Is It Your Money?

Sometimes the simple questions are the most powerful. So for today, lets start with a simple but powerful question.

When you earn money...
who's money is it?

This is not a trick question. You see, under liberal thinking, it is the federal government's money. They have the "first call" on as much of it as they "need." Their "first call" comes before your family's and before God's. In theological language, the Federal Government believes that it has the moral right to take the "first fruits." You get to keep the rest.... not because it is yours... but because they allow you to keep it. (For today, we'll limit our discussion to the Federal Government. The rights of State and Local Governments are different and demand a separate discussion.)

HOW MUCH?
How do we determine the correct amount the government has a "right" to take. I am not asking how much they want. I am asking where the government's rights start and stop. It is clear by the way the federal government operates, politicians believe that they have a "right" to whatever they want. Of course they will use the word need, not want.

First, we must define the word "right."

       right - noun
       - a just claim or title
       - a moral, legal or ethical principle

       - an underlying cause of justice

Starting Point
First we have to agree to the necessary, non-optional, functions of national government. Clearly, there are necessary functions defined in the Constitution.

• Defense of the nation
• Codifying and supporting the Rule of Law
• Limited infrastructure programs

No one will argue that these must be funded for our nation to survive and prosper. Government has "a just right and title" to the resources necessary to accomplish these literal and specific functions. But these things represent less than 1/3 of the total federal budget! Defense represents about 20-25%. Funding limited legal and physical infrastructure could easily be accomplished with 10% of the total budget. This is where the "rights" of the federal government end! All the rest are government "wants"... not needs... and certainly not "rights." But politicians have convinced themselves, and us, that all the other operations of the government are on the same moral footing as the 3 I mention above. They are not!

Remember, we didn't even have an income tax as we know it until the Civil War (1862). Wars always result in higher taxes. It wasn't until 1913 and the passage of the 16th Amendment that Congress received the actual authority to tax income on individuals and corporations.

Here Is Your Allowance
Where does the word allowance come from? It comes from the word allow. The Federal Government allows us to keep some of the money we earn. Today's politicians, in both major parties, act as if what is left after taxes is your allowance. It is given to you by the Nanny State. They can raise or lower it at will. My favorite example...

• Tax Holidays: Tennessee, like many other states, declares a "Tax Holiday" a few weeks before Back-to-School. (While this isn't a Federal program, it is too good of an illustration to pass up.) Think about it! If the State Government does not "need" the revenue, why not lower the overall tax rate. The reason is simple. Legislators get to pass popular legislation, at least with the unthinking majority, thereby gaining political brownie points and securing power. It is horrible policy and trains us to appreciate government allowing us to keep more of our money.  We are grateful that our allowance is increased for one weekend.

Where Do You Go For Real Change?
There are several terrific places to go for information, to influence policy makers and to sharpen your thinking on important issues like these.

For Action...
- The Club for Growth
- National Taxpayers Union
- Ron Paul's Campaign for Liberty
- The Cato Institute

For Learning...
- The Ludwig von Mises Institute
- Cafe Hayek (a terrific blog from George Mason University's Econ Dept.)

After you are armed with a little information, call your Congressman and Senators. Write letters to the editor. Engage your friends. Don't be silent. Do something! Start with this...

Pick One Organization On My List...
Support It Today!

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RINOs - Anything But Humble

RINO:

Republican In Name Only

Regular readers of this blog know that I believe, and hope to convince you, that it is imperative to have frameworks through which to filter ideas, speeches, laws and the general illogical proposals that come out of Liberals and RINOs. While the actual frameworks/filters are different based on the concept being considered, the methodology for use is exactly the same.

"If you find yourself believing that you have found some new, unique and world changing insight to Biblical interpretation... STOP... you are wrong. Go read what the Church Fathers thought."

                                                                                                            R. C. Sproul Jr.

                                                                                                            Aggressively Paraphrased

The advice that R. C. gives is true for theology and for at least 2 areas beyond theology. For me, the specific areas for the use of frameworks and filters are...

