by Danny de Gracia, II

A weekly liberty briefing and news guide to keep you informed and prepared on what’s UP to more freedom or DOWN to bigger, more intrusive government.

Quote of the Week:

“A free market grants no authority or privileges to labor unions or business. All contracts between workers and businesses must be mutually agreeable and without government mandates. No one is forced to work, no one is prevented from quitting, and the wages are to be set by mutual agreement. All workers are free to organize and collectively negotiate with employees. Employees have a right to participate or not. Government workers have no power to force obscene wages on the taxpayers and should not be given a contractual right to strike and hold the taxpayers hostage.”
Rep. Ron Paul

Local News

Election 2012 Is Over, What’s Next?

Once again, another election is finally over here in Hawaii and across America. So much time, emotion and money often hangs on these races, and more often than not our future leaders are determined by capricious voting and sometimes sheer luck. But just as the 1980s Glenn Frey song goes, “someone’s gonna cry when they know they’ve lost you, someone’s gonna thank the stars above.” Some are overjoyed, others are angry at the results from this week’s election, but what does it mean for you and me?

ANALYSIS: Personality politics aside, both Hawaii and the United States at large are in deep fiscal trouble. The Federal government is pushing close to $17 trillion dollars in debt and in spite of talk of “cutting spending” new mandates both in Washington and here in Hawaii will cost taxpayers even more money. It seems like the taxpayers just can’t get a break!

In an interview with Bloomberg, outgoing Congressman Ron Paul (R-TX) recently said that he believes America has already gone far off the so-called fiscal cliff and warned “We cannot get enough people in Congress in the next five to ten years who will do wise things.” Rep. Paul is correct – elections and hope of turnover are too unreliable and slow a process to get relief in time.

America’s founders engineered as many breaks as possible into the design of the Constitution to ensure that this day never comes. We constantly hear politicians complaining about “there is so much gridlock in government” or accusing opposing parties of being “legislative obstructionists” but the truth is our founding fathers knew that the faster government runs, the faster government taxes, spends and legislates the people into oblivion. Can you imagine what kind of world we would be living in right now if politicians could actually do in an efficient manner their full desires upon the public?

Here in Hawaii we need to pay close attention to the Constitution to hold the line on liberty. Washington D.C. has forced so many mandates on Hawaii and the combined impact has wrecked our state. Our best hope is to look to the Tenth Amendment which tells us “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

The founders never meant for Washington D.C. to be a dictatorial city, enforcing its will over the states. If the people of Hawaii would start talking with their state legislators and pressuring them to start nullifying unconstitutional mandates, Hawaii could literally be an “island” for liberty and set the example for the rest of the states to follow. All it takes is courage and initiative … and we need that now more than ever!

If you want UP to more freedom and liberty, we have to start working locally to ensure the Bill of Rights and Constitution are upheld. Don’t just accept lip service from your local elected officials!

Hawaii Tax Department Poised to Crack Down on Solar Tax Credits (Civil Beat, 11/8)

Sophie Cocke at Civil Beat reports “The state tax department is set to come out with new rules that would limit the number of tax credits solar companies can claim on a solar array. And the solar industry, worried that the changes will deeply hurt the business, is already gearing up for a fight that likely will head to the Legislature in January. Concerns that solar companies were gaming the system by claiming more credits than the tax credit law intended prompted state lawmakers to propose legislation last year that would ensure that only a single tax credit is taken per property. But the legislation, which the solar industry vigorously fought, never passed” (italics added).

ANALYSIS: U.S. Supreme Court Chief Justice John Marshall warned in 1819 that the power to tax involves the power to destroy. The existence of any form of taxation is a form of market control in which government artificially distorts prices in its pursuit of revenues. If one considers taxes as the “stick” of government, tax credits are the “carrot” in which legislators seek to stimulate some behaviors over others by waiving taxes. The problem however with tax credits is that, as alluded to earlier, government taxation distorts the marketplace. When government tries to pick winners and losers, it does so without any consideration for the long term effects on the forces of supply and demand.

