American Solutions, in partnership with the Nationwide Tea Party Coalition, is sponsoring nationwide Tax Day Tea Parties for April 15, 2009. The purpose is to “communicate our anger and opposition to the irresponsible policies of politicians in Washington who have failed to solve problems.” American Solutions continues: “More importantly however, this is our opportunity to clearly define a bold, new agenda and to tell our elected officials that they can either work with us, or find new jobs.”

I’m very concerned about our incredible national borrowing and spending. I’ve been concerned for decades about the size of the national debt; however, the almost exponential rate of increase seen over the past few weeks is staggering and unsustainable. We cannot spend our way out of debt but we can spend our way into slavery.  We’re rapidly approaching the point of national bankruptcy with debt accumulation patterns that resemble a third world dictatorship. This simply must stop.

I’m also very concerned about the erosion of our rights. Companies are being nationalized. Private corporate leaders replaced. Banks have been forced to take federal money and then not allowed to pay it back (which allows the federal government to exercise direct control).

As for my reaction, I’m slow to anger and don’t want to knee-jerk into protest mode. However, I’m not sure what else will get our leaders attention in Washington. I smell a rat when they pass legislation without allowing anyone to read it first. When they ignore minority party input and play hardball even with dissenting members of their own party, I know something is wrong. When our tax cheating Treasury Secretary and bowing to the king of Saudi Arabia President force businesses to remove their own leaders and nationalize banks, I know we’re losing our freedoms quickly.

The bottom line is something needs to be done while we still have the resources and freedom to do something. After studying the successes of the Civil Rights Movement, I feel that non-violent protests are in order. In any protest, though, I feel it is wise to offer a clear and reasonable alternative to the situation being protested.

So, with that in mind, I offer some solutions for the American Economy in 2009.  I first share the 12 American Solutions for Jobs & Prosperity offered by American Solutions as a start and then add 8 more of my own (which in a few cases somewhat overlap with the first 12).

1. Payroll Tax Stimulus. With a temporary new tax credit to offset 50% of the payroll tax, every small business would have more money, and all Americans would take home more of what they earn.

2. Real Middle-Income Tax Relief. Reduce the marginal tax rate of 25% down to 15%, in effect establishing a flat-rate tax of 15% for close to 9 out of 10 American workers.

3. Reduce the Business Tax Rate. Match Ireland’s rate of 12.5% to keep more jobs in America.

4. Homeowner’s Assistance. Provide tax credit incentives to responsible home buyers so they can keep their homes.

5. Control Spending So We Can Move to a Balanced Budget. This begins with eliminating Congressional earmarks and wasteful pork-barrel spending.

6. No State Aid Without Protection From Fraud. Require state governments to adopt anti-fraud and anti-theft policies before giving them more money.

7. More American Energy Now. Explore for more American oil and gas and invest in affordable energy for the future, including clean coal, ethanol, nuclear power and renewable fuels.

8. Abolish Taxes on Capital Gains. Match China, Singapore and many other competitors. More investment in America means more jobs in America.

9. Protect the Rights of American Workers. We must protect a worker’s right to decide by secret ballot whether to join a union, and the worker’s right to freely negotiate. Forced unionism will kill jobs in America at a time when we can’t afford to lose them.

10. Replace Sarbanes-Oxley. This failed law is crippling entrepreneurial startups. Replace it with affordable rules that help create jobs, not destroy them.

11. Abolish the Death Tax. Americans should work for their families, not for Washington.

12. Invest in Energy and Transportation Infrastructure. This includes a new, expanded electric power grid and a 21st century air traffic control system that will reduce delays in air travel and save passengers, employees and airlines billions of dollars per year.

In addition to the above 12 solutions, I offer the following:

13. Cut payroll taxes now. To provide immediate relief to working Americans, I propose immediate payroll tax cuts. On their very next paycheck Americans would receive tax relief. Additionally, tax relief should be available to all employers paying additional taxes on behalf of their employees (which, on top of withholding taxes, amounts to additional tax payments of more than 7% of most employee’s wages — if an employer pays an employee $2000, it really costs the employer more than $2140 for that employee). Cut both of their taxes and there’s more left for both to spend and stimulate the economy.

