Obama's health care law is a tragedy. He campaigned on “change” and spoke of “fundamentally restructuring the United States of America.” And on signing the health care bill into law, he said, “This is what change looks like.” That law represents a rejection of the historic American system, the Constitution, arithmetic, and simple honesty. All those were considered expendable by the liars and thieves who created Obamacare under the noble-sounding slogan of helping those who can't afford health insurance.
A congressman from Texas was widely criticized when he shouted “He lies” while Obama was speaking to Congress. But not being in Congress, I am not prevented by its decorum from speaking the same truth. Since there are many websites devoted solely to listing Obama's many lies (which can be found by googling “Obama's lies”) I shall confine myself here to some of his major ones connected with the new health care law.
First of all, there was Obama's claim, stated publicly on at least seven occasions, that he would negotiate health care openly with all the parties, including insurers and doctors, sitting at a big table and televised by CNN. Seven lies. The health care bill was negotiated in secret. When asked about Obama's promises of televising the debate to the public, Speaker Nancy Pelosi quipped, “There are a number of things he was for on the campaign trail.”
According to Michael F. Cannon, director of health policy studies at the Cato Institute, the Medical Loss Ratio memo released by the Congressional Budget Office “is the smoking gun that shows how congressional Democrats have very carefully hidden more than half the cost of their health care bills...Democrats have been submitting proposals to the CBO behind closed doors and tailoring their private-sector mandates to avoid having those costs appear in the federal budget. Proposals that would result in a complete cost estimate—such as the proposal suggested by Sen. Rockefeller discussed in the Medical Loss Ratios memo—are dropped. Because we can't let the public see how much this thing really costs.”
The Congressional Budget Office claims the law will cost about $950 billion over ten years and lower federal deficits by $138 billion. The CBO makes such estimates on the basis of what a bill contains—not whether the bill is realistic or will be changed after the CBO calculations are made. For example, the law requires a 21 percent cut in physicians fees. Everyone in Congress knows that is unrealistic and will be changed very soon—because many physicians are already refusing to take on additional Medicare patients. Without this cut—which was not in an earlier version of the House bill—the cost of the bill was well over $1 trillion, the arbitrary limit set by the president. So the cut in physicians' fees was introduced to trim $230 billion from the cost, with the intent that it would be restored by separate legislation after the original bill became law. Thus the health care bill was passed on a deliberate misrepresentation of its real costs. In other words, what occurred was a well-planned big lie carried out by a dishonest legislative maneuver.
It was also dishonest to claim the program is a cost-saving measure when it includes only six years of benefits against ten years of costs. Nearly all of the benefits do not kick in until 2014, but Americans have to start paying for the program right away. Furthermore, insurance premiums of $70 billion paid in the first ten years are counted as deficit reduction for that period, but they are intended to finance benefits that won't come until after ten years and whose costs aren't included in the first ten years.
The Obamacare law will divert $53 billion from Social Security to help the health care numbers look better. Never mind that Social Security is already going bankrupt.
The Obamacare law will siphon an expected $19 billion from the government takeover of federally financed student loans. Never mind that student loans have nothing to do with health care; the funding transfer makes the health care numbers look better.
The biggest lie of all was Obama's repeated promise he would not cut Medicare. The law cuts $463 billion from Medicare to be diverted to financing insurance subsidies. Medicare is already scheduled to go broke in seven years. Obama claims that reducing “waste, fraud and abuse” will enable Medicare to operate more efficiently at far lower costs, but the new law contains no reforms that would enable it to do so. It is even harder to imagine how Medicare can provide quality health care with drastically reduced funding when it faces a huge increase in demand for services as babyboomers age.
The new health care reform would establish two new entitlement spending programs—health insurance subsidies and long-term health care benefits—but their costs are excluded from the CBO calculations. Douglas Holtz-Eakin, a former director of the Congressional Budget Office, says future Congresses will need to vote an additional annual $114 billion for these two new programs. Of the law overall, he concludes, “If you strip out all the gimmicks and budgetary games,” Obamacare will increase federal deficits by $562 billion. This 2,700-page law is a gigantic fraud perpetrated by Obama, Pelosi, Reid and their accomplices in this most depraved Congress in U.S. history.
Holtz-Eakin also states, “The federal deficit is already expected to exceed at least $700 billion every year over the next decade, doubling the national debt to more than $20 trillion. By 2020, the federal deficit—the amount the government must borrow to meet its expenses—is projected to be $1.2 trillion, $900 billion of which represents interest on the previous debt.”
If anything, those numbers understate the case. Entitlement legislation always ends up costing more than expected. Take Medicare, for example. When it began in 1965, its cost was projected to be $2 to $3 billion in the first year, and Congress said it wouldn't reach $10 billion until the 1990s. But it cost $7 billion the first year, and in 1990 the cost was $107 billion. In 1992 the cost was $140 billion. In 1994 it was $179 billion.
Thomas Jefferson wrote, “The principle of spending money to be paid by posterity, under the name of funding, is but swindling futurity on a large scale.” He also wrote, “I place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared. To preserve our independence, we must not let our rulers load us with perpetual debt.” And Samuel Adams wrote, “Shame on the men who can court exemption from present trouble and expense at the price of their own posterity's liberty!”
