Big government.

Everyone, including the middle class that Obama is supposedly “saving,” has lost.

The entire fiscal cliff debacle was about one thing, and one thing only. It was a question of morality. Do people want to take responsibility for themselves, or do they [...]]]>

So who emerged as the winner of the fiscal cliff deal?

Big government.

Everyone, including the middle class that Obama is supposedly “saving,” has lost.

The entire fiscal cliff debacle was about one thing, and one thing only. It was a question of morality. Do people want to take responsibility for themselves, or do they want to blame somebody else? Do they want to live according to their means, or pretend that they can live above their means by forcing other people to pay for it? In other words, the fiscal cliff deal was entirely about whether we (especially Democrats) want to stick it to the rich people. The answer appears to be a resound “yes.”

As much as the President wants to pretend that this deal was about preventing another recession or saving the middle class, all of the evidence suggests that this isn’t the right course of policy; he understands this perfectly well. But again, the government doesn’t want to help you. The government wants to help itself.

What exactly has come out of the fiscal cliff deal that’s emerged from the Senate? Tax hikes for the rich, and no spending cuts. The top income tax bracket will rise from 35% to 40%, and is expected to raise 600 billion dollars in “revenue” over the next 10 years. In other words, the expected revenue is 60 billion per year. To put this into perspective, the government spent over 100 times that amount in 2012. Of course, the revenue that the government receives won’t actually equate to this. Chances are it will receive even less money than it does now because when taxes increase, people take measures to avoid paying the extra money – whether it be by working or producing less in the country. Every one of Obama’s economic advisors should be familiar with the Laffer Curve.

Supposedly, it’s okay to tax the people paying half of the country’s income taxes even more because they can afford it, and the middle class can’t. Do you want to know who really can’t afford excessive taxation of the wealthy? The middle class. Taxing the wealthy hurts the middle and lower classes more than it hurts the upper class. If taxes go up on car dealers, the car dealer isn’t the person who gets hurt most by higher taxes. The salesman in his dealership, who talks to the customers, is. The dealer will end up paying 40% of his income to the federal government, but the salesman now loses 100% of his income because now he is out of a job. All that the increased taxation does is take money from the productive private sector and give it to the unproductive public sector – which is Washington.

The best part about the fiscal cliff deal is that it doesn’t even address government’s spending problem. The fiscal cliff deal essentially says: “we’re going to raise taxes and we’re going to raise government spending.” We’ve already tried this and it has failed. The U.S. economy is currently growing at 2% a year. We may not get any economic growth, but at least we get to flip off the rich guy who provides Americans with their jobs and the country with its growth.

But of course, some deal had to be made. If one wasn’t, then everyone’s taxes would have risen, and government spending would have decreased. This would have “surely crippled the U.S. Economy.” Those who make this claim forget that the most productive side of the economy is being crippled by the fiscal cliff deal. But now, there are no cuts in spending. The tax hikes could have easily been avoided if the Bush tax cuts had been made permanent as Republicans wanted to. Now, the President and the Democrats are deemed heroes because they prevented taxes from going up on 98% of people – something Republicans had wanted to do years earlier, except include 100% of the people.

What has been the one consistent factor that has never failed to bring people out of poverty? Is it righteous government policy? Is it welfare programs? The correct answer is economic growth. All that this fiscal cliff deal do is prevent further economic growth and bring more turmoil to the people of this country.

An organization that has been described by many as a fourth branch of government, although it is technically independent from the government, controls all of the United States monetary policies in secret. When something that it does goes into effect, people know about. However, no one really knows anything about the deliberations that [...]]]>

Picture this:

An organization that has been described by many as a fourth branch of government, although it is technically independent from the government, controls all of the United States monetary policies in secret. When something that it does goes into effect, people know about. However, no one really knows anything about the deliberations that take place. No one knows what really goes inside that organization, despite that fact that it is one of the most powerful organizations on the planet, and controls what happens to the United States money supply, interest rates, etc.

Then we have a man who proposes a bill in the House, the Audit the Fed Bill, to make such an organization more transparent so that people know exactly what this organization does. The bill passes, with a mere 98 dissenters. Who are the dissenters?

Of course, 97/98 of them are Democrats.