14. Require a two-thirds super-majority vote of Congress to borrow money (or deficit spend). To be safe, that would require a Constitutional amendment to institute since Congressional rules can be exempted and overturned easily. Such a requirement would go a long way towards the goal of a balanced budget while allowing emergency spending and borrowing for widely-accepted capital investments to proceed.

15. Strengthen our national currency. If we do not dilute our currency through inflationary expansion, then it will remain high and investments will flow into this country as other nations’ currencies weaken relative to ours.

16. Allow companies to fail and/or be reorganized through bankruptcy. Stop propping up failures and bad leadership. Instead of infusing failing companies with public money taken from taxpayers, let them suffer the consequences of their bad decisions and fail. Let the market innovate with new and better replacements. The assets don’t disappear with bankruptcy, the ownership of them changes. If there was demand for the product before bankruptcy, there will be demand after bankruptcy and somebody creative will meet that demand.

17. Overturn regulations and accounting rules that restrict innovative market solutions. I’m not an accountant but I know that most mortgages are sound. There is no reason for the massive declines in values that we’re seeing when only a single digit percentage of most assets are bad. There are billions of dollars to be made by creatively insuring “toxic assets.” The government needs to provide enough oversight to prevent fraud but not so much that creative solutions are stifled and rejected. Furthermore, the government should not nationalize companies, period.

18. Rebuild trust in the American people. Our leaders in Washington are largely responsible for this problem. For one, they set up the environmental parameters in which the problems occurred and they allowed it to happen under their watch. Most did nothing until it happened and their response has been to throw new money at the problem and into the hands of the same governmental and other entities that created the problem. That’s like paying the fox that ate the chickens to do a better job next time in guarding the hen house. Crazy!

19. Cut government spending. Everybody knows there’s so much waste. Yes, jobs are lost when government spending is cut but jobs are also lost when taxes are raised. Government does not have anything that it doesn’t take from somebody else first. If government takes money from employers, then they cannot hire as many workers or pay as high a wage. We’ve got to stop taking so much money out of the economy to “stimulate” the economy as the government sees fit. The best stimulus for the economy is the people. Let them keep their money and use it as they see fit.

20. Return power to the States. Many things are better done at the local level. Where the Federal government has encroached on the States’ Constitutional prerogatives, the Federal Government must be required to back down. The states provide 50 laboratories of innovation and competition. That’s good for our country and usually costs far less.

These 20 items would make a good start in addressing these trying economic times. There are many more items that could be added to this list and I invite your suggestions. In all, I argue that the principles of freedom, capitalism and individual responsibility should remain supreme and trump any attempt at collectivism, socialism and bailouts.

Note: Photo courtesy of http://patriotpost.us/images/broadcasts/humor/040609.htm

In my opinion, after the recent massive financial bailouts and other interventionist federal actions (and in some cases nationalizations) within our economy (i.e. the private sector), several pressing questions remain unanswered. I have been pondering on five of them for some time now. These are listed below in no apparent order.

1. If bad loans got us into this situation, then why is there so much effort to get banks to loan even more money?

If there is a dollar to be made and people are free to act in rational ways, then somebody creative will find a way to earn that dollar. My thinking is that in spite of the negative news regarding financial markets right now, there remains a market for loaning money to people with good credit. If this is the case, then there must be people willing to make a profit in such a market and so they will loan money to those with the means to pay them back. No crisis there.

On the other hand, the market for people with bad credit (i.e. people who you shouldn’t loan money to) has dried up and rightfully so. That should be a good thing. It made no sense to make risky loans but such actions were encouraged by foolish government policy that distorted reality and created an artificial market for bad loans. No loans to people who should not get loans means no crisis there either.