1. Economic Policy ➪ Filtered by Free Market economic theory as embodied in either the Austrian or Chicago School.
   
2. Laws / Government Action ➪ Filtered by a framework of Original Intent and/or Strict Construction. Use the Constitution as the first and most important filter. (As a rule-of-thumb, anything from Supreme Court during the Warren Court or the Berger Court is wrong. As a hard and fast rule, anything!!!!... from the 9th Circuit is completely unconstitutional and is untethered from ALL reason and logic.)
   
3. Biblical Interpretation ➪ I use the Westminster Confession of Faith... but if you use Spurgeon's Baptist Confession of Faith (1689) or an equally rigorous, historic and non-postmodern confession that is in agreement with these type of documents ... I believe you are on a firm foundation.
   

Arrogance: RINOs and the "Gang of 10"
While RINOs try to sound humble and statesmanlike by being "bi-partisan" and pragmatic, what they really are is ARROGANT! They have decided that they know better than:

• the Founding Fathers,
• the long line of Noble Laureates in the Free Market tradition... and ...
• the Church Fathers.

No matter how much they are praised by the mainstream media, they are demonstrating supreme arrogance. (At least true Liberals have a completely different framework that they hold to.) The framework for RINOs is:

• I know best.
• Whatever I feel is right.
• Will the New York Times like it?

We recently saw this in spades in the "Gang of 10's" energy plan. Sadly, I am not at all surprised that one of my Senators...

... Senator Bob Corker (R-TN) ...

... was a part of this arrogant (disguised as bi-partisan) plan. Actually, my other Senator, Lamar Alexander (R-TN) is a RINO too.

The Best Guns For RINO Hunting

If you want to stop RINOs in their tracks, read policy papers from and financially support...

• The Club for Growth
• The Cato Institute
• The Heritage Foundation
• The Independent Institute...

... and read The Great Books.

Sorry I Have Been Sick

On the way back from the best dude ranch in the world... Lost Valley Ranch... my whole family got sick with really bad colds.  We turned the corner today.   I can't wait to get back to the blog.  

Please sign up for e-mail alerts as the posts will come fast and often now that I am well.

Back From The Ranch Sunday

We will be back from the Lost Valley Ranch late Sunday.
Look for 7-10 posts next week.

Note: This is my oldest son and me on "the family ride."

Windfall Profits Tax: How To Kill Investment

Obama wants to take a "reasonable share" of "windfall profits" from US oil companies. If you have read this blog before, you know that I try to point out the way politicians use language, redefinition and fuzzy logic to disguise and truth. These two are classic examples and show the danger in allowing politicians to do this unchecked.

"Windfall Profits"
The Wall Street Journal did a very nice job on its editorial page last Monday discussing the profit margins of various companies and industries versus Exxon Mobil and Big Oil.

They cited:
Exxon Mobil = 10% .... and the Big Oil Average = 9%
Electronics Companies = 14.5%
Pharmaceuticals = 18.4%
Google = 25%

From this, let's give Obama the benefit of the doubt and say that his definition of windfall profits does not simply mean high profit margins. He hasn't suggested a windfall tax on Google...yet. So what does he mean??? He seems to imply, as does the language, profits that seem high versus some nebulous or historic benchmark. So, if windfall profits should fairly be taxed at a different and higher rate, we have to understand what triggers improvements in profits. What causes a company's or industry's profits to be above the "norm?"

What Triggers "Really High Profits?"

1. Risk: Modern Portfolio Theory (MPT) states that risk and returns are highly correlated. The higher the risk, the higher the potential return... and, the higher the potential for loss. Every Nobel Laureate in Economics, financial planner, venture capitalist and entrepreneur knows this well. The Nike founders and early investors made a fortune. But for every Nike, there are 100+ companies that went under and investors lost everything. To take on this risk of losing it all, the potential return has to be substantially above the norm. Otherwise, everyone would invest in P&G stock.
   