It is indisputable that our Founding Fathers intended government to protect individual rights, including property rights. They were familiar with the concept of rights to “life, liberty and property” from the English philosopher John Locke. In fact, when Jefferson wrote in the Declaration of Independence that governments are instituted to secure man's “unalienable rights” to “life, liberty and the pursuit of happiness,” he was accused by some of simply copying Locke's work. Jefferson replied that he “did not consider it as any part of my charge to invent new ideas altogether.” Rather, he said he intended simply to make “an expression of the American mind.”
The Founders understood that Jefferson's substitution of the phrase “pursuit of happiness” for the word “property” in Locke's triad of rights was in no way intended to downgrade property rights. They viewed property as the principal means for exercising the right to the “pursuit of happiness.” On the importance of property rights, James Madison wrote: “Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man whatever is his own." (Italics added.)
The Founders believed man had natural rights, that these were “unalienable,” as Jefferson stated, because they came from his own existence, not from government. Government can only recognize or deny them. “Unalienable” means “not transferable to another or capable of being repudiated.” Government cannot repudiate nature. Nor can it transfer property from someone without his consent without violating his natural rights as well as the principles of equal rights and equal protection of the law.
The Founders believed in liberty and property rights, not government “redistribution of wealth.” Jefferson wrote: "To take from one, because it is thought his own industry and that of his fathers has acquired too much, in order to spare to others, who, or whose fathers, have not exercised equal industry and skill, is to violate arbitrarily the first principle of association, the guarantee to everyone the free exercise of his industry and the fruits acquired by it." (italics added)
Jefferson and his cohorts saw property rights as a natural outgrowth of the exercise of liberty. If men were to enjoy freedom in America, what kind of economic system would the new nation have? Only a free economy would be appropriate for free men. Economic choices of work, trade and prices would be determined by men exercising their liberty through their rights to property, while respecting the similar rights of others. That is the essence of freedom. Though not perfect in all respects, certainly not with respect to slavery, the American system of freedom was the key to America's growth and prosperity.
Even before America had demonstrated the economic effectiveness of freedom, it was recognized by the world's first great economist Adam Smith in his monumental work The Wealth of Nations, which by neat coincidence appeared in 1776, the same year as our Declaration of Independence. In it, he wrote: "The statesman who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most necessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it." Such a man has now arrived. Barrack Obama.
He attempts to “direct private people in what manner they ought to employ” their money for health insurance. And this is to be for insurance for others, not just oneself, thereby elevating their needs—both legally and morally—above people whose “unalienable rights” are being displaced. Thus is government transformed from being the protector of the rights of all into a weapon for plundering wealth of some for the benefits of others whose alleged needs are deemed morally superior to not only other people's property rights but to their “unalienable right” to their pursuit of happiness. As Frederic Bastiat wrote more than a century and half ago, “When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it.”
In 1791 James Wilson, a signer of the Declaration of Independence and an important delegate at the Constitutional Convention, wrote that government “should be formed to secure and to 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.” Contrast this to the performance of Vice President Joe Biden, then a senator, at the hearings for Clarence Thomas' nomination to the Supreme Court. He tried to browbeat the nominee and, waving a copy of Professor Richard Epstein's book on private property, asked Thomas menacingly, “Are you now, or have you ever been, a member of this cult that believes in the sanctity of individual rights? Do you believe that 'natural rights' should underlay the Constitution and our legal system?" Remember, too, that President Obama has said he would not nominate someone such as Clarence Thomas to the Court.
Obama's vision of health care is a collectivist goal at odds with the concept of individual rights and can only be achieved by their negation. He has stated that everyone should have a right to health care, by which he means with other people's money. Which means at the expense of others' liberty, property rights and the right to pursuit of their own happiness. Nobody has a right to deprive others of their natural rights. When Obamacare commandeers people's earnings to finance other people's insurance, it is tantamount to condemning them to “involuntary servitude,” which, along with slavery, is prohibited by the 13th Amendment to the Constitution. What is the difference, in effect, between a slave who is forced to labor in a cotton field for a master and a citizen who is forced to surrender the earnings of his labor to a master in Washington, who dismisses his rights as inferior to whatever that master decides should be done with those earnings, in this case health insurance for others?
Obamacare has more in common with the Marxist dictum of a redistributing wealth “from each according to his ability, to each according to his need” than with America's historic reliance on property rights. Marx favored the abolition of private property. According to Richard Weikart, a professor of history, “In Marx's view private property was the source of all the evils in human society... Private property thus spawned a class struggle in every age.” He called for a communist society to overcome the dehumanizing effect of private property. He said it caused humans to work only for themselves, rather than for the good of the species. Obviously this view is incompatible with the individual's right to the pursuit of happiness. Marx believed, according to www.radicalacademy.com, that material happiness “must be obtained through organized collectivism. [emphasis in the text.]” This is incompatible not only with the historical record of America's success through individual rights, but with the contrasting failures of socialism or communism in every country that tried it. But oblivious to history and logic, Obama is determined to take America down the path to collectivism—even if that means sacrificing honesty and deceiving the public with phony numbers.
Obama, like Marx, views society through the lens of “class struggle.” The “enemies of the people” now are the big banks, the big corporations, the insurance companies, the rich. Not big government.