So let’s fast forward to now. I want to know why there is all the fuss about banks not loaning money then? It’s good banks are not making more bad loans. To push them to loan on a large scale again seems to me to further push us into the mud. We’re supposed to be getting ourselves “unstuck” but loaning more would seem to do just the opposite and compound our already bad situation. That doesn’t make a bit of sense.

2. Bailouts rewards bad performance.

Corporate leaders are paid to lead. Part of leading means avoiding problems. It seems to me that we have a bunch of bad leaders at many financial institutions (and in government) since they led their companies (and federal policy) on a path of suicide. Why should the government reward these guys with a bailout? Seems to me that such actions simply reward their poor judgment and punish those who kept their companies out of trouble.

As for the auto industry in particular, I have some specific thoughts along these lines. They were on an unsustainable path by operating at a loss and piling up debt for so long. Instead of cutting back, rethinking, retooling, living within their means and building products that customers want (and will turn a profit), they were unwilling to change. A bailout will just put off the invevitable and reward their past negatives. Where is the incentive to adjust to market forces and make an honest profit by pleasing customers like all other businesses have to do? Furthermore, a bailout invites the government to meddle within an essential American industry. That’s an incredibly dangerous proposition.

3. Bankruptcy and subsequent restructuring allows serious change to occur quickly.

Bankruptcy can give a company temporary relief while forcing hard decisions to be made and implemented under court order. In some cases, ownership changes as assets are sold or even repossessed. Physical assets, however, don’t disappear just because ownership changes. In most cases of high profile companies, ownership changes don’t kill the company. Just because ownership or the company name changes doesn’t mean the demand for that type of product ends. Good news! That means, then, there is still a market for those products.

Think again of the American auto industry. If General Motors were to go bankrupt, the demand for vehicles would not cease. Somebody would still build cars in most of those General Motors factories. The other companies could not step in overnight and build enough cars, trucks and parts to meet consumer demand. That means there is still a huge market for, and thus incentive, to keep General Motors alive.

If left alone, I predict that instead of collapse, bankruptcy and much-needed restructuring would occur within the American auto industry. The result would be an industry that is much stronger and more competitive for the future after undergoing the tough decisions needed now.

4. We’re on a slippery slope to socialism and nationalization (i.e. communism).

I alluded to this thought above. I don’t like the federal government taking taxpayer money (or borrowing money that taxpayers will have to repay) and “buying” or assuming ownership of private companies or even parts of them. I see no Constitutional authority for such a move and it is highly contrary to the tenets of capitalism.

This economic downturn is not a problem with capitalism. Instead, it is a problem caused by government interference that distorted free markets by preventing them from properly regulating themselves and rooting out bad loans and risky behavior. In short, government created this problem and now we’re asking government to fix it? How foolish is that?

5. Finally, why have certain leaders not been fired for their incompetence?

We have a Treasury Secretary that serves at the will and pleasure of the President. There are leaders in Congress that oversee financial committees and other influential boards and administrative bodies. Corporations and banks have leaders. Surely these leaders should have seen this problem coming years ago. After all, they are paid to prevent problems such as this.

The very fact that so many of our leaders, from the Treasury Secretary down to corporate executives, either didn’t see the problems or failed to warn of them makes these individuals part of the problem. Instead, and making the case even worse, it seems many of these leaders contributed greatly to the problem. That scenario suggests they are guilty of inept leadership. Simply put, they are incompetent.

In short, those incompetent individuals who contributed to this problem should be fired and replaced with competent individuals who will work to get their companies and our country out of debt and on a solid financial footing. I’m troubled that I can think of nobody who has been fired for their part in creating this problem. Instead, they are awarded billions to spend and authorized with questionable powers to “fix” what they either helped create or failed to avert. That response seems about as reasonable as giving gas and matches to an arsonist.

So, in conclusion, these five ponderings have occupied a great deal of my thought (and frustration) over the past few months. Please share your ponderings below.