But hold one just one second. Aren’t the Democrats supposed to be the party that protects the little guy from the big, bad 1%? Wasn’t it the Democrats who passed Sarbanes Oxley legislation to make big corporations “more transparent”? Well, what gives?

The main reason that most of them give is identical to Fed Chairman Ben Bernanke’s, who says that people should oppose this bill because having Congressional investigators in the room could “create a political influence” and have a “chilling effect.” Bernanke also said he could envision a “nightmare scenario” where Congress would disagree with a Fed decision on interest rates and attempt to get other government agencies to review it.

But there’s a name for what Bernanke has described: a system of checks and balances. While the Fed is technically an independent agency, the President appoints the members of its board, including the Chairman. As a result, the agency isn’t completely independent anyway. But given the amount of influence that the Federal Reserve has over the world economy, looking into the specifics of why it chooses to enact certain policies really isn’t too much to ask for. For example, a partial audit of the Fed revealed that it had spent $16 trillion in complete secrecy after the financial crisis of 2008, which included lending money to foreign central banks and foreign corporations. How many Americans knew this without the partial audit? Virtually none.

The ironic thing about Bernanke’s statements is that the issue is already politicized. In 1995, Senate Majority Leader Harry Reid said that he supported an audit of the Federal Reserve. Most of the reasons, such as the fact that the Fed’s actions often negatively affect everybody in the U.S, are identical to the reasons that Republicans give for supporting the Audit the Fed Bill. But what has happened since then? Both the Democrats and the Fed have become much more in favor of big government controlling the lives of Americans.

The issue is so politicized that Bernanke has sent out thank you cards to members of Congress who opposed Ron Paul’s End the Fed Bill. Bernanke said: ”While the outcome of the vote was not in doubt, your willingness to stand up for the independence of the Federal Reserve is greatly appreciated,”followed by “Independence in monetary policy operations is now the normal for central banks around the world — and it would be a grave mistake were Congress to reverse the protection it provided to the Federal Reserve more than 30 years ago.”

Yes, allowing an more extensive (I write extensive because the Fed does go under a very limited audit) audit of the Fed would be a great mistake – for you. People would see exactly what sort of corruption exists within the Fed, and you would be held personally responsible.

Most Americans support an extensive audit of the Fed. Ben Bernanke, instead of circumventing anything that ever gets asked of you, please give us an actual reason for  why allowing people to see exactly what the Fed does is “bad”. Democrats who support Bernanke (I say who support Bernanke because certainly not all of them do), please give me an actual reason for why you support him, despite supposedly being the party of the little guy. So far all of your claims are logically identical to Bush’s claims of there having been weapons of mass destruction in Iraq. It’s time that we truly audit the Fed.

“Top tier universities are lavish. At the University of Rochester we have tons of activities, the earliest classes start at 9am, and the architecture is breathtaking. But you can’t get a good bite to [...]]]>

I’ve been writing an op-ed and I wanted to know what you guys think, maybe some edits. Thanks.

“Top tier universities are lavish. At the University of Rochester we have tons of activities, the earliest classes start at 9am, and the architecture is breathtaking. But you can’t get a good bite to eat.

This isn’t specific to the University of Rochester. There is generally a commonly held belief that college dining is lacking. Why is it that these schools provide so much but do not provide a satisfying dining experience?

The quick answer is that most of them do not have proprietary dining services. They contract a third party to do it or they contract a third party to help do it. Outsourcing dining services has become common place. Here is the problem:

If a school provided their own dining they would partake in both all the costs and all the benefits. When a school brings in a 3rd party, the interests of the 3rd party aren’t the same. This is what is known as an agency problem. The college has an interest in providing more, cheaper, or better services than what would be the profit maximizing amount, price, or quality now. They want to provide a good college experience to the students. They care for the same reason they try to get the smartest and most hard working students at their institution. Because the intelligent, hardworking students that love their college experience become the biggest alumni donators.

Think of providing university services like an investment. The university provides a good service in the hopes that in the future, there will be more donations from alumni. To invest, however, you need to have capital. If strapped for cash, divestment looks like a good idea.

