minimums for credit card purchases.

This is a law. Think about that….not a regulation. A law. And it’s digging down into the nitty gritty details of how even the most basic transaction can occur.

Everywhere you look, energy, healthcare, telecom, the automotive industry, banking….everything, is slowly being installed into an economic framework wholly defined by laws. Very soon (if not already) we will be working in an economy that is set up and functionally defined by politically designed laws that are very difficult to change, much less eliminate.

If this had happened earlier, by law we’d still be riding horses.

Back in middle school (during the cold war) we actually learned about how these command/control style governments were bad and how free market capitalism was going to kick their tail. Apparently not all middle schools were teaching this.

When you combine the looming energy crisis, the eventual debt disaster of the Federal Gubmint, and the collapsing market efficiency of our command/control economy, it’s pretty clear we’re headed for a really dark period of American history. Hey, it happens. Let’s just hope there is some sort of eventual rational response that doesn’t end up in a huge, terrible war.

Last night we went to our daughter’s future school for information on enrollment for next year. We were extremely impressed, and are really looking forward to our daughter’s experience there.

During the presentation we were asked several times to vote for a tax extension on April 27th.

The tax extension will extend a property tax from 17 to 36 additional years, which will enable them to refinance debt that was originally used to build a substantial chunk of very advanced (and apparently effective) educational infrastructure. They talked about the cash flow, and that refinancing would free up 6 million dollars for new teachers, etc.

So it seemed like a great idea as presented, but this is not the freewheeling, borrowing times of the 1990′s or early 2000′s where debt was no big deal. As our effectively bankrupt county illustrates, refinancing debt can get a municipal governments in a heap of trouble. The City of Hoover is obviously a tighter ship than the county, but it’s still a dangerous world for governments and debt.

There are plenty of things a government can do to raise cash and hire teachers. But are they all good things? I wanted to find out exactly what the numbers were with this refinancing. Are we being asked to make great short term choices at the expense of long term flexibility? Or is the rate environment so favorable that this is a no-brainer? Are we shoveling more debt on future residents or is it a wash?

Unfortunately there’s not much of information out there. The only number you see consistently is the increased cash flow (approximately 6 million dollars per year), and that’s troubling. In the world of debt you can easily make a boneheaded long term decision for increased cash flow.

The only numbers I saw were these from this article:

The school system spends about $16 million per year making payments on that debt. On a per-student ba­sis, Hoover schools spend more on debt service than any other system in the state, Craig said.

The school system’s debt now is scheduled to be paid off in 17 years. With an ex­tension of the 24-mill tax, the system could stretch out that debt over a 30-year term, lowering payments to an estimated $10 million to $13 million per year during tough financial times.

(first of all, that 10-13 million dollar figure illustrates some spin of the message. It looks like saving 6 million per year is the high estimate and 3 million is the conservative estimate).

Other than the sample ballot, I can’t find any further info on the tax at the hoover web site.

Using this info as a blunt estimator, the cost of refinancing is as follows:

Current total payments (17 years X 16 million) = 272 million dollars
Optimistic extension estimate (30 years X 10 millioin) = 300 million dollars
Conservative extension estimate (30 years X 13 million) = 370 million dollars

So there you have it….extending this debt will cost anywhere from 28 million more dollars to 98 million more dollars over the term. Assuming this info as presented is reliable.

One thing should be clear, the city wouldn’t be saving any money. They’d be lowering the payments.

The problem I have is that this is a pretty broad range of figures. And it’s a large amount of additional money at the conservative end of the estimate. I’m also not comfortable with the presented 6 million figure (which seems variable), since we really don’t know what the final cash flow will be.

Lastly, the assertion that the money will be used for teachers is questionable…it’s my understanding that the money can be used for anything the city wants. As I said, we were very impressed with the school and staff and clearly we should give them every tool we can to educate our chillun’s.

But are we taking tools away from future generations with this decision? I realize dumping junk on future generations is the American way, but if that’s what we’re doing we should at least know how and how much before we vote.

I guess this is just a large amount of money to be throwing around in a small municipal vote during a severe recession. It could have significant implications down the road, and I don’t think we’re being given complete information. We see the catastrophic results that can occur. I hope this choice is being made in an intelligent way.