2. Innovation: Media companies have had a terrible past 5+ years... especially newspapers. This is "old media". On the other hand, Google has continued to grow rapidly. Google is nothing more than a media asset that innovated and changed the world. Further, like in point #1, the Google founders and funders took on massive risk in order to reap "windfall profit."
   
3. Cyclicality: Then there are business that have huge fixed costs and move with the cyclical macro-economic trends. When things boom, they boom. When the overall world economy falls, they record huge losses. When Obama singles out Big Oil, he forgets that the entire commodities sector has been on fire. Everything from agricultural crops to coal have risen dramatically. World demand is incredibly high. Prices and profits are the mechanism by which demand adjusts and the ROI on substitute products becomes viable making new investment rational. BTW, in the 90s when oil was $11 a barrel and gas was under a dollar, I didn't hear any politician offer taxpayer dollars to bail out Big Oil.
   

Imagine The Damage
Imagine the damage to risk taking, innovation and cyclical industry investment if above average profits were capped via higher taxes. Innovation and infrastructure would move overseas. Silicon Valley would be nothing more than a place with great weather. And let's not forget Barack's Hollywood buddies. Because of innovation (creativity) and risk taking, blockbusters like Titanic and smaller movies like Shakespeare In Love reap incredible profits. That is why even low odds of success draws film funding. Does he want a windfall profits tax on every Hollywood box office winner?

Oh... That's What He Means!
What Obama really means is twofold. First, it is politically expedient to demonize Big Oil... logic and consistency be damned. It gets him votes. Second, by justifying taking more taxes ("a reasonable share"), he gets to further fund his redistribution of wealth and nanny state programs. The federal government gets to control a bigger piece of the pie. Politicians get to become more powerful.

Mr. Obama....

Profits Reward Risk Taking
Profits Fund Innovation
Profits In Good Years Make Up For Bad Years

Windfall profits happen when you buy a lottery ticket...
not when you invest in a business!

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Spirit of the West

Yesterday we flew to Colorado. We will be staying the week at a dude ranch. I will probably only post 3 times this week as there is only WiFi in the main house.

The ranch, Lost Valley Ranch, is 2 hours from the airport. There is no cell phone coverage. In fact you get the "no service" signal 45 minutes before you even arrive at the ranch. The final road you turn onto is dirt, bumpy (really bumpy) with hairpin twists and turns and 9 miles long. There is no TV, no phones in the rooms and no one locks their doors. After you find your room, the first thing you do is get fitted for a saddle and get your horse. The horse I'm riding is named Dust Bottoms which I assume is descriptive of his and mine after a few hours on the trail.

Spirit of the West!
On the drive here, there are a few things that caught my attention. First, there are LOTS of motorcycles. Unlike Tennesee, most of the riders do not wear helmets. You see, there isn't a helmet law in Colorado. When I asked about how far schools were, I was told that a lot of families home school in the area. When I asked about 9 mile road to the ranch closing in the winter and staying repaired and drivable, the answer was "we do it." You see, the spirit of the west...the spirit of independence ... is still alive and well here in Colorado!

Compare this to the nanny state of California. In California, they are seriously considering banning use of trans-fats, banning fast food restaurants in poor neighborhoods and banning or heavily regulating home schooling. The spirit of the west.... the spirit of Reagan... died long ago in California.

Founding of the Libertarian Party
Then I remembered, the Libertarian Party was founded here in Colorado in 1971! Most libertarians are not anarchists. They have a strong bias toward freedom: individual and economic. The chart below was published by The Cato Institute. It is a terrific illustration of the basics of each core political position: Liberal, Libertarian, Conservative and Populist.

Regardless of the presidential election returns, the voters in Colorado have a strong Libertarian bias. It is everywhere. It is refreshing.

It is time we all went out, bought some cowboy boots, and decided to take care of ourselves and our families...

Saddle Up!

