The View From 1776

For her sermon today at the Cohocton (New York) United Methodist Church, Rev. Karin Porch’s text was Mark 13:1-37.  Her focal points were, first, a call to prayer for a new Great Awakening of spiritual awareness and a return to the principles of morality that shaped the formation of our nation, and, second, an awakened watchfulness for the spiritual arrival of Jesus this Christmas and for His return as depicted in the Book of Revelation.

"As he was leaving the temple, one of his disciples said to him, “Look, Teacher! What massive stones! What magnificent buildings!”

“Do you see all these great buildings?” replied Jesus. “Not one stone here will be left on another; every one will be thrown down.”

As Jesus was sitting on the Mount of Olives opposite the temple, Peter, James, John and Andrew asked him privately, “Tell us, when will these things happen? And what will be the sign that they are all about to be fulfilled?”

Jesus said to them: “Watch out that no one deceives you.  Many will come in my name, claiming, ‘I am he,’ and will deceive many.  When you hear of wars and rumors of wars, do not be alarmed. Such things must happen, but the end is still to come.  Nation will rise against nation, and kingdom against kingdom. There will be earthquakes in various places, and famines. These are the beginning of birth pains.

“You must be on your guard. You will be handed over to the local councils and flogged in the synagogues. On account of me you will stand before governors and kings as witnesses to them.  And the gospel must first be preached to all nations.  Whenever you are arrested and brought to trial, do not worry beforehand about what to say. Just say whatever is given you at the time, for it is not you speaking, but the Holy Spirit.

“Brother will betray brother to death, and a father his child. Children will rebel against their parents and have them put to death.  All men will hate you because of me, but he who stands firm to the end will be saved.

“When you see ‘the abomination that causes desolation’ standing where it does not belong—let the reader understand—then let those who are in Judea flee to the mountains.  Let no one on the roof of his house go down or enter the house to take anything out.  Let no one in the field go back to get his cloak.  How dreadful it will be in those days for pregnant women and nursing mothers!  Pray that this will not take place in winter, because those will be days of distress unequaled from the beginning, when God created the world, until now—and never to be equaled again.  If the Lord had not cut short those days, no one would survive. But for the sake of the elect, whom he has chosen, he has shortened them.  At that time if anyone says to you, ‘Look, here is the Christ!’ or, ‘Look, there he is!’ do not believe it.  For false Christs and false prophets will appear and perform signs and miracles to deceive the elect—if that were possible.  So be on your guard; I have told you everything ahead of time.

“But in those days, following that distress, 
” ‘the sun will be darkened, 
and the moon will not give its light; 
the stars will fall from the sky, 
and the heavenly bodies will be shaken.’

“At that time men will see the Son of Man coming in clouds with great power and glory. And he will send his angels and gather his elect from the four winds, from the ends of the earth to the ends of the heavens.

“Now learn this lesson from the fig tree: As soon as its twigs get tender and its leaves come out, you know that summer is near.  Even so, when you see these things happening, you know that it is near, right at the door.  I tell you the truth, this generation will certainly not pass away until all these things have happened.  Heaven and earth will pass away, but my words will never pass away.

“No one knows about that day or hour, not even the angels in heaven, nor the Son, but only the Father.  Be on guard! Be alert! You do not know when that time will come. It’s like a man going away: He leaves his house and puts his servants in charge, each with his assigned task, and tells the one at the door to keep watch.

“Therefore keep watch because you do not know when the owner of the house will come back—whether in the evening, or at midnight, or when the rooster crows, or at dawn.  If he comes suddenly, do not let him find you sleeping.  What I say to you, I say to everyone: ‘Watch!’ “

To say the least, that is hardly the frame of mind of most people when they think of Christmas.  As Rev. Porch expressed it in her church newsletter:

"The church of God is declining - especially the major denominations.  The church is dying for lack of interest and lack of love for God.  Many people today do not know God and believe they can handle life all on their own. But that is not the way God designed the world.  We are to look to Him for help and hope.  God’s Word says He will give us all we need for this life.

Do you believe it?