In the case of the State of Hawaii, our government is essentially concerned that loopholes in their own laws will allow people to bypass “the system” and get rich while the state loses revenues. This is the fundamental crisis that always emerges whenever government gets involved in anything: it tries to regulate market forces which adapt to its own mandates and discovers the end result is more disorder and more need for regulation.

A better solution would be simply to allow Hawaii consumers to determine their preferred means of energy production and to have absolutely no government interference or taxation in that area. The end result is that people have more money to save or invest in capital acquisition or labor and that goes towards private enhancement and modernization of Hawaii’s energy markets. That means greater efficiency, less consumption and higher quality of life – all as a result of private action. Instead, the government wants to force a green economy and the only thing it produces is people making green – at taxpayer expense.

If you want an UP to more liberty and freedom, don’t play with complicated taxes and tax credits. Just repeal taxes and let everyone be on a level playing field!

Miami man pleads guilty in University of Hawaii scam (Hawaii Reporter, 11/8)

Hawaii Reporter follows up on the UH Stevie Wonder concert debacle and reports “Sean Barriero, one of two man accused of scamming the University of Hawaii out of $200,000 pleaded guilty in federal court today […] admitting that he lied to UH officials about how their money would be used. The funds were supposed to be a deposit securing the appearance of entertainer Stevie Wonder at an August fundraiser for the UH Athletics Office. But the money disappeared after it was wired to a Barriero bank account in Miami. The concert was cancelled after Wonder’s representatives told the university that he knew nothing about the planned concert.”

ANALYSIS: It’s a good thing that justice will be done in this unfortunate waste of UH funds, but before you get outraged at the criminals involved, one must immediately ask the question why UH officials were so easily taken for a ride and not able to do their due diligence and proper attention to detail regarding the acquisition of entertainer Stevie Wonder in the first place.

Supposedly the job of government is to protect people; likewise, purportedly the function of a university is to seek veritas or truth – one can only reason then that a state university should be the best there is when it comes to protecting funds and acting on accurate information in its contracting process! Excuses will always be made but the fact of the matter is it is a common blemish on the institution of public agencies to see failure of attention to detail. No amount of litigation, legislation or regulation can possibly make public agencies shape up because the key difference between a private university and a public university is that public universities always know they’re using someone else’s money, not their own to enter into contracts.

There are times when I feel like a broken record saying this over and over again, but if you want UP to competence, UP to attention to detail, UP to quality and UP to freedom, you need to get government out of everything.

 

National/International News

Conservative talk show host Sean Hannity says he’s ‘evolved’ on immigration (Politico, 11/8)

Politico’s Mackenzie Weinger reports Sean Hannity announced to his radio listeners that he has “evolved” on immigration and that he now supports a pathway to legal citizenship. “You can’t let the problem continue,” Hannity says, “it’s got to stop.”

ANALYSIS: Like so many other issues, the topic of illegal immigration and citizenship is one that stirs immense and often incendiary debate. Some people believe that America should crack down on persons living here illegally, others think that America should provide amnesty or even look the other way. The real root problem however is not immigration, contrary to what you might think. The problem is government mandates and taxation.

Just think for a moment: imagine a world where there was no Federal income tax, no property tax, no social safety nets and no requirements that employers file any form of reports with the government concerning their employees or their profits made each year. (And before you get “that look” on your face, America was, in fact, once like that.) In such a society, business owners would be focused almost exclusively on profit-seeking, which means they would pursue both more labor and more capital to advance higher production output.

In a free market, no one really cares “what” one’s employees are or where they come from, so long as the employees are good at what they do and productive workers. If I were to see someone who has a real talent at cutting hedges into artistic shapes, I couldn’t care less what nationality they are – my natural inclination would be to make that person a monetary offer in exchange for cutting my hedges. However, I can’t just do that, thanks to the government I have to worry whether or not the guy is a legal citizen and I have to worry about filing paperwork with the IRS just to have my lawn manicured.