Let me clearly state that I don’t like or approve of the recent federal intervention in the United States economy. Government policy over the past three decades, pushed to extremes by left-leaning and radical groups like ACORN and using the Community Reinvestment Act, created the corrupt lending environment that was exploited by Fannie Mae and Freddie Mac to produce the toxic mortgage situation in which we find ourselves. So, since government is primarily responsible for this crisis, why should we then trust government to fix the problem they created?

This unfavorable economic environment is not a shortcoming of capitalism. It is a direct result of government manipulation within our economy for the benefit of a few people. Sometimes manipulation gives an unfair advantage to the rich and sometimes the poor. In this current environment, those who should not get a loan it were encouraged to borrow beyond their means.  While historically no bank would loan money under such terms, Fannie and Freddie created an unnatural market for banks to offload risky mortgages. The result was the poisoning of our entire financial system.

Unfortunately, as is often the case, the federal government stepped in and removed even more of our individual freedoms and made our economic system less of a capitalistic one and more like a planned economy under socialism. To give you an idea of the extent of the change, we’re now talking about the government owning or nationalizing large portions of our banking system. We’re also talking about government confiscating taxpayer money to buy up and refinance failing mortgages. We’re also talking about government, not shareholders, owners or investors, telling companies how much they can pay their employees and how to run their businesses. Sounds more like the old Soviet Union than what the Founding Fathers set up, doesn’t it?

This is an extremely dangerous precedent that will severely damage our economy in the long run. It makes the American taxpayer the ultimate holder of risks that the market should allocate to willing investors. It also gives government enormous control over our economy, our money and our everyday lives. In effect, a government bureaucrat will soon be deciding who can borrow, how much they can borrow and under what terms. In the name of fairness and environmentalism, other factors will probably be imposed later like how large our house can be and whether we really need what we can afford.

Instead of the massive bailout that was adopted, I wish government had essentially stepped out of the picture and removed as many of the artificial market distortions imposed on our economy as possible. True, those who foolishly risked assets would go bankrupt but those assets would not disappear (yes, all those over-mortgaged houses would not evaporate into thin air and people would still have places to live). Instead, those assets and failing institutions would be transferred to their creditors who would carry on the business of finding renters and owners for them. The system would have adjusted and done so relatively quickly compared to this permanent fix imposed by the government.

Furthermore, such a capitalist move would have injected more fairness and rational decision-making into our economic system instead of advancing our nation down the slippery slope of socialism. Power corrupts. Whether power is concentrated in the hands of government or unfair markets, it still corrupts. The best fix would have been for government to ensure that free markets existed and then to step back and let the incredibly creative innovations of the American people solve the crisis.

In conclusion, the current economic crisis was caused by government intervention in the first place and will not be fixed by yet another bigger government intervention. It is utter foolishness to grant government more power to tinker with our economy. It is especially dangerous to further empower those same forces who pushed the radical agenda that first took our government down the destructive path of socialism decades ago. Furthermore, I’m also very troubled by the lack of real resistance to this massive erosion of our precious American freedoms.

We’ve been told for months now by politicians, especially Democrats, that the U.S. economy is in shambles.  Over the past few days we’ve been told that government must act now in a huge way to bail it out before the woes of Wall Street hit Main Street. We’re told that this is the worst economy since (insert year of choice here). There is so much doom and gloom.

But let’s step back and think for a minute. Yesterday we saw a huge drop in the stock market. Today we saw it recover about half that drop. While wild swings are not ideal, the fact that things calmed down and recovered so much today after the hailed bailout plan was voted down yesterday speaks volumes about consumer confidence (which today was reported for September to be up from August’s numbers and higher than analysts expected).

Also, the value of the U.S. Dollar surged in relation to many foreign currencies today, especially major tracking ones like the Euro, Yen and the British Pound. How could that be if our economy is on the verge of collapse and a second Great Depression? Would foreigners want to hold dollars if they were soon to be devalued or made worthless? I think not.