As you watch all the pretty lights, buy presents and make preparations for the Christmas dinner, remember that Christmas is Jesus’s birthday.  It is a special day to share the gift of God’s entrance into our world because he loves us.

Citicorp’s Robert Rubin is getting harsh words from investors who ask why he should receive $115 million in annual compensation, while shrugging off any suggestion of personal responsibility for the banking giant’s horrendously imprudent investment policies.  Mr. Rubin says that he was merely a broad-gauge policy advisor, that problems arose from the policies he supported only because of poor execution by underlings.

In the same vein, liberal-progressives steadfastly maintain that socialist welfare-state policies always fail only because the government didn’t spend enough money, long enough.

Like New Jersey governor Jon Corzine, his liberal-progressive, former Goldman Sachs colleague, Mr. Rubin, the Clinton administration’s Secretary of the Treasury, apparently believes that liberal-progressives can do no wrong, because they know what is best for you and me.  What is best in their judgment is confiscating our earnings and redistributing them to favored special-interest groups in the name of social justice. 

Redistributing wealth, in the dogma of the socialist religion, is a step in the direction of eliminating private property ownership.  That mythology, elaborated in Jean Jacques Rousseau’s Social Contract, instructs us that original sin was the advent of private property, which changed human nature and introduced greed, crime, and warfare to society.

In the Judeo-Christian tradition, original sin was Adam and Eve’s eating fruit of the tree of knowledge, seeking to become God’s equal in knowledge and power.  Christians and religious Jews are schooled to eschew preoccupation with self and to seek ways to help others, while prayerfully acknowledging that all their blessings come, not from themselves or the secular political state, but from God.

In contrast, liberal-progressives like Messrs. Rubin and Corzine assume that they have successfully eaten the fruit of the tree of knowledge (the modern gnosticism of socialism) and are therefore wise and powerful enough to play God here on earth. 

Just as in Mr. Rubin’s failure to take responsibility for disaster on his watch at Citicorp, liberal-progressive Republicans and Democrat/Socialists repeatedly raise taxes to confiscatory levels, and expand the nanny state with deficit financing, heedless of the destructive effects on public morality and financial stability. 

Liberal-progressivism’s welfare state encourages self-centered, special-interest greed, evidenced currently in the public’s unwillingness to reduce government spending in the face of approaching bankruptcy at state and Federal levels.

Ironically, the Federal Reserve’s massive over-expansion of the money supply to finance deficit spending, the be-all and end-all of liberal-progressive policy, is the root cause of the financial system disaster in which Citicorp played a major part.  Mr. Rubin, we may suppose, sees no connection between his advocacy of imprudent policies in the Federal government and their fostering greed at Citicorp.

Pastor Dan Gardner at the Cohocton (New York) Assembly of God Church reminded us this Sunday of some of the things about which all of us can feel joyful. (My embellishments regarding the malign influence of the detestable doctrines of liberal-progressive-socialism are not necessarily to be attributed to Pastor Gardner).

Be thankful for God:

And the twenty-four elders, who were seated on their thrones before God, fell on their faces and worshiped God, saying:

"We give thanks to you, Lord God Almighty, the One who is and who was, because you have taken your great power and have begun to reign.” (Revelation 11:16-17)

Be thankful for God’s Creation:

Come, let us sing for joy to the LORD; let us shout aloud to the Rock of our salvation.
Let us come before him with thanksgiving and extol him with music and song.  For the LORD is the great God, the great King above all gods.  In his hand are the depths of the earth, and the mountain peaks belong to him.  The sea is his, for he made it, and his hands formed the dry land.  (Psalms 95:1-5)

Be thankful for God’s word:

Oh, that my ways were steadfast in obeying your decrees!  Then I would not be put to shame when I consider all your commands.  I will praise you with an upright heart as I learn your righteous laws.  (Psalms 119:5-7)

In today’s troubled world, and in our own kulturkampf between emissaries of the secular political state and witnesses for the kingdom of God, it’s comforting to know that we can turn for sure guidance to God’s word.