Obama attacked the banks for making unsound housing mortgages, but he did not mention that Big Government required them to do so. The Community Reinvestment Act required them to lower their underwriting standards for the political goal of enabling low-income people to buy homes with mortgages for which they wouldn't otherwise qualify. And the biggest offenders in the housing crisis and the ones who precipitated the crisis were the GSEs (government sponsored enterprises) Fannie Mae and Freddie Mac, which were subsidized in various ways by the federal government. They were also guilty of egregious risk practices and fundamental business mismanagement, according the government regulators--who did not prevent the credit bubble from inflating and bursting. (See http://www.amlibpub.com/liberty_blog_archive/2008_08_01_archive.html)
Obama attacked the health insurance companies, posing as a hero by castigating them for raising their rates to fatten their profits. He was accusing them of evil even though they had done nothing wrong, had violated no law, and he has no authority for determining that their prices or profits are wrong and that the companies should be subject to his public attack. Never mind that their profits are not out of line with other industries, nor that they have raised rates because their costs have increased—and will increase more because of coverage changes demanded by the president. Never mind, too, that 85 percent of the public has private health insurance and 74 percent are satisfied with their insurance company. That is irrelevant from a political standpoint. What is needed politically is not satisfaction with business, as occurs under freedom, but conjuring up an “enemy” to fit the description of class struggle in order to create support for the intrusion of government.
Obama attacked the Big Three American auto companies. He never mentioned that the problems that imperiled their survival were caused by government. (See http://www.amlibpub.com/liberty_blog_archive/2010_01_01_archive.html)
Then there are the rich, always an easy political target in a democracy because they are a small minority. And it is easy to gain votes by promising to tax their wealth for the benefit of the majority who are less well off. But the top one percent of taxpayers already pay more income tax than the bottom 95 percent! The top 10 percent pay 72.4 percent of the total. The bottom 50 percent pay less than 3 percent. Thus the politicians always find it easier to win elections by promising to deliver plunder to the masses rather than by defending the rights that our Founders believed were the reason for government in the first place.
Given that political situation, it is hard to see how Obamacare will be repealed even if the Democrats lose a large number of seats in both the House and Senate elections this fall. Even if the Republicans were to gain majorities in both houses, they undoubtedly would not have enough votes to override a presidential veto, which would surely come. One can certainly hope that Congress will repeal Obamacare—I certainly do—but there is another possibility that deserves our attention. With the U.S. Congress having so thoroughly disregarded the views of the American people on Obamacare, perhaps it is time to consider an alternative through the state governments. What I have in mind could not only eliminate Obamacare but “fundamentally restructure the United States of America”—back to the kind of government the Founders intended!
In 2009 The Tennessee General Assembly voted overwhelmingly to pass a resolution asserting the federal government is abusing its constitutional authority and affirming the state's claim as a self-governing jurisdictional entity in keeping with the Tenth Amendment to the Constitution, which reads: “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively or to the people.” The resolution also noted that while “the federal government was created by the states specifically to be an agent of the states...today, in 2009, the states are demonstrably treated as agents of the federal government.” The vote was spectacularly one-sided: 85-2 for approval in the state House of Representatives and 31-0 in the Senate, and the bill was signed by Governor Phil Bredesen.
Letters were sent to the 49 other states, noting “the purpose of our political system is to secure for its citizens their natural rights,” and including the following:
“Today the federal government seeks to control the salaries of those employed by private business, to change the provisions of private contracts, to nationalize banks, insurers and auto manufacturers, and to dictate to every person in the land what his or her medical choices will be.
“Forcing property from employers to provide health care, legislating what individuals are and are not entitled to, and using the labor of some so that others can receive money that they did not earn goes far beyond securing natural rights and the enumerated power in the Constitution...
“We invite your state to join with us to form a joint working group between the states to enumerate the abuses of authority by the federal government and to seek repeal of the assumption of powers and the imposed mandates."
Since then, six other states have joined Tennessee in passing similar resolutions. Approximately 30 others are in various stages of trying to legislatively assert sovereignty in various ways.
A very good start has been made, but the problem is these resolutions can simply be ignored by Congress. Something stronger is needed. I have some ideas about this.
Several years ago I wrote a book titled The Trojan Project. It is a novel of political intrigue between opposing forces of good and evil over control of the U.S. government. Although the storyline is fictional, the book is about 60 percent nonfiction. All of the laws, regulations and examples of people being persecuted by the government in this book are real—even their real names are used. The unconstitutional expansions of federal power and improper decisions of the Supreme Court are also explained. All of the historical references to the Constitution, the Founding Fathers, and quotations from them are real, as are the reforms proposed in the book. These include nine constitutional amendments, most of which I believe have never before been proposed and a method of enacting them that has never before been used. I would hope that the state sovereignty movement initiated by Tennessee will eventually lead to using this method to limit the federal government to its proper role--permanently. This may seem a difficult task right now. But given the anger that Obama has already generated over health care and the strength of the Tea Party movement, I think resentment over the federal government's role will only grow when people start to see how his colossal spending adversely affects the economy, the value of the dollar, and their lives. Then the American people and the states may be willing to resort to constitutional amendments as I have suggested. These could throttle back federal expansion in ways beyond the scope of the sovereignty regulations now being pursued and could not just be ignored by Congress as the sovereignty resolutions can.