Before the University of Rochester’s contract with Aramark, dining services was losing a lot of money and having cash flow problems. Aramark was brought in to help change that in 1998. They succeeded, but not by increasing efficiency or quality. The biggest driver was that students would be forced to have meal plans. Anyone could run a business profitably if they could force their customers to buy their product. Instead of creating a better business model, they shifted the cost from one place to another; all the while taking a fee. Cam Schauf, Director of Dining Services at the University of Rochester, said that “one of the goals of dining services is to be financially self-sufficient and not to be a boon on the rest of the University”; a goal that, at the surface, seems met. However, transferring costs from Dining Services to the students is a cost on the University (for reasons stated above). On top of this, now there is an extra mouth to be fed, Aramark.

I can’t tell whether the amount, quality, and price of food are too low or too high. But I do know that under the assumption that dining services is a good investment, college dining should be better than elsewhere. Subjectively speaking, that is not the case. These costs may be less visible to the University (even though in the long run, it hurts them) than running a loss in Dining Services but it is very visible to the student. Duly noted.”

I think we are seeing the making of a bigger bubble than the dot com bubble or the real estate [...]]]>

Well, it’s here. QE3. The third round of stimulus by the federal reserve. They will be purchasing $40 billion of mortgage debt per month for an open-ended number of months.

I think we are seeing the making of a bigger bubble than the dot com bubble or the real estate bubble, a bubble in bonds. It is inevitable in the long run that these stimulus and 0 interest rate policies will cause rapid inflation. When (not if) that happens, the feds only defense will be higher interest rates. The more inflation, the higher interest rates will need to be to curb that inflation and the higher rates go, the lower bond prices will fall.

Don’t make the mistake of thinking that your money is safe in bonds and don’t make the mistake of thinking that we have free markets.

I do believe that we should, however, learn as much as we can from these attacks.

I believe that there are two principle, fundamental [...]]]>

My heart goes out to all of the victims of of the September 11 terrorist attacks and their families. September 11 is a day that will forever live in infamy.

I do believe that we should, however, learn as much as we can from these attacks.

I believe that there are two principle, fundamental questions that now need to be asked.

The first question is:  what is it that provoked the attacks?

This is an incredibly important question to analyze, because how can we expect to stop future attacks if we don’t know what caused past ones? Some people believe that the reason for the terrorist attacks is that Al-Qaeda hates the freedoms of the United States – but that doesn’t make sense. We’re not the only free country in the world, and bombing a country because it’s “free” seems like a lost cause. A reason that makes far more sense is retaliation against the United States for continually going into the Middle East, toying with the countries and governments in those countries, making a mess, and then leaving. Perhaps less interventionist policies would actually result in more domestic security – not vice versa as both Democrats and Republicans seem to believe.

The second question is: has the U.S. government’s infringement on Americans’ civil rights been beneficial? Has sending people merely accused of being terrorists, in a McCartyhian fashion, actually preserved the freedoms that Al-Qaeda supposedly aimed to destroy? Is the P.A.T.R.I.O.T. Act, which came about as a result of the September 11 attacks actually “patriotic”? The answer to all of these questions is a resounding no.

The attacks that occurred on September 11 are truly tragic. Ironically, as a result of what occurred, the U.S. government has cracked down on individual rights with legislation such as the P.A.T.R.I.O.T. Act, which was the supposed goal of the terrorists. We should not forget what happened on September 11, but let’s also remember that we need to protect the freedoms our ancestors have fought so hard to preserve.

If the government legalized marijuana and then taxed it to the point where the price is equal to what it is today (plus risk), we would have the same level of consumption but an extra revenue stream.

Risk is a deterrent just like a tax. Make something [...]]]>

Here’s a morning thought:

If the government legalized marijuana and then taxed it to the point where the price is equal to what it is today (plus risk), we would have the same level of consumption but an extra revenue stream.

Risk is a deterrent just like a tax. Make something illegal, and you add risk thereby reducing consumption. A tax would be merely monetizing the risk.

I’m not saying this is an optimal policy for I don’t know if this or a no-tax legalization would be better. To keep things simple though, it makes sense to think of the taxed legalization to keep the change in consumption out of scope. When you make that assumption, whether or not a no-tax legalization would be better, it’s pretty easy to see that:

1. Our current policy is far from good/optimal.

2. There are better options.