Be thankful for God’s promises and blessings:

Let them give thanks to the LORD for his unfailing love and his wonderful deeds for men.  Let them sacrifice thank offerings and tell of his works with songs of joy.  (Psalms 107:21-22)

Be thankful for family - our own, the local church family, and the great world family of the Christian church:

Sing to God, sing praise to his name, extol him who rides on the clouds — his name is the LORD — and rejoice before him.  A father to the fatherless, a defender of widows, is God in his holy dwelling.  God sets the lonely in families, he leads forth the prisoners with singing; but the rebellious live in a sun-scorched land.  (Psalms 68:4-6)

Be thankful for other believers:

The Apostle Paul, in his letter to the church in Philippi, begins with personal expressions of gratitude:

I thank my God every time I remember you.  In all my prayers for all of you, I always pray with joy because of your partnership in the gospel from the first day until now, being confident of this, that he who began a good work in you will carry it on to completion until the day of Christ Jesus.  (Philippians 3-6)

Like Paul, we today need, and can be grateful for, mutual help and support that is found most fully among other believers in the church.

Be thankful for our salvation:

As revealed in the Old Testament and the New Testament Gospels, we can thank God for His grace that liberates us from Satan’s grasp and gives us salvation through Jesus Christ.

O LORD, truly I am your servant; I am your servant, the son of your maidservant; you have freed me from my chains.  I will sacrifice a thank offering to you and call on the name of the LORD.  (Psalms 116:16-17)

Be thankful for whatever talents God has given us and for his calls to us to use them:

In the Apostle Paul’s first letter to ‘Timothy my true son in the faith,’ he writes:

I thank Christ Jesus our Lord, who has given me strength, that he considered me faithful, appointing me to his service.  Even though I was once a blasphemer and a persecutor and a violent man, I was shown mercy because I acted in ignorance and unbelief.  (1 Timothy 1:12-13)

God gives each of us some gifts, some talents.  We are to be prayerfully listening for the promptings of the Holy Spirit in our consciences to follow Jesus, using those talents to glorify God by doing good for others.

Be thankful for our church:

Our church is both a refuge of comfort in our times of need and a source of truth to lead us into the path of salvation.

As the Apostle Paul wrote in his letter to the church at Colosse:

And over all these virtues put on love, which binds them all together in perfect unity.  Let the peace of Christ rule in your hearts, since as members of one body you were called to peace. And be thankful.  Let the word of Christ dwell in you richly as you teach and admonish one another with all wisdom, and as you sing psalms, hymns and spiritual songs with gratitude in your hearts to God.  (Colossians 3:14-15)

Paul was particularly concerned about false teachings of gnostic doctrine, which involved belief in secret knowledge available only to an elite, hence “admonish one another with all wisdom.”

Paul’s concern is particularly apt today, when, on all sides, we are belabored by the French Enlightenment’s manifestation of gnosticism, liberal-progressivise-socialism, which preaches salvation via purely material things through the secular political state.

Be thankful for God’s provision:

Sing to the LORD with thanksgiving; make music to our God on the harp.  He covers the sky with clouds; he supplies the earth with rain and makes grass grow on the hills.  He provides food for the cattle and for the young ravens when they call.  (Psalms 147:7-9)

As He did when leading the Israelites out of Egypt, God will provide for us.  The secular welfare state gives only material things, administered by bureaucracies bound by the formality of rules that would have put the ancient Pharisees to shame.  The love and spiritual sustenance our souls hunger for come only from God Who made us. 

We are not creatures of the political state.  However important any President of the United States may be, he is not the creator of society nor the source of truth.  We must look to our Creator and praise Him for the blessings he showers upon us.

Be thankful for a free nation:

In his first letter to Timothy, Paul wrote:

I urge, then, first of all, that requests, prayers, intercession and thanksgiving be made for everyone— for kings and all those in authority, that we may live peaceful and quiet lives in all godliness and holiness.  (1 Timothy 2:1-2)

Persons entrusted by the voters with political authority are not always the ones we want.  Regardless of our apprehensions, we should pray for those leaders and honor the offices they hold.  We should pray that they will be guided by the Holy Spirit and not by the secular gospel spewing from the depths of university sociology departments.