Here are excerpts from some reviews of my book The Trojan Project:
“The Trojan Project provides an excellent introduction to a well-articulated Conservative/Libertarian philosophy presented in a clear and enjoyable format that should serve to disturb many Americans who have little to no idea how deeply our fundamental American principles of government have been corrupted over the years.” -- Michael J. McFadden, Mid-Atlantic Director, Citizens Freedom Alliance, Inc.
“An intriguing and absorbing novel, The Trojan Project is set squarely in the middle of today's political climate. This work can be classified as both fiction and nonfiction. Taking current events and realities, Contoski has woven a masterful tale of technological horror, finishing with an uncommon and totally unanticipated ending. Your attention is held until the very last period -- and beyond." -- Writer's Choice Literary Journal
"There is a conversation in The Trojan Project that is better than any history lesson, or class or professor that you could ever imagine. Reading through this dialogue--which is powerful and provocative steeped-in-truth fiction--transformed me. I felt that my American heritage was rehabilitated. Listen up, America! This book contains relevant and necessary information for every individual in this country today. It's that powerful." --Lori Crever, host of TV show "30 Minutes with the Author."
For more on this book, including additional reviews and information on how to order this book autographed to you personally by the author, go to American Liberty Publishers at http://www.amlibpub.com/
Wednesday, March 31, 2010
Sunday, February 07, 2010
Cash for Clunkers: Immoral, Wasteful, Failure
The government program that gave people up to $4,500 for trading in an old car for a new energy efficient model has been widely proclaimed a huge success, as measured by the popularity of the program. That certainly made it successful for the politicians who, in effect, were buying futures votes for themselves. Of course, they didn't say so; instead they claimed they were pursuing the noble benefits of stimulating the economy, promoting energy efficiency and reducing carbon dioxide emissions. Absent from the discussion was whether there was any moral or constitutional basis for taking money from some people (taxpayers) and redistributing it to others for purchasing automobiles.
Government is supposed to protect people's rights, but its violation of people's rights to their own money has become so widespread for so long it has become generally accepted. According to economist Walter Williams, “Two-thirds of the federal budget consists of taking property from one American and giving it to another. Were a private person to do the same thing, we'd call it theft. When government does it, we euphemistically call it income redistribution, but that's exactly what thieves do—redistribute income.” The “cash for clunkers” program (CARS, Car Allowance Rebate System) is simply another scheme for doing the same, disguised by claims of collective economic, environmental, and energy benefits. These claims are not only false but distract attention from the moral and constitutional issue of property rights and government theft.
The Founding Fathers were very familiar with the English philosopher John Locke's ideas about the rights to life, liberty and property. Jefferson was actually accused by some, most notably his fellow Virginian Richard Henry Lee, of simply copying Locke's work in writing the Declaration of Independence. Jefferson replied that he did not consult other literature while he was writing but “did not consider it as any part of my charge to invent new ideas altogether.” Rather, he said he intended simply to make “an expression of the American mind.”
In 1772, four years before Jefferson wrote the Declaration of Independence, Sam Adams created a “committee of correspondence,” the first organized opposition to British policies. It composed a document that provided a framework for the Declaration of Independence. It enumerated the rights of the colonists: “First. A right to Life; secondly to Liberty; thirdly to Property.”
Jefferson, however, substituted the words “pursuit of happiness” for the word “property” in Locke's triad of rights. The change was in no way intended to downgrade property rights. Jefferson and his contemporaries envisioned property rights as the principal means for the pursuit and attainment of happiness. The new phrase was inclusive not only of property rights but of the purpose they were to serve, and that of human actions in general.
The Declaration of Independence referred to the rights to “life, liberty and the pursuit of happiness” as “unalienable” because they were derived from the nature of man and inseparable from it. Man's rights are not given to him by government but by his own existence. Government can only recognize them or violate them. “Unalienable” means “not transferable to another or capable of being repudiated.” One's right to property is not to be transferred to another by government. Nor is it to be repudiated by laws that deprive him of using that right for the pursuit of his own happiness rather than for what the politicians may claim is better for society. The Declaration states that it was “to secure”—Locke's phrase—the rights to life, liberty and the pursuit of happiness that governments are instituted. When government engages in redistributing property rather than securing it for its rightful owners, it is an instrument for violating rights and plundering wealth instead of securing it.
Madison wrote: “Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man whatever is his own."
So the cash for clunkers program was off to a bad start in the most fundamental sense. The alleged collective benefits from the program fare no better. Burton Abrams and George Parsons of the University of Delaware added up the total benefits to buyers and auto companies, the environment, and from reduced gas consumption, minus the overall cost of the program. They found that instead of stimulating the economy, the $3 billion program that sold 700,000 vehicles made the nation $1.4 billion poorer.
What about the increased auto sales from the program? An analysis published by Edmunds.com showed that in any given month 60,000 to 70,000 “clunker-like” deals happen with no government program. Jeremy Anwyl, CEO of Edmunds.com, says the 200,000-plus deals the government originally anticipated from the program were about the “natural” clunker trade-in rate. He notes, too, that 100,000 buyers put their purchases on hold waiting for the program to launch, thus exaggerating the effect of the program once it began. Furthermore, when it became apparent the program was underfunded, consumers rushed to take advantage before the funding ran out. Anwyl also says “car prices are usually slashed in August and September to make room for the next year's models arriving in September. In anticipation, buyers have been putting off purchases all year.”