A couple weeks ago John McCain was ridiculed for expressing that while there are problems in our economy it is fundamentally strong. I agree with McCain and applaud him for speaking the truth and not trying to “talk down” the economy for political gain. Think about it: The American worker remains the most productive in the world. We have an incredible infrastructure to facilitate business transactions, labor exchanges and economic development. We have a strong legal foundation that protects innovation, entrepreneurship, private property — including intellectual property — and individual freedom. Where else in the world can you find all these components required for a strong economy?

Yes, there are problems in our economy today (largely the result of bad government policy) but the American economy remains fundamentally strong because Americans are fundamentally strong and innovative. The sooner government realizes that it needs to get out of the way of free and private markets the better it will be for everyone — from Wall Street to Main Street. I think the positive economic response we say today to yesterday’s no vote on the bailout bill should serve as a lesson that government intervention in the economy ought to be limited and restrained.

Jeffrey A. Miron is a senior lecturer in economics at Harvard University. He is a Libertarian and was one of 166 academic economists who signed a letter to congressional leaders last week opposing the government bailout plan. His commentary, entitled Bankruptcy, Not Bailout, is the Right Answer, was published today at CNN.com and the American Future Fund, an organization that advocates conservative, free market ideals.

The latest bailout plan that was voted down yesterday would have authorized $700 billion for the U.S. Treasury to purchase “troubled assets” from Wall Street financial institutions. Miron argues that this bailout proposal was a “terrible idea” and explains why. First, however, he explains how we got ourselves into this mess.

The current mess would never have occurred in the absence of ill-conceived federal policies. The federal government chartered Fannie Mae in 1938 and Freddie Mac in 1970; these two mortgage lending institutions are at the center of the crisis. The government implicitly promised these institutions that it would make good on their debts, so Fannie and Freddie took on huge amounts of excessive risk.

Worse, beginning in 1977 and even more in the 1990s and the early part of this century, Congress pushed mortgage lenders and Fannie/Freddie to expand subprime lending. The industry was happy to oblige, given the implicit promise of federal backing, and subprime lending soared.

This subprime lending was more than a minor relaxation of existing credit guidelines. This lending was a wholesale abandonment of reasonable lending practices in which borrowers with poor credit characteristics got mortgages they were ill-equipped to handle.

Once housing prices declined and economic conditions worsened, defaults and delinquencies soared, leaving the industry holding large amounts of severely depreciated mortgage assets.

After pinning the blame squarely on failed government policy, Miron correctly reasons that it is unwise to let government do more of the same in the name of recovery.

The fact that government bears such a huge responsibility for the current mess means any response should eliminate the conditions that created this situation in the first place, not attempt to fix bad government with more government.

Miron then builds a case for allowing financial institutions to declare bankruptcy which would mean their creditors would own the remaining assets.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

He argues that bankrupcy is superior to a government bailout because it punishes foolishness and protects taxpayers.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This “moral hazard” generates enormous distortions in an economy’s allocation of its financial resources.

Miron admits that this process would be ugly and could make the credit situation worse before we would see improvement. However, he argues that “talk of Armageddon” is “ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.”

Miron also suggests that the current credit freeze conditions we’re seeing is “likely due to Wall Street’s hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.” I agree that good market-based alternatives are probably being overlooked in the hopes of a more favorable (in the short run, at least) government rescue.

So that’s the problem. Now for the solution. What should government do? Miron writes:

Eliminate those policies that generated the current mess. This means, at a general level, abandoning the goal of home ownership independent of ability to pay. This means, in particular, getting rid of Fannie Mae and Freddie Mac, along with policies like the Community Reinvestment Act that pressure banks into subprime lending.

Miron concludes that someone will have to pay for these mistakes but it does not have to be the U.S. taxpayer. I couldn’t agree more.

I don’t trust the government to fix this mess when their non-market-based policies were what created the problem. Undoubtedly any bailout plan would be filled with unnecessary spending and loaded with benefits for special interests. No big government, no bailout!

Think about this with me for a minute if you would. The government is asking us taxpayers to hand over $700 billion more dollars on top of the $2+ trillion we already give them (or they obligate us with in the form of debt). That’s an enormous amount of money.