French President Sarkozy, along with many other political leaders, gleefully declared that free-market capitalism is dead.  In their view, only the centrally-planned economy, regulated by welfare-state bureaucrats, can function effectively; only the socialized political state can support the life, liberty, and pursuit of happiness proclaimed by the Declaration of Independence.

Liberal-progressive pundits tell us that banking deregulation caused the subprime meltdown, though none of them can demonstrate cause and effect between the two.  The collapse of much of the banking community is said by liberal-progressives to reflect a fatal theoretical flaw in capitalism and to justify, indeed to demand, its replacement by a socialist, managed economy. 

What liberal-progressives fail to recognize is that the free marketplace did very well what it is supposed to do: assess the goodness of products and price them appropriately.  This interplay between demand and prices is the most effective mechanism in economic history for efficiently allocating scarce economic resources. 

As economist Joseph Schumpater famously said, an essential aspect of capitalism is creative destruction.  When an economic process is deeply flawed, or when a better economic process is developed, rejection by the free market economy destroys the old.  The example of buggy whip producers being run over by Henry Ford’s Model T is overworked, but apt.

Lost in the panic is the fundamental fact that the market mechanisms supporting the housing boom and the proliferation of non-creditworthy debt were planned and mandated by the Federal government.  The free market merely responded for a time to the Federal bureaucracies’ interventions.

When it became apparent, however, that the structured investment vehicles and huge pools of securitized mortgages and other debt instruments were composed of rotten assets, the free market did its job.  It sharply reduced the prices of poor quality securitized debt and punished the most egregious of their non-government structurers and purveyors.

Contrast this to government anointed and government-run programs.  No matter how unnecessary or grossly inefficient, it is almost impossible to kill a government program once initiated.  Government programs exist to buy votes.  They are impervious to rational analysis and heedless of efficiency.

The centerpiece exhibits are Fannie Mae and Freddie Mac.  As quasi-Federal institutions with an implicit Federal guarantee of their debt obligations, Fannie and Freddie were able to grow unchecked to mammoth proportions.  Until the final market collapse, they were protected by Democrat/Socialists in Congress against all scrutiny.

When free-market credit analysts questioned Fannie’s and Freddie’s lending and accounting practices, Congress refused to listen.  Even after government investigators uncovered fraudulent accounting and highly risky balance sheet maneuvers, Democrat/Socialist congressional leaders stiff-armed Republicans who demanded corrective action.

Without the ability to offload bad mortgage loans into the Fannie Mae and Freddie Mac secondary market, banks would have carried the loans on their own books, and they would have been considerably more prudent in judging risk.  But government intervention in the free market wildly distorted economic incentives by making it both highly profitable and necessary to generate and package subprime mortgage loans. 

The 1977 Community Reinvestment Act compelled banks to make mortgage loans to unqualified borrowers.  Before that legislative act, banks confined their lending to creditworthy borrowers with documentable jobs and incomes sufficient to service their debt.  But with Federal regulators threatening economic punishment for failure to make risky mortgage loans to uncreditworthy borrowers, banks complied and sold those loans to Fannie and Freddie.

The subprime meltdown and financial collapse thus were the product of socialist government, not the free marketplace.  The root of the subprime meltdown and financial collapse was the Fed’s over-expansion of the money supply.  Coupled with it, the government’s socialistic intervention with Fannie, Freddie, and the Community Reinvestment Act’s mandate for uncreditworthy mortgages in high-risk neighborhoods, gave us today’s fiasco.

It was free-market capitalism that finally opened the barn doors and began the process of shoveling out government-produced financial excrement.  The Federal government meanwhile is considering perfuming socialist labor union outhouses that don’t deserve to survive.

Read Why Spending Stimulus Plans Fail in the Wall Street Journal.

See also Stimulus Packages: 1929 to 2008 and Why Tax Rebates Are Delusional.