All those factors contributed to peak sales during the CARS program. But to the extent they caused buyers to move their purchases forward, they reduced demand for vehicles after the program expired. It should not be surprising that in September 2009, the first month following the clunkers program, U.S. sales of cars and light trucks fell 41 percent from August. GM's sales fell 45 percent; Chrysler's, 41 percent; and Ford's, 5 percent. Similarly, Volkswagen said Germany's cash-for-clunkers program might boost sales to 3.7 million units, up from 2.8 million, but that sales would likely revert to 2.8 million in 2010.
In the same way that the CARS program demonstrates an ignorance of human rights that is more than two centuries behind the times—predating the wisdom of our Founding Fathers and our nation's history of progress— it demonstrates a similarly primitive ignorance of economics. The wizards of Washington who devised CARS, and those who defend it, are apparently ignorant of an elementary principle explained more than a century and a half ago by the French economist Frederic Bastiat. In his famous “broken window” essay, a man's son breaks a window pane, which costs six francs to replace. Against the argument that such accidents stimulate the economy by supporting glaziers and the manufacturers of glass, Bastiat explained economic effects that are not seen. If the man didn't need to replace the window pane, he could have, for example, replaced his worn-out shoes or added another book to his library. If the accident did not happen, the man would have both the window and the shoes (or book). Instead he has only the new window. The shoes or book are never seen because they aren't purchased, but they represent a loss not only for the man but to society from the destruction of the window. In Bastiat's words: “Society loses the value of objects unnecessarily destroyed,” and “to break, to destroy, to dissipate does not encourage national employment.” Or as the great economist Henry Hazlitt wrote a century later, referring to the same essay: “You can't raise living standards by breaking windows so some people can get jobs repairing them.” But that is the principle behind the CARS requirement that perfectly serviceable vehicles traded in under the program be destroyed. Auto dealers were required to destroy the engines by injecting sodium silicate, then crush the cars for scrap, eliminating the possibility that even parts that might be usable could be salvaged.
Even with the CARS rebates, many people still either couldn't afford a new car or couldn't meet the requirements of the program. These include the working poor, teenagers, and charities that depend on donated junkers to carry out their work. A used car would meet such needs just fine, but the program eliminated 700,000 used cars from the market. So, many people who really needed a car ended up buying a new one and paying more than they felt they could really afford. As a result, they then couldn't afford new shoes or books—or such things as health insurance, dental care, better housing, more nutritious food, or an evening educational class. Furthermore, since they paid more for a car than they intended, they went further in debt with larger monthly car payments that cause a long-term reduction in their ability buy shoes, books, etc.. And depleting the supply of used cars reduces business for repair shops, employment for automobile mechanics, and auto dealer business for used cars.
When we turn to the issue of newer cars reducing gasoline consumption because of greater fuel efficiency, we see that ignorance once again prevails. As the English economist Stanley Jevons explained way back in 1865, “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth ...It is the very economy of use which leads to extensive consumption. It has been so in the past and will be so in the future.”
There is plenty of evidence that Jevons was right. When James Watt's steam engine was more efficient than its predecessor, the Newcomen engine, demand soared. People found all sorts of new uses for steam power. The same thing happened with electricity. And when automobiles became smaller and more energy efficient because of the Arab oil embargo in 1973, people drove more—not less—because they could go further on the same amount of gasoline. Gasoline consumption rose for two decades as energy-efficient cars flooded the roads.
In April 2009, Boston Globe columnist Jeff Jacoby wrote: “Improvements in fuel economy effectively make fuel less expensive, and when costs fall, demand tends to rise. As driving has grown cheaper in recent decades, people have done more of it—choosing to drive to work instead of taking a bus, for example, or buying a second car, or moving to a house with a longer commute, or sending the kids to college with cars of their own. Between 1983 and 2001, data from the Energy Information Administration show, the number of annual vehicle-miles driven by the average American household rose from 16,800 vehicle-miles to more than 23,000.”
During the period of which Jacoby speaks, fuel efficiency increased by 20.4 percent, from 14.2 mpg to 17.1 mpg, and vehicle-miles traveled per household increased 37 percent.
The proponents of the CARS program talk only about the energy efficiency of new cars compared to clunkers. They don't compare it to the energy required to manufacture them. Paul Driessen, a senior fellow with the Atlas Economic Research Foundation and a former Sierra Club member, calls attention to the energy required “to extract metallic ores, hydrocarbons and other raw materials from the earth, process and refine them, create alloys and plastics, and turn them into engines, chassis, windows, tires and interiors.” He says there is “no way” these energy costs “will ever be recouped by any savings the replacement cars might conceivable generate.” Daniel J. Stern writes: “It quickly becomes clear to all but the most strident Prius-preacher that driving an old car a half a million miles is really less taxing to the greater environment than making even just a single new one.”
Finally, we come to the issue of global warming and the carbon dioxide emissions of older cars. Again, the pro-CARS argument is based on ignorance—plus plenty of misinformation and even outright fraud. Climate change is not caused by changes in atmospheric carbon dioxide or by human activity. See my 3-part article “Global Warming, Global Myth” at http://www.amlibpub.com/liberty_blog_archive/2008_10_01_archive.html [for Parts 1 and 2] and http://www.amlibpub.com/liberty_blog_archive/2008_11_01_archive.html [for Part 3]. For a more detailed explanation, see the massive report issued in 2009 by the Nongovernmental International Panel on Climate Change (NIPCC). It is an 880-page book by many scientists that comprehensively refutes the global warming claims of the United Nations' Intergovernmental Panel on Climate Change (IPCC). This is a work of enormous scholarship backed by over 4,000 peer-reviewed scientific studies that were not considered by the IPCC.
