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Get out your slide rules and compasses, boys and girls. We’re about to dissect the whats, the hows, and wherefores of the wonderful and wacky world of welfare reform! Please, try and contain yourselves.

Our story begins with this complaint from the Right: the White House has undone welfare reform!

According to headlines,

Obama Ends Welfare Reform As We Know It (Robert Rector and Katherine Bradley, National Review, 7/12)

Romney hits Obama move gutting welfare reform (Byron York, Washington Examiner, 7/13)

Obama administration ‘guts’ welfare reform with new HHS rule (Caroline May, The Daily Caller, 7/13)

‘Partisan Disgrace’: Obama Admin Quietly Rewrites Welfare Reform Law (Becket Adams, The Blaze, 7/13)

Obama to Clinton welfare reform: Drop dead (Jennifer Rubin, Washington Post, 7/15)

Obama Bids Farewell to Welfare Reform (Gerri Willis, Fox News, 7/17)

We also learned last week that

House and Senate Republicans introduced a bill Wednesday to prohibit the administration from implementing its latest policy … “eviscerating” planks from the 1996 bipartisan agreement on welfare reform.

Changing the law is one thing, but was it done extra-legally? According to Jennifer Rubin,

The list of laws [President Obama] won’t enforce or is unilaterally amending is getting long. …The latest and most inexplicable gambit is his decision to undo bipartisan welfare reform.

So what happened exactly? And whatever it was, was it illegal? And whether or not it’s legal, what does it mean and does it matter at all?

The implications are immense, but it was not illegal. In this article, I will first explain why the law allows President Obama’s unilateral move. I will then explain how the move undermines the much heralded welfare restrictions of 1996 and how it fits so well with White House welfare policies from the start of President Obama’s tenure.

 

THE LEGALITY OF THE PRESIDENT’S DIRECTIVE

The work requirements of Temporary Assistance for Needy Families (TANF)are at the heart of concerns coming from proponents of welfare reform. President Clinton’s 1996 signature law forced states to put at least 50% of their welfare recipients through “work activities,” and proponents believe this requirement was essential for the subsequent mass migration into the workforce of former welfare recipients during the late 1990s. These proponents are now up in arms because the recent White House memorandum (July 12) from the Department of Health and Human Services (HHS) offered states a waiver from their work requirements.

What was the stated legal justification? HHS claimed authority under §1115 of the Social Security code to waive the work requirements. But the work requirements are stated in §407, which §1115 conspicuously does not cover. However, HHS (brilliantly, in my opinion) located a loophole: it turns out §1115 does allow the waiver of §402, which itself implements the work requirements of §407.

So if HHS has authority to waive any requirements in §402, it has authority to waive the teeth out of the work requirements in §407. Here is the language giving the Secretary of HHS that very authority under §1115: “the Secretary may waive compliance with any of the requirements of section 2, 402, 454, 1002, 1402, 1602, or 1902, as the case may be, to the extent and for the period he finds necessary.”

The work requirements of §407 can therefore be legally waved. Here is how the HHS memo puts it:

Section 1115 authorizes waivers concerning section 402.  Accordingly, other provisions of the TANF statute are not waivable.  For example, the purposes of TANF are not waivable, because they are contained in section 401.  The prohibitions on assistance are not waivable, because they are contained in section 408.

While the TANF work participation requirements are contained in section 407, section 402(a)(1)(A)(iii) requires that the state plan “[e]nsure that parents and caretakers receiving assistance under the program engage in work activities in accordance with section 407.”  Thus, HHS has authority to waive compliance with this 402 requirement and authorize a state to test approaches and methods other than those set forth in section 407, including definitions of work activities and engagement, specified limitations, verification procedures, and the calculation of participation rates.

All signs indicate this move to be legal. Whether it is good policy is another question entirely.

CONSEQUENCES

In 2005, work requirements were tightened by Congress. According to Rubin, this was in response to the following findings:

the nonpartisan Government Accountability Office reported that several states listed as part of their definition of a ‘federal work activity’ under TANF the following:

  1. Bed rest
  2. Personal care activities
  3. Massage
  4. Exercise
  5. Journaling
  6. Motivational reading
  7. Smoking cessation
  8. Weight loss promotion
  9. Participating in parent teacher meetings
  10. Helping a friend or relative with household tasks and errands.