More effective than pumping inflationary dollars into consumers’ hands would be one of JFK’s primary stimulus measures in the 1960s.  As Ernest S. Christian and Gary A. Robbins wrote in The JFK Stimulus Plan (Wall Street Journal, January 12, 2008; Page A8):

Got an economic downturn? Need a stimulus package? Why not adopt full or partial first-year expensing (or its cousin, the investment tax credit), which has come to the rescue many times since 1962, when President John F. Kennedy first administered this type of remedy to the economy?
By allowing more of the cost of machinery and equipment to be deducted more quickly, first-year expensing causes new investment to be made sooner. More investment means more productivity—and 80% of the net benefit from increased productivity goes to labor. Expensing is a no-risk tax cut. It worked four times in the 1960s and 1970s. It worked in 1981-1982 and again in 2002-2004…

During the recession that started in 2000, the economy did not respond much to a Keynesian tax cut in 2001, consisting mostly of a new 10% bottom bracket for individuals and a child credit. In the first quarter of 2001, real investment began falling at an annual rate of 6%. The decline was stopped by the 30% partial expensing enacted in the spring of 2002. Investment started rising again at a real annual rate of 9% beginning with the enactment in 2003 of 50% partial expensing, in combination with lower rates of tax on capital gains and dividends.

Robert P. Murphy’s article on the Mises.org blog, Consumers Don’t Cause Recessions, deals with Mr. Krugman’s recent socialist propaganda piece advocating a reprise of the Keynesian economic policies that so signally failed to end the Depression during Franklin Roosevelt’s New Deal. 

Mr. Krugman wants a large new Federal spending program (he doesn’t say spending on what), exactly what the New Deal tried repeatedly without success for eight dreary years of double-digit unemployment, from 1933 to 1941.  Exactly what president-elect Obama and the Democrat/Socialist Congress propose to repeat.

In his October 31, 2008, column, Mr. Krugman tells us that the current economic recession is a consequence of consumers cutting back on consumption spending.  We are, he declares, now ensnared in a Keynesian liquidity trap, from which only massive Federal spending can free us.

...consumers are cutting back just as the U.S. economy has fallen into a liquidity trap — a situation in which the Federal Reserve has lost its grip on the economy.

Some background: one of the high points of the semester, if you’re a teacher of introductory macroeconomics, comes when you explain how individual virtue can be public vice, how attempts by consumers to do the right thing by saving more can leave everyone worse off. The point is that if consumers cut their spending, and nothing else takes the place of that spending, the economy will slide into a recession, reducing everyone’s income.

In fact, consumers’ income may actually fall more than their spending, so that their attempt to save more backfires — a possibility known as the paradox of thrift.

At this point, however, the instructor hastens to explain that virtue isn’t really vice: in practice, if consumers were to cut back, the Fed would respond by slashing interest rates, which would help the economy avoid recession and lead to a rise in investment. So virtue is virtue after all, unless for some reason the Fed can’t offset the fall in consumer spending…

...what the economy needs now is something to take the place of retrenching consumers. That means a major fiscal stimulus. And this time the stimulus should take the form of actual government spending rather than rebate checks that consumers probably wouldn’t spend.

In the same vein, J.M. Keynes’s best known American acolyte, Harvard economist Alvin Hansen, wrote in the 1930s that the American private enterprise economy had matured.  That meant, he wrote, that the United States would remain permanently in economic Depression, that private business would never again be able to attain the production volumes of 1928.  The Keynesian prescription was that the Federal government would be required permanently to fill the gap by spending enough to maintain full employment.  Moreover, the government would have to become the initiator and funder of all investment in productive equipment.

In short, a socialist state-planner’s dream.

In the event, the depression was ended by the Japanese bombing of Pearl Harbor and our entry into World War II, not Keynesian inflationary, deficit spending.

Mr. Krugman’s Keynesian, socialistic nonsense, of course, is what ignorant and inexperienced young students are fed in our so-called educational system as part of their indoctrination in the secular religion of socialism.  The message is that only the collectivized political state can save us, and even then only when intellectuals like Paul Krugman call the shots.

Oddly, Mr. Krugman undercuts his own argument, writing that:

It’s true that American consumers have long been living beyond their means. In the mid-1980s Americans saved about 10 percent of their income. Lately, however, the savings rate has generally been below 2 percent — sometimes it has even been negative — and consumer debt has risen to 98 percent of G.D.P., twice its level a quarter-century ago.