Today there is an Associated Press article that looks at what just how big $700 billion is compared to other spending. I quote some of the article below:

You could buy yourself a war with that kind of money – the U.S. has spent $648 billion on Iraq war operations so far.

You could match Franklin Roosevelt on his New Deal and raise him billions more.

Even in a town where billions come and go without anyone blinking, the money that could go into the Wall Street rescue is eye-popping. The House on Monday voted down a proposed $700 billion bailout package, but congressional leaders said they were committed to trying again.

What else could the government do with a $700 billion blank check? There are, well, billions of possibilities.

It could ensure universal health care coverage for six years, for example, or upgrade the country’s most deficient bridges four times over. All the work to upgrade coastal levees that’s been done since Hurricane Katrina? It’s a mere drop in the proverbial $700 billion bucket – $7 billion, or just 1 percent. You could build 1,750 bridges to nowhere.

Or run an entire country. Seven hundred billion dollars is more than twice the size of the economy of Denmark, which had a gross domestic product of $312 billion in 2007.

Seven hundred billion dollars would buy 70 Hubble-type space telescopes. Or about seven international space stations. It would finance the National Institutes of Health, the nation’s premier medical research institute, for two decades. Or pay the U.S. national intelligence budget for 15 years.

According to the Wall Street Journal, half the money FDR spent on his New Deal program to lift the country out of the Depression and banking crisis was for public works projects. For $250 billion in today’s dollars, the nation got 8,000 parks, 40,000 public buildings and 72,000 schools.

The article provides even more examples but I think you get the picture. My question for the government is simple: You created this problem so why should I trust you to fix it with more government?

A few hours ago the U.S. House of Representatives defeated the $700 billion “emergency rescue” package designed to boost our nation’s financial systems and prevent an economic meltdown. More than two-thirds of Republicans and 40% of Democrats voted against this legislation.

AP Reporter Julie Hieschfeld Davis reported the following comments from Speaker of the House Nancy Pelosi (D-CA) after the measure’s failure to pass:

“The legislation may have failed; the crisis is still with us,” said House Speaker Nancy Pelosi, D-Calif., in a news conference after the defeat.

“What happened today cannot stand,” Pelosi said. “We must move forward, and I hope that the markets will take that message.”

Sounds like she was disappointed that the vote was insufficient to move the package out of the House, doesn’t it? Likewise Democrats were quick to blame Republicans for defeating this bill. However, that’s only part of the story. Some Republicans are saying they feel that Pelosi poisoned the atmosphere of bipartisanship when right before the vote she asked chairman of the House Financial Services Committee Barney Frank (D-MA) to yield 1 minute for some comments. Her 1 minute allotment turned into more than 5 minutes and included plenty of divisive partisan attacks on the “right-wing ideology of anything goes, no supervision, no discipline, no regulation” Republicans. Some way to win friends when you need them, isn’t it?

Davis reported the following comment by Minority Leader John Boehner (R-OH) following the vote:

“We could have gotten there today had it not been for the partisan speech that the speaker gave on the floor of the House,” Minority Leader John Boehner said. Pelosi’s words, the Ohio Republican said, “poisoned our conference, caused a number of members that we thought we could get, to go south.”

Watch the video below for yourself and see if you think Pelosi’s comments may have been a deliberate attempt to poison the bailout vote before it occurred. Remember, she needed Republicans to vote for the measure because she couldn’t get enough Democrats behind it.

Click here to view the embedded video.

From my perspective it looks like she wanted the vote to fail so Democrats could go on television and blame Republicans as “bad for America” and other similar nonsense. And for the icing on the cake, she pulled this stunt off when there’s plenty of evidence that Democrats actually created the financial crisis we find ourselves in today.

John McCain just released a statement suspending his campaign, effective Thursday morning, to focus on resolving the economic crisis. Here are his remarks.