Working requirements must be present, they must be tough, and they must be enforced, so the argument goes.

But Rubin’s colleague Ezra Klein at the Washington Post protests that this recent change is nothing to be concerned about:

The stated intention is to allow states more room to try programs that promote employment for welfare recipients in the face of the recession. The actual language is rather strict and rules out a number of potential waiver applications. For example, the memo states, “The Secretary will not use her authority to allow use of TANF funds to provide assistance to individuals or families subject to the TANF prohibitions on assistance.” Translation: people who aren’t on TANF because they didn’t meet the work requirements aren’t going to get bailed out here.

This is simply disingenuous. True, the prohibitions on assistance he refers to are in §408, which are not subject to waiver. However, these prohibitions on assistance are not work requirements. If they were, then the work requirements of §407 would be superfluous. Indeed, the entire HHS memo would be an embarrassing waste of time. It is not helpful to pretend that a policy lifting work requirements will not effectively lift work requirements, without further exposition.

Klein also notes:

Proposed waivers also must include concrete methods of evaluating performance, and set standards that the new programs must meet for the waiver to continue.

To paraphrase Klein, one man’s concrete methods of evaluation is, of course, another man’s free-for-all. As noted above, the HHS memo requires things like “definitions of work activities and engagement, specified limitations, verification procedures, and the calculation of participation rates.” These requirements are further detailed at the bottom of the memo.

The implication that any of these requirements will subject the states to any substantial limit is a wild guess at best and is made with willful disregard of the mechanics of government at worst. This is especially true because the memo is just a letter — a ‘heads up’ to the states — without the force of law. In a nation governed by waivers, this kind of naïve, unquestioning analysis just won’t do.

Klein notes other potential positives of this welfare “tweak,” such as financial protection for some in need.

Assuming welfare to be a net benefit for its recipients, granted.

However, if our concern, for whatever reason, is the expanding of welfare payments at the expense of work requirements — the very concern that made welfare reform popular in the first place — the policy directive in this memo is anathema.

Make no mistake: we have just experienced an about-face of welfare reform.

WELFARE’S LATE GROWTH SPURT

If you thought this just couldn’t get any more riveting — if you thought only the first drop on a roller coaster at a Red Hot Chili Peppers concert could top this — oh, it’s going to get so much better! It’s time for some context before we cover what the Obama Administration has been doing with welfare reform since its very first days in office.

What do we mean by “welfare”? It is now a widely-known fact that net welfare entitlements have skyrocketed in recent years. An April CATO paper notes the explosion:

In 2011 the federal government spent roughly $668.2 billion on [all welfare programs]. That represents an increase of more than $193 billion since Barack Obama be­came president. This is roughly two and a half times greater than any increase over a similar time frame in U.S. history, and it means an increase in means-tested welfare spending of about 2.4 percent of GDP. If one includes state and local welfare spend­ing, government at all levels will spend more than $952 billion this year to fight poverty. To put this in perspective, the defense bud­get this year, including spending for the wars in Iraq and Afghanistan, totals $685 billion. (CATO, p.2)

The paper goes on to detail some of the loosening of eligibility requirements and reports projected costs of welfare over the coming decade:

According to Obama administration pro­jections … [b]y 2014 [combined federal and state welfare] spending is likely to equal $1 trillion per year and will total $10.3 trillion over the next 10 years. According to these projections, over the next 10 years, federal and state governments will spend $250,000 for every American currently living in pov­erty, or $1 million for every poor family of four. And that does not include spending under the Patient Protection and Affordable Care Act, which will dramatically increase the number of low-income Americans par­ticipating in Medicaid. (CATO, p.8)

The same paper details that combined federal and state welfare since LBJ’s 1964 promise to fight poverty totals nearly $15 trillion. This means the projections for the next 10 years ($10.3 trillion) equal more than 69% of the last 40 years of spending.

That’s total welfare. However, this article’s object is not total welfare, but only the single program that was reformed in 1996 and whose reform was just “gutted” by the HHS memo.