But, for the sake of argument, let's assume it is desirable to reduce carbon dioxide emissions and look at the effect of CARS. “As a carbon dioxide policy, this [program] is a terribly wasteful thing to do,” says Henry Jacoby, a professor of management and co-director of the Joint Program on the Science and Policy of Global Climate Change at MIT. “The amount of carbon you are saving per federal expenditure is very, very small.” Bruce Yandle, Distinguished Professor of Economics Emeritus, Clemson University, says “the reduction costs are at least ten times higher than alternate ways of removing carbon.”
Based on Department of Transportation numbers, the total carbon savings from cash for clunkers amounts to only about 57 minutes of America's annual carbon dioxide emissions. But that is based on a static analysis, i.e., that there will be no change in driving behavior when fuel efficiency improves. Since we have already shown that greater fuel efficiency leads to more miles being driven, the actual reduction in carbon dioxide emissions will be even less than 57 minutes per year—and it could even be more than from the traded-in vehicles if the new vehicles are driven enough additional miles per year. Now consider that 6.7 tons of carbon are emitted in building a new car, and it becomes obvious that CARS results in a many-fold increase in carbon dioxide. Paul Driessen says there is absolutely no way that the emissions of carbon dioxide, other greenhouse gases and “real pollutants” from manufacturing replacement vehicles will ever be recouped by any savings from driving them.
President Obama said cash for clunkers was an “overwhelming success...provided the American auto industry an important boost, and is achieving environmental benefits well beyond what was originally anticipated...while reducing greenhouse gas emissions...and has proven to be a successful part of our economic recovery.” Is he as ignorant of what has been happening during his own administration as he is of the past? Has his collectivist ideology left him totally disconnected from the realities of history, property rights, economics and science?
Transportation Secretary Ray LaHood said “this is one stimulus program that seems to be working better than just about any other program.” That must mean those other programs are even bigger failures.
The CARS program is just one more demonstration that collectivism cannot triumph over reality. Collective good cannot be achieved by benefiting some people at the expense of other people's rights—including their property rights. The situation is not unlike that in our “broken window” example: the property rights that are destroyed are like the pair of shoes or book that is never purchased. They remain unseen and unconsidered while the benefits to others (or the environment) are extolled. Yet, not only are property rights themselves a value to people; if some people are deprived of them, the economy and society lose as well. For if people were not deprived of their property rights, they would exercise them in buying goods and services that would benefit employment and industries. And these would be of greater value than what is obtained under CARS or similar programs, as demonstrated by market prices and preferences. Government intervention in the market simply diverts resources in society to things of lesser value at greater cost. Thus society is better off when people are free to exercise their property rights than when the government violates those rights to stimulate other purchases. And the more a government substitutes its preferences for the choices of the people in the marketplace, the more the economy goes downhill, as history abundantly demonstrates.
Collectivism has failed wherever it has been tried. In contrast, America showed the greatest advancement of society in history because the Founding Fathers based their government on individual rights, not collectivism. Individual rights are essential to human progress. That is an inescapable reality. It will not be overcome by ignorance, lies and smooth talk in the cause of collectivism.
Government is supposed to protect people's rights, but its violation of people's rights to their own money has become so widespread for so long it has become generally accepted. According to economist Walter Williams, “Two-thirds of the federal budget consists of taking property from one American and giving it to another. Were a private person to do the same thing, we'd call it theft. When government does it, we euphemistically call it income redistribution, but that's exactly what thieves do—redistribute income.” The “cash for clunkers” program (CARS, Car Allowance Rebate System) is simply another scheme for doing the same, disguised by claims of collective economic, environmental, and energy benefits. These claims are not only false but distract attention from the moral and constitutional issue of property rights and government theft.
The Founding Fathers were very familiar with the English philosopher John Locke's ideas about the rights to life, liberty and property. Jefferson was actually accused by some, most notably his fellow Virginian Richard Henry Lee, of simply copying Locke's work in writing the Declaration of Independence. Jefferson replied that he did not consult other literature while he was writing but “did not consider it as any part of my charge to invent new ideas altogether.” Rather, he said he intended simply to make “an expression of the American mind.”
In 1772, four years before Jefferson wrote the Declaration of Independence, Sam Adams created a “committee of correspondence,” the first organized opposition to British policies. It composed a document that provided a framework for the Declaration of Independence. It enumerated the rights of the colonists: “First. A right to Life; secondly to Liberty; thirdly to Property.”
Jefferson, however, substituted the words “pursuit of happiness” for the word “property” in Locke's triad of rights. The change was in no way intended to downgrade property rights. Jefferson and his contemporaries envisioned property rights as the principal means for the pursuit and attainment of happiness. The new phrase was inclusive not only of property rights but of the purpose they were to serve, and that of human actions in general.