America this week faces an historic crisis in our financial system. We must pass legislation to address this crisis. If we do not, credit will dry up, with devastating consequences for our economy. People will no longer be able to buy homes and their life savings will be at stake. Businesses will not have enough money to pay their employees. If we do not act, ever corner of our country will be impacted. We cannot allow this to happen.

Last Friday, I laid out my proposal and I have since discussed my priorities and concerns with the bill the Administration has put forward. Senator Obama has expressed his priorities and concerns. This morning, I met with a group of economic advisers to talk about the proposal on the table and the steps that we should take going forward. I have also spoken with members of Congress to hear their perspective.

It has become clear that no consensus has developed to support the Administration’s proposal. I do not believe that the plan on the table will pass as it currently stands, and we are running out of time.

Tomorrow morning, I will suspend my campaign and return to Washington after speaking at the Clinton Global Initiative. I have spoken to Senator Obama and informed him of my decision and have asked him to join me.

I am calling on the President to convene a meeting with the leadership from both houses of Congress, including Senator Obama and myself. It is time for both parties to come together to solve this problem.

We must meet as Americans, not as Democrats or Republicans, and we must meet until this crisis is resolved. I am directing my campaign to work with the Obama campaign and the commission on presidential debates to delay Friday night’s debate until we have taken action to address this crisis.

I am confident that before the markets open on Monday we can achieve consensus on legislation that will stabilize our financial markets, protect taxpayers and homeowners, and earn the confidence of the American people. All we must do to achieve this is temporarily set politics aside, and I am committed to doing so.

Following September 11th, our national leaders came together at a time of crisis. We must show that kind of patriotism now. Americans across our country lament the fact that partisan divisions in Washington have prevented us from addressing our national challenges. Now is our chance to come together to prove that Washington is once again capable of leading this country.

I’ve been a strong critic of John McCain at times but this action shows who is putting country over self. That bold move is leadership in action and I applaud his efforts. I hope the voters reward him accordingly.

Yesterday director of economic-policy studies at the American Enterprise Institute and Bloomberg News columnist Kevin Hasset reported at Bloomberg.com that Democrats are the ones who created the current financial crisis that we find ourselves in as a nation. According to his commentary, Fannie Mae and Freddie Mac “exploded” and injured many bystanders (some fatally). “Take away Fannie and Freddie, or regulate them more wisely, and it’s hard to imagine how these highly liquid markets would ever have emerged. This whole mess would never have happened.”

Hassett reports that as of the end of June 2008, “Fannie alone owned or guaranteed more than $388 billion in high-risk mortgage investments.” He continues (emphasis mine).

Some might say the current mess couldn’t be foreseen, yet in 2005 Alan Greenspan told Congress how urgent it was for it to act in the clearest possible terms: If Fannie and Freddie “continue to grow, continue to have the low capital that they have, continue to engage in the dynamic hedging of their portfolios, which they need to do for interest rate risk aversion, they potentially create ever-growing potential systemic risk down the road,” he said. “We are placing the total financial system of the future at a substantial risk.”

What happened next was extraordinary. For the first time in history, a serious Fannie and Freddie reform bill was passed by the Senate Banking Committee. The bill gave a regulator power to crack down, and would have required the companies to eliminate their investments in risky assets.

If that bill had become law, then the world today would be different. In 2005, 2006 and 2007, a blizzard of terrible mortgage paper fluttered out of the Fannie and Freddie clouds, burying many of our oldest and most venerable institutions. Without their checkbooks keeping the market liquid and buying up excess supply, the market would likely have not existed.

But the bill didn’t become law, for a simple reason: Democrats opposed it on a party-line vote in the committee, signaling that this would be a partisan issue. Republicans, tied in knots by the tight Democratic opposition, couldn’t even get the Senate to vote on the matter.

Hassett suggests that many Democrats may have opposed this bill due to the massive financial contributions they received from Fannie and Freddie. He continues (emphasis mine).

But we now know that many of the senators who protected Fannie and Freddie, including Barack Obama, Hillary Clinton and Christopher Dodd, have received mind-boggling levels of financial support from them over the years.