This program, the Temporary Assistance for Needy Families (TANF) is only one of 126 welfare programs. It is one of the top 10 most expensive of the programs, but it is still nowhere near as large as the top two, Medicaid and SNAP (food stamps). CATO provides us with a chart of total costs from 2011 among the most expensive programs:

And the number of recipients per program:

Obviously, TANF is by no means our greatest concern regarding unvarnished welfare spending.

To my mind, then, TANF is not itself a crisis, unless it expands astronomically. However, as the numbers in the CATO paper indicate, the entire welfare establishment of 126 programs is in crisis and any expansion in any program does contribute to the problem. Indeed, CATO details several recently-expanded programs, including TANF. This is why an eye on TANF is important, but always in conjunction with its sister programs.

WELFARE REFORM: A PREHISTORY

To understand the last three years of TANF, a short stroll through the glorious days of the 1990s will clear a few things up.

We begin with Barack Obama’s opinion of welfare reform. Here is Byron York:

when a real attempt to break through that culture of dysfunction — the landmark 1996 welfare-reform bill…— came up, Obama vowed to use all the resources at his disposal to undo it. “I made sure our new welfare system didn’t punish people by kicking them off the rolls,” he said in 1999. Two years earlier, he had declared: “We want to make sure that there is health care, child care, job training, and transportation vouchers — everything that is needed to ensure that those who need it will have support.”…

Obama’s professional colleagues, people like Jerry Kellman, believe his lasting accomplishment was to build an organization, the Developing Communities Project, that survived his departure. … It has become, much more than it was when Obama was there, a grant-getting institution; according to tax records, about three-quarters of its funding comes from government grants

To recap, TANF is the post-reform moniker of Aid to Families with Dependent Children (AFDC), which gained its unpopularity because too few strings were attached to its welfare benefits, and too many people were taking advantage of readily-available tax funds. This program was colloquially considered “welfare,” even though it is only one of many welfare programs.

And so, part of the 1996 Clinton welfare reform was the mandate that, in order for states to receive federal funding, at least half of their recipients had to be involved in some kind of “work activity” (i.e. workfare, job search, training), as defined in §407.

The states’ hands were tied to the work requirement. But if one state had 10,000 people on welfare and 5,000 dropped off the rolls because the work requirement drove them into a job, the state would still have 5,000 recipients left and would have to force half of them into work activities as well, until a de facto 100% work requirement materialized.

In order to avoid this impossible iterative regression, the 1996 reform included a “caseload reduction credit.” The 5,000 workers who left the welfare rolls would still be counted as workers toward the work requirement, and states would be rewarded for their successful efforts in moving recipients into jobs. Here is the mechanism for counting lost welfare beneficiaries:

The Secretary shall prescribe regulations for reducing the minimum participation rate otherwise required by this section for a fiscal year by the number of percentage points equal to the number of percentage points (if any) by which—

(i)     the average monthly number of families receiving assistance during the immediately preceding fiscal year * under the State program … is less than

(ii)    the average monthly number of families that received assistance under the State program referred to in clause (i) during fiscal year 1996**. [§407(b)(3)(A)]

 *amended by the 2009 Stimulus (see below)

**amended in 2005 to be “fiscal year 2005″

In short, the HHS Secretary will take the number of families on welfare in 1996, subtract the amount still on welfare in a subsequent year, and use that difference to credit the state for the number of families that have left welfare rolls.

That was the caseload reduction credit and it is generally considered to have successfully induced states to reduce their caseloads by pursuing work requirements.

RECENT EPISODES IN WELFARE “REFORM”

As mentioned above, TANF requirements were strengthened in 2005. However, the 2009 Stimulus was the first major turn-around for the program since its 1996 reform.

The Stimulus, or the American Recovery and Reinvestment Act of 2009, which was passed all the way at the start of President Obama’s term (February 17, 2009), reserved a $5 billion block grant to be used to pay 80% of the excess state TANF caseloads:

the amount of the grant to be made to a State … shall be an amount equal to 80 percent of the amount (if any) by which the total expenditures of the State for basic assistance (as defined by the Secretary) … exceeds the total expenditures of the State for such assistance [§2101(a)(1)(3)(A)(iii), p. 446]

The funding was thus tied to increased caseloads, rather than to some measure of need, like increased unemployment or level of poverty.