The Declaration of Independence referred to the rights to “life, liberty and the pursuit of happiness” as “unalienable” because they were derived from the nature of man and inseparable from it. Man's rights are not given to him by government but by his own existence. Government can only recognize them or violate them. “Unalienable” means “not transferable to another or capable of being repudiated.” One's right to property is not to be transferred to another by government. Nor is it to be repudiated by laws that deprive him of using that right for the pursuit of his own happiness rather than for what the politicians may claim is better for society. The Declaration states that it was “to secure”—Locke's phrase—the rights to life, liberty and the pursuit of happiness that governments are instituted. When government engages in redistributing property rather than securing it for its rightful owners, it is an instrument for violating rights and plundering wealth instead of securing it.
Madison wrote: “Government is instituted to protect property of every sort; as well that which lies in the various rights of individuals, as that which the term particularly expresses. This being the end of government, that alone is a just government, which impartially secures to every man whatever is his own."
So the cash for clunkers program was off to a bad start in the most fundamental sense. The alleged collective benefits from the program fare no better. Burton Abrams and George Parsons of the University of Delaware added up the total benefits to buyers and auto companies, the environment, and from reduced gas consumption, minus the overall cost of the program. They found that instead of stimulating the economy, the $3 billion program that sold 700,000 vehicles made the nation $1.4 billion poorer.
What about the increased auto sales from the program? An analysis published by Edmunds.com showed that in any given month 60,000 to 70,000 “clunker-like” deals happen with no government program. Jeremy Anwyl, CEO of Edmunds.com, says the 200,000-plus deals the government originally anticipated from the program were about the “natural” clunker trade-in rate. He notes, too, that 100,000 buyers put their purchases on hold waiting for the program to launch, thus exaggerating the effect of the program once it began. Furthermore, when it became apparent the program was underfunded, consumers rushed to take advantage before the funding ran out. Anwyl also says “car prices are usually slashed in August and September to make room for the next year's models arriving in September. In anticipation, buyers have been putting off purchases all year.”
All those factors contributed to peak sales during the CARS program. But to the extent they caused buyers to move their purchases forward, they reduced demand for vehicles after the program expired. It should not be surprising that in September 2009, the first month following the clunkers program, U.S. sales of cars and light trucks fell 41 percent from August. GM's sales fell 45 percent; Chrysler's, 41 percent; and Ford's, 5 percent. Similarly, Volkswagen said Germany's cash-for-clunkers program might boost sales to 3.7 million units, up from 2.8 million, but that sales would likely revert to 2.8 million in 2010.
In the same way that the CARS program demonstrates an ignorance of human rights that is more than two centuries behind the times—predating the wisdom of our Founding Fathers and our nation's history of progress— it demonstrates a similarly primitive ignorance of economics. The wizards of Washington who devised CARS, and those who defend it, are apparently ignorant of an elementary principle explained more than a century and a half ago by the French economist Frederic Bastiat. In his famous “broken window” essay, a man's son breaks a window pane, which costs six francs to replace. Against the argument that such accidents stimulate the economy by supporting glaziers and the manufacturers of glass, Bastiat explained economic effects that are not seen. If the man didn't need to replace the window pane, he could have, for example, replaced his worn-out shoes or added another book to his library. If the accident did not happen, the man would have both the window and the shoes (or book). Instead he has only the new window. The shoes or book are never seen because they aren't purchased, but they represent a loss not only for the man but to society from the destruction of the window. In Bastiat's words: “Society loses the value of objects unnecessarily destroyed,” and “to break, to destroy, to dissipate does not encourage national employment.” Or as the great economist Henry Hazlitt wrote a century later, referring to the same essay: “You can't raise living standards by breaking windows so some people can get jobs repairing them.” But that is the principle behind the CARS requirement that perfectly serviceable vehicles traded in under the program be destroyed. Auto dealers were required to destroy the engines by injecting sodium silicate, then crush the cars for scrap, eliminating the possibility that even parts that might be usable could be salvaged.
Even with the CARS rebates, many people still either couldn't afford a new car or couldn't meet the requirements of the program. These include the working poor, teenagers, and charities that depend on donated junkers to carry out their work. A used car would meet such needs just fine, but the program eliminated 700,000 used cars from the market. So, many people who really needed a car ended up buying a new one and paying more than they felt they could really afford. As a result, they then couldn't afford new shoes or books—or such things as health insurance, dental care, better housing, more nutritious food, or an evening educational class. Furthermore, since they paid more for a car than they intended, they went further in debt with larger monthly car payments that cause a long-term reduction in their ability buy shoes, books, etc.. And depleting the supply of used cars reduces business for repair shops, employment for automobile mechanics, and auto dealer business for used cars.
When we turn to the issue of newer cars reducing gasoline consumption because of greater fuel efficiency, we see that ignorance once again prevails. As the English economist Stanley Jevons explained way back in 1865, “It is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to diminished consumption. The very contrary is the truth ...It is the very economy of use which leads to extensive consumption. It has been so in the past and will be so in the future.”
There is plenty of evidence that Jevons was right. When James Watt's steam engine was more efficient than its predecessor, the Newcomen engine, demand soared. People found all sorts of new uses for steam power. The same thing happened with electricity. And when automobiles became smaller and more energy efficient because of the Arab oil embargo in 1973, people drove more—not less—because they could go further on the same amount of gasoline. Gasoline consumption rose for two decades as energy-efficient cars flooded the roads.