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Avoiding Disaster Now: The Principles of 1776

When people first find my blog, most see the "1776" and assume it is in some way a patriotic or "American" blog. After you have been reading this blog for a while, you will understand that...

I chose 1776 for two primary reasons...

1. I argue that the Founding Fathers had radically different intentions when they founded our country and ultimately wrote the Constitution versus the way we are governed today. I believe the evidence shows that our long drift from our founding principles has come via activist courts, an overly powerful (imperial) view of the presidency and an abdication of responsibility by Congress. This move away from first principles has damaged our republic and threatens individual liberties.
   
2. The Free-Markets view of economics was first defined and gained momentum in 1776. In that year, Adam Smith published The Wealth of Nations in Great Britain. In this book, he redefined "freedom" and changed the world forever. I believe that the evidence supports this as the only correct economic model to maximize societal happiness, wealth and freedom.
   

Taken together, these are the lenses through which we should view and critique issues we face and actions taken by our federal government. (For individuals, families and communities, the Biblical lens is in my view also essential.)

Why Should You Care?
Both of the points above were massive paradigm shifts in understanding human association and economics as it effects individuals. (As an aside, the 3rd was the Protestant Reformation in 1517 and the Biblical principles it recovered.) Without these 2 events in 1776, your freedoms, your economic mobility, your personal liberties and your "station" in life would be radically different. Drifting from these principles reduces our freedoms and liberties. Further, it increases economic inefficiencies and reduces economic motivation. In today's post, I explain the basics of free market economics. This should be your filter to distill today's disastrous political theories and rhetoric.

Free-Markets 101
Since 1974 when F.A. Hayek won the Nobel Prize in Economics, free-market economists and their thinking have ruled the day with the Nobel Committee and within the academic world. It isn't just their ideas that have won... it is the body of factual evidence that has killed the Keynsian/Marxist views. Even so, if Obama has his way the old Keynesian central planning, regulation and redistribution of wealth model will have a tremendous resurgence, no matter how wrong it is.

There are two primary schools of thought when it comes to adherents of free-market association / free-market economics: The Austrian School and The Chicago School. (Over time, I'll write a 201 piece on how the two schools differ.)

While these two schools have some significant disagreements, they agree on a core framework that defines free-market economics:

- BOTH SCHOOLS BELIEVE...

• Individuals, pursuing their own economic and non-monetary success, will ultimately maximize the economic success and freedoms within a society. Adam Smith called this "the invisible hand."
  
• Because of this invisible hand, liberty and order can coexist.
• Respect for private property is essential to freedom and progress. Without private property, there is no real mechanism for exchange.
• Free trade, within and between countries, is essential to individual and therefore societal maximization.
• For trade to be free, there must NOT be government controls on prices, the exchange process or wages (including minimum wages).
• Limited government is essential. Government's only necessary functions should be defending the nation against attack, protection of individual property rights, and limited infrastructure projects.
• There should be no central planning of the economy; it cannot be effectively done.
  
• Deficit spending should not be needed.
• Market intervention (as Keynes suggested) is not the path to economic stabilization.
• Progressive taxes are harmful.
• Using the tax code for social engineering is wrong.
  
• Income redistribution and the creation of the nanny state hurts individuals and the nation by destroying their liberties/freedoms and reducing motivation.
• Importantly, they oppose "corporate welfare", not just individual welfare.
• Finally, they believe in privatization of almost all government assets.
  

The Current Issues
The principles and freedoms created in 1776 have become the freedoms threatened by our current political leaders and bureaucrats... disaster looms. The core principles of free-market economics must be used daily, especially in this political season. Obama wants to institute a massive tax increase and an equally massive program of central planning and redistribution of wealth. We just made a mistake by increasing the minimum wage (See July 24 post... Minimum Wage - Maximum Ignorance). The Social Security and Medicare disasters threaten our economy and have robbed individuals of prosperity. And the list goes on and on.

That is why we need to understand ...

1776
Now More Than Ever !

Note 1: I have just added a link to The Independent Institute.

Please take a minute and visit them.

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