Government forces us to “care” about who we hire because the government has mandated that everyone have Social Security, report income taxes or more recently purchase/provide medical insurance, thus forcing a conflict in which 1.) artificial scarcity of labor is created for both those wanting to work and those seeking laborers, 2.) law abiding citizens and taxpayers alike are now angry and upset because while they are being taxed by government, illegal immigrants are not and are reaping the social handouts of government for free and  3.) a law enforcement crisis arises in which government must police and pursue illegals.

The situation is really not as complicated as people would make it seem. Government creates crisis. If you want to solve the illegal immigrant issue, just set everyone on level field by abolishing most taxes, shrinking the size of government and discontinuing social handouts. No one gets “cheated” when there is nothing to cheat.

Instead, because of our confusing (and often confused) government, all of us are made to suffer by the unintended consequences of immigration laws and market regulation. If you want UP to more freedom, we need free markets. Free markets mean free people!

Iranian Warplanes Fired On U.S. Drone Over Gulf (CNBC, 11/8)

CNBC reports that it is only now being revealed that last week Iranian Su-25 Frogfoot attack planes intercepted an unmanned Predator drone just barely in international airspace 16 nautical miles off the coast of Iran. The Russian-made Su-25s opened fire but did not hit or damage the U.S. drone.

ANALYSIS: Fortunately in spite of the incident, no aircraft or lives were lost. Tensions have been high for months as U.S., Israeli and Iranian officials have been engaged in an ongoing regional show of force and brinkmanship. With markets as unstable as they are from the ongoing global banking crisis and government budgets running in the red, it is increasingly important that we not start any new wars or conflicts.

The cost of war, both in human lives and financial cost is something that all sides should take into account before escalating tensions any further. War only destroys. I believe that if we want UP to peace and freedom, we also have to inform our elected leadership in Washington to stay OUT of more wars, especially in Iran.

Fiscal cliff forecast: Bad now, worse later (Washington Times, 11/8)

The Washington Times reports “All sides appear to agree that taxes rates should be kept lower for most other Americans – something that the CBO said will indeed help the economy in the short term, but deepen deficits and hurt over the longer run. With Congress and the White House now looking for common ground, the CBO laid out the exact short-term economic benefits of some options: Halting the $110 billion in automatic sequesters due Jan. 2 would raise gross domestic product by three-quarters of a percent last year, while extending all of the George W. Bush-era tax cuts, due to expire Jan. 1, would raise GDP by a little less than 1.5 percent.”

ANALYSIS: Forget all the numbers and hairsplitting you’re hearing about tax cuts and GDP. The simple fact of the matter is Gross Domestic Product includes government spending, so bigger government, under that economic indicator, would always appear to produce bigger “economic growth.” The reality is that the “economy” isn’t growing, consumption is simply dilating.

Rather than worry about what effects cutting taxes or raising taxes will have on GDP, our elected officials in Washington should worry more appropriately about interest rates and the purchasing power of the dollar. The demand curve for money affects the rate of spending (consumption) and the rate of inflation which is essentially the root of the crisis that we are in. America is in trouble because the money supply keeps expanding faster than people can produce or save. The end result is, with the money “on fire” government and private individuals never have enough paper currency for what they need and constantly need to resort to more credit – or in the case of government, more collection.

The fiscal cliff is looming because of the fact that government artificially stimulated demand and consumption via low interest rates and massive injections of money through TARP and the bailouts. Had government allowed market forces to liquidate weak assets, we would see a massive drop in prices allowing investors to buy up even as “zombie” banks and companies go down. The economy would literally fix itself if government had not intervened. Now there is almost no way to avert the crisis which America is headed for. As Ludwig von Mises famously said, “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

What we are seeing right now is a serious DOWN for liberty. Stay tuned, however … as the so-called “fiscal cliff” draws near, we will keep you informed and in the loop.

Danny de Gracia is the Economic Policy Adviser for the Grassroot Institute of Hawaii. Views expressed in this column are intended to promote creative thought, educate, and, we hope, prompt comment. Accordingly, thoughts expressed do not necessarily reflect the official position of Grassroot Institute of Hawaii or the author.

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