The end of a model

Some argue in the media that the era in which free-market capitalism was the model by which nations determined their economic policies has ended. Our markets have had too much freedom, they argue. What we need now is less freedom and more regulation.

But our markets have not been free. Regulation is omni-present. Look no further than Sarbanes Oxley. We have not too little regulation but too much, and it hasn't helped.

Most recently, the Bush administration, with Congressional support, and the Federal Reserve have been pumping money into banks and other financial institutions, as well as carmakers. Government money demands government regulation. Has it helped?

There's no evidence so far that it has. But deficits are up and the dollar is down, hardly evidence of success.

California's budget problem

Democrats and their supporters, like the LAT, never cease to argue that the solution to California's budget problem must include tax increases. Yet they never acknowledge that Californians already have the 6th largest state and local tax burden in the U.S., behind New Jersey, New York, Connecticut, Maryland and Hawaii --according to the Tax Foundation. If the tax burden were low in California, higher taxes might make sense.

The LAT's nonsensical editorial

The LAT is angry again this morning at California's Republican legislators, this time because they took a "no new taxes pledge." The budget deficit and the budgetary stalemate rest firmly on their shoulders, the LAT claims. Cutting back on state expenditures would be worse than raising taxes, the LAT says, because the money not spent by the state wouldn't end up juicing the economy. And the economy needs juicing now.

Near the end of its editorial, the LAT prints the following sentence: "They [Republican legislators] can concentrate instead on the additional money that even deeper cuts will take out of the [state's] economy and see that modest or temporary tax increases will serve California better."

Apparently, the LAT believes that if money isn't spent by the state it won't be spent, and that confiscating taxpayers' money isn't contractionary.

O. C. Register: Follow the money

In an editorial yesterday, the Orange County Register lambasted the federal government for not attaching enough strings to TARP funding. The Treasury Department should have been required to track the money that has been given to banks to insure it has been used for the purposes Congress intended, the Register says.

But one dollar looks like another. Pour a bucket of water into a swimming pool and nothing changes that you can see, except the bucket gets emptied. The water in the pool all looks the same. Mix two containers of maple syrup and nothing changes except the quantity of maple syrup. You can't tell which syrup came from which container because all the syrup looks the same.

Money is like that. Dump borrowed money into a bank account that already contains money. Then pay some bills. Which bills were paid with the borrowed money? You can't tell.

So, you can't insist that money that is commingled with other money be used in a particular way. It isn't possible to determine how it was used.

The government can insist that certain things be accomplished, or avoided. For example, the government could require that firms receiving TARP funding not pay dividends. Or not attempt to raise money via a stock issue or by new borrowing. Or not acquire other companies. Or not pay large salaries to managers. All these are legitimate restrictions because they can be verified.

Perhaps the Register intended to suggest those kinds of restrictions. But that's not how the editorial read.

Blame Republican legislators

LAT columnist George Skelton claimed in his column yesterday that the 43 percent increase in California's general fund expenditures since the governator took office (Skelton says it's actually 45 percent. The 43 percent is a Republican figure.) is a relatively modest increase and can be attributed to population growth and inflation. Besides, more people need mental healthcare and the population is aging. But the biggest factor is the governator's cut in the car tax which mainly went to local governments. The governator promised to replace the local governments' lost tax revenue from state coffers.

OK, but don't the people moving into the state pay taxes, and aren't people paying more in sales and income taxes on inflated wages and retail sales? Is it necessary to regularly raise tax rates so as to keep the deficit down, as Democrats consistently insist? That can't be the answer.

Blame Bush

LAT columnist Paul Richter wrote in yesterday's LAT that the U.S. is going to hell in a hand basket and its all Bush's fault. Hardly a day goes by without something like this appearing in the LAT. The newspaper describes Richter's column as one in a series of occasional reports on President Bush's legacy. The LAT ought to save the ink and paper. It needs the money to pay its debts.

Orange County union members protest firings

The County of Orange, California, is in financial distress. Revenues are shrinking due to the economy. County administrators have taken action to live within the County's means. Among the actions is to lay off some workers and furlough others for days or weeks at a time. This has infuriated the union, which has organized demonstrations against the cutbacks, some apparently on County time.

The demonstrators and organizers ought to be fired. They're confused about what their rights and obligations are. They don't have a right to a job. County administrators have an obligation to cut back so that outlay doesn't exceed income. Administrators are just doing what they're obligated to do.