If consumers were behaving so admirably, in Keynesian economic terms, with almost no savings and very high consumption spending, how then did we get into a recession? 

If the Federal government gives consumers more money to spend why would that get us out of a recession, if consumers were already spending at the max when the recession started? 

Why didn’t the recent Federal $150 billion stimulus plan (tax rebates of $1,200 per person) forestall the recession?

If ending a recession is only a matter of more consumer spending regulated by the Federal Reserve’s “slashing interest rates,” why didn’t cutting the discount rate 75%, from 5% a year ago to 1.25%, not inject enough liquidity to maintain consumer spending at Mr. Krugman’s magic levels?

In Keynesian Predictions I wrote:

As noted in Krugman and Friedman - Part Four, Keynesian economic theory, now refurbished as neo-Keynesianism, dominates liberal-Progressive-socialist thinking in the United States.  Mr. Krugman is one of its fiercest proponents.

Like Keynes, he has been consistently wrong in his predictions, most notably in proclaiming that tax cuts in the first term of the present Bush administration would not revive the economy and, in any event, would not lead to creation of new jobs.  Only government spending can revive the economy, according to liberal-Progressive orthodoxy.

In “Krugman and Friedman - Part Four,” reference was made to Milton Friedman’s Theory of the Consumption Function, which flayed and butchered Keynes’s analysis.  From that opus came the prediction of conditions that became horrific reality in the 1970s stagflation.

Professor Friedman not only discredited Keynes’s predictions of consumer behavior, but also, in effect, eviscerated the entire Keynesian theory.

Keynes regarded savings as the villain that produced and sustained the Depression.  The economy, he theorized, had fallen into equilibrium at a low level with insufficient activity to produce full employment, because people weren’t spending enough money and businesses weren’t investing enough in new production.  The gap would have to be filled by Federal spending that, in the view of his chief American acolyte, Harvard’s Alvin Hansen, would be necessary forever.

It’s not hard to see why Keynes’s theories appealed so mightily to American liberal-Progressive-socialists.  It conformed so nicely to the socialist theory that only they were qualified to plan and to manage the whole economy.  Individual workers and individual businessmen couldn’t be depended upon to respond to market forces and create greater production and more jobs.  That was a job for the nanny-state that would provide security, not opportunity…

A crucial problem was that a cornerstone of Keynes’s theory - the villainous role of savings - was dead wrong. 

As Henry Hazlitt noted in his 1959 “The Failure of the ‘New Economics’: An Analysis of the Keynesian Fallacies,” Keynes theorized that the “propensity to consume” (Milton Friedman’s target) was quantifiable as a law of economics, so precisely so that Keynes reduced his law to a single calculus equation, which he called the consumption function…

The point was to support his contention that, as incomes increased, people consumed less of the increase and therefore saved more, with dire consequences for economic activity and employment.

Mr. Hazlitt points out that neither Keynes nor Hansen supplied any proof for the consumption function calculus equation.  They would not have found substantiation in statistics reflecting actual behavior, which proved to be the opposite of Keynes’s predictions.

As one of many possible examples, Mr. Hazlitt records that between 1944 and 1955, national income increased 83.5%.  According to Keynes’s economic “law” of consumption, savings were supposed to increase at an even faster rate.  In fact the actual amount of savings fell from $36.9 billion in 1944 to $17.1 billion in 1955.  In recent years, while our economy has grown at stupendous rates, consumers have actually had negative savings.

For additional background on this issue, see Democrats, the Fed, and Milton Friedman.

New York Times columnist John Tierney, one of the very few on that newspaper with his head screwed on straight, asks What Shortage of Scientists and Engineers?

His analysis supports the earlier commentary by my friend Frank Madarasz in Scientific Research: Maybe it is Salaries.

If there really is no shortage of engineers and scientists in the United States, why waste Federal funds, in the face of a staggering, inflationary budget deficit, to add capacity to an already overbuilt segment of the academic community? 

In fact, why not get the Federal government entirely out of funding education, which to an alarming extent is for the purpose of inculcating socialism?