In April 2009, Boston Globe columnist Jeff Jacoby wrote: “Improvements in fuel economy effectively make fuel less expensive, and when costs fall, demand tends to rise. As driving has grown cheaper in recent decades, people have done more of it—choosing to drive to work instead of taking a bus, for example, or buying a second car, or moving to a house with a longer commute, or sending the kids to college with cars of their own. Between 1983 and 2001, data from the Energy Information Administration show, the number of annual vehicle-miles driven by the average American household rose from 16,800 vehicle-miles to more than 23,000.”
During the period of which Jacoby speaks, fuel efficiency increased by 20.4 percent, from 14.2 mpg to 17.1 mpg, and vehicle-miles traveled per household increased 37 percent.
The proponents of the CARS program talk only about the energy efficiency of new cars compared to clunkers. They don't compare it to the energy required to manufacture them. Paul Driessen, a senior fellow with the Atlas Economic Research Foundation and a former Sierra Club member, calls attention to the energy required “to extract metallic ores, hydrocarbons and other raw materials from the earth, process and refine them, create alloys and plastics, and turn them into engines, chassis, windows, tires and interiors.” He says there is “no way” these energy costs “will ever be recouped by any savings the replacement cars might conceivable generate.” Daniel J. Stern writes: “It quickly becomes clear to all but the most strident Prius-preacher that driving an old car a half a million miles is really less taxing to the greater environment than making even just a single new one.”
Finally, we come to the issue of global warming and the carbon dioxide emissions of older cars. Again, the pro-CARS argument is based on ignorance—plus plenty of misinformation and even outright fraud. Climate change is not caused by changes in atmospheric carbon dioxide or by human activity. See my 3-part article “Global Warming, Global Myth” at http://www.amlibpub.com/liberty_blog_archive/2008_10_01_archive.html [for Parts 1 and 2] and http://www.amlibpub.com/liberty_blog_archive/2008_11_01_archive.html [for Part 3]. For a more detailed explanation, see the massive report issued in 2009 by the Nongovernmental International Panel on Climate Change (NIPCC). It is an 880-page book by many scientists that comprehensively refutes the global warming claims of the United Nations' Intergovernmental Panel on Climate Change (IPCC). This is a work of enormous scholarship backed by over 4,000 peer-reviewed scientific studies that were not considered by the IPCC.
But, for the sake of argument, let's assume it is desirable to reduce carbon dioxide emissions and look at the effect of CARS. “As a carbon dioxide policy, this [program] is a terribly wasteful thing to do,” says Henry Jacoby, a professor of management and co-director of the Joint Program on the Science and Policy of Global Climate Change at MIT. “The amount of carbon you are saving per federal expenditure is very, very small.” Bruce Yandle, Distinguished Professor of Economics Emeritus, Clemson University, says “the reduction costs are at least ten times higher than alternate ways of removing carbon.”
Based on Department of Transportation numbers, the total carbon savings from cash for clunkers amounts to only about 57 minutes of America's annual carbon dioxide emissions. But that is based on a static analysis, i.e., that there will be no change in driving behavior when fuel efficiency improves. Since we have already shown that greater fuel efficiency leads to more miles being driven, the actual reduction in carbon dioxide emissions will be even less than 57 minutes per year—and it could even be more than from the traded-in vehicles if the new vehicles are driven enough additional miles per year. Now consider that 6.7 tons of carbon are emitted in building a new car, and it becomes obvious that CARS results in a many-fold increase in carbon dioxide. Paul Driessen says there is absolutely no way that the emissions of carbon dioxide, other greenhouse gases and “real pollutants” from manufacturing replacement vehicles will ever be recouped by any savings from driving them.
President Obama said cash for clunkers was an “overwhelming success...provided the American auto industry an important boost, and is achieving environmental benefits well beyond what was originally anticipated...while reducing greenhouse gas emissions...and has proven to be a successful part of our economic recovery.” Is he as ignorant of what has been happening during his own administration as he is of the past? Has his collectivist ideology left him totally disconnected from the realities of history, property rights, economics and science?
Transportation Secretary Ray LaHood said “this is one stimulus program that seems to be working better than just about any other program.” That must mean those other programs are even bigger failures.
The CARS program is just one more demonstration that collectivism cannot triumph over reality. Collective good cannot be achieved by benefiting some people at the expense of other people's rights—including their property rights. The situation is not unlike that in our “broken window” example: the property rights that are destroyed are like the pair of shoes or book that is never purchased. They remain unseen and unconsidered while the benefits to others (or the environment) are extolled. Yet, not only are property rights themselves a value to people; if some people are deprived of them, the economy and society lose as well. For if people were not deprived of their property rights, they would exercise them in buying goods and services that would benefit employment and industries. And these would be of greater value than what is obtained under CARS or similar programs, as demonstrated by market prices and preferences. Government intervention in the market simply diverts resources in society to things of lesser value at greater cost. Thus society is better off when people are free to exercise their property rights than when the government violates those rights to stimulate other purchases. And the more a government substitutes its preferences for the choices of the people in the marketplace, the more the economy goes downhill, as history abundantly demonstrates.
Collectivism has failed wherever it has been tried. In contrast, America showed the greatest advancement of society in history because the Founding Fathers based their government on individual rights, not collectivism. Individual rights are essential to human progress. That is an inescapable reality. It will not be overcome by ignorance, lies and smooth talk in the cause of collectivism.
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