Throughout his political career, Obama has gotten more than $125,000 in campaign contributions from employees and political action committees of Fannie Mae and Freddie Mac, second only to Dodd, the Senate Banking Committee chairman, who received more than $165,000.

Clinton, the 12th-ranked recipient of Fannie and Freddie PAC and employee contributions, has received more than $75,000 from the two enterprises and their employees. The private profit found its way back to the senators who killed the fix.

Hassett’s conclusion is remarkable (emphasis mine).

There has been a lot of talk about who is to blame for this crisis. A look back at the story of 2005 makes the answer pretty clear.

Oh, and there is one little footnote to the story that’s worth keeping in mind while Democrats point fingers between now and Nov. 4: Senator John McCain was one of the three cosponsors of S.190, the bill that would have averted this mess.

I’m guessing most of us haven’t heard that Democrats are to blame for the current financial crisis we’re experiencing.  It looks to me like Barack Obama and the majority of his Democratic Party were so blinded by money that they put themselves first and failed to do what was best for the country.

Please note that Kevin Hasset is also an adviser to Senator John McCain in the 2008 Presidential election.

In this latest election cycle I’ve been frustrated by the lack of talk about core principles.  It seems that window dressing is king right now and a few buzzwords about change are shaping the political debate.  That’s bad news for people who think critically — especially for those of us who know that change for the sake of change is not necessarily a good thing. We could change from bad to worse, for example, so I want to know why we need change and where (and how) the change agent wants to change things.

While mulling over these notions, they triggered some thinking about my own core principles. I felt it was wise to put my core beliefs about government in writing (even if in a rough format) and provide some basic application of them regarding the federal government.  I am a strong believer in federalism, separation of powers, and checks and balances. As such, I feel the Constitution clearly restricts the federal government from action — particularly in domestic issues.  Similarly, in the areas where federal action is authorized, it is often severely limited. In fact, the Tenth Amendment is very specific about this:

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.

In a nutshell, this means the federal government is severely limited to a few (primarily national and interstate commerce) powers with the remainder left to the States and the people.  Thus, I advocate a very limited role for the federal government and argue against many social and spending programs currently found at the federal level. However, please note that I am not against all government social programs. While opposing federal programs, I will argue for more involvement at the state and local levels of governments. At these levels of government there are not the same Constitutional prohibitions. Similarly, I firmly believe that social programs are more effective from a practical and service-oriented point of view when administered at the lowest level of government possible (state, county, city, special district, etc.).

So, understanding the above, I will embark on drafting my “Key Principles of Government” as they relate to the federal government specifically, and to all governments in general. Please note that this is a work in progress — thus the short sentences, bullet format and limited explanation/supportive details.

1. Government exists to protect life and liberty and maintain an orderly society.

Government protects but does not create rights. Our government is a representative democracy (not a direct democracy). Minority rights are safeguarded from the “tyranny of the majority.” The federal government exists primarily to:

• provide national defense (foreign and domestic)
• promote national interests
• administer interstate commerce and conflicts

2. Government should be limited and restrained.

Power begins with the people and authority comes from God. Just because a problem exists doesn’t mean the government should try to solve it. A government that governs least tends to governs best. When possible, local solutions are preferred over national or state ones. The Constitution should be followed explicitly. If additional federal involvement is deemed needed then the Constitution should be amended to authorize such action.

3. Economic markets should be free.

The free enterprise system powers personal prosperity. Because government intervention disrupts the “invisible hand” (see Adam Smith) of the economy and encroaches on personal freedom, it should be rare. Also, to avoid creating special advantages and unintended consequences, government should limit its involvement in the economy as much as possible.

4. Taxes should be low.

It’s not the government’s money. Anything the government possesses it has had to first take from somebody.

5. Simple solutions are preferred over more complex alternatives.

The simplest working solution is usually the best one. The more complicated something is the more parts there are to break. Long-term costs and benefits should be considered above short-term impacts.

What do you think? Did I leave anything out? I invite your comments and suggestions.