At the time, Robert Rector and Katherine Bradley at the Heritage Foundation made an important distinction:

Proponents of the stimulus plan might argue that these changes are necessary to help TANF weather the current recession. This is not true. Under existing TANF law, the federal government operates a TANF “contingency fund” with nearly $2 billion in funding that can be quickly funneled to states that have rising unemployment. It should be noted that the existing contingency fund ties increased financial support to states to the objective external factor of unemployment; it specifically avoids a policy of funding states for increased welfare caseloads, recognizing the perverse incentives this could entail.

If the authors of the stimulus bills merely wanted to provide states with more TANF funds in the current recession, they could have increased funding in the existing contingency fund. But they deliberately did not do this. Instead, they completely overturned the fiscal and policy foundations of welfare reform.

Either this was a major oversight by White House lawyers or they were indeed intent on undoing the structure of TANF for the express purpose of undoing the structure of TANF.

Additionally, the 80% payment is at the high end of what the federal government paid state governments for AFDC coverage, which in 1995 was anywhere from 50% to 74%. The 80% Stimulus provision was certainly a brazen step in several directions — and all before President Obama’s tenure began losing its first baby teeth.

On the other hand, there were some limitations on the Stimulus changes to TANF. The granting power for the “Emergency Fund” was subject to a 1.5-year limitation ending September 2010:

In no case may the Secretary make a grant from the Emergency Fund for a fiscal year after fiscal year 2010. [§2101(a)(1)(2)(C), p. 446]

(Fiscal years end on the October of their year so FY2010 lasts until late September 2010.)

The new granting power was also subject to the further limitation of the state’s finances: whatever is the size of its annual TANF program, the Stimulus fund cannot pay more than half of it over the course of two years:

The total amount payable to a single State … for fiscal years 2009 and 2010 combined shall not exceed 50 percent of the annual State family assistance grant. [§2101(a)(1)(5), p. 448]

I cannot find which year the “annual State family assistance grant” refers to and whether it refers to all of TANF or part of it, but we might as well stop nitpicking here and be charitable enough to allow that the temporary welfare expansion in the Stimulus was limited both by time (1.5 years) and money (50% of annual grants per state).

However, the fact remains that the Stimulus had, for the first time since 1996, incentivized the increase of caseloads, for caseloads’ sake. One thing held this shift back: the caseload reduction credit, which was so critical in incentivizing the states to lessen their caseloads back in 1996. The question here was, if caseloads expanded in response to the Stimulus’ 80% federal welfare bonus, wouldn’t the caseload reduction credit be unable to protect the states’ funding? Would not the work requirements then kick in and force funding away from the states?

The solution in the Stimulus legislation was to suspend the critical 1996 caseload requirement temporarily by throwing the following clause into §407(b)(3)(A)(i), which is asterisked above:

“(or if the immediately preceding fiscal year is fiscal year 2008, 2009, or 2010, then, at State option, during the emergency fund base year of the State with respect to the average monthly assistance caseload of the State (within the meaning of section 403(c)(9)), except that, if a State elects such option for fiscal year 2008, the emergency fund base year of the State with respect to such caseload shall be fiscal year 2007))” [§2101(b), p. 448-9]

What does this gobbledygook mean? Let’s take it one step at a time.

According to the original 1996 law, if it is currently 2009 or 2010 or 2011, the state may look to the “immediately preceding fiscal year” — 2008, 2009, 2010 — for their caseload data. Instead, this amendment allowed the state to forget about the “immediately preceding fiscal year,” and go back instead for their caseload data to 2007 or 2008, which is referred to as the “emergency fund base year,” as defined here:

The term “emergency fund base year” means … whichever of fiscal year 2007 or 2008 is the fiscal year in which the amount described by the category with respect to the State is the lesser. [§403(c)(9)(B)(i)]

But as it says in the previous excerpt from the Stimulus amendment, “if a State elects such option for fiscal year 2008, the emergency fund base year of the State with respect to such caseload shall be fiscal year 2007.”

The bottom line is that the Stimulus gave states the option to either stick with their current and real data points or use their 2007 (smaller) caseload data, in order to pretend that their caseloads have not increased, when, in fact, they had increased, due to the 80% Stimulus welfare bonus for increased caseloads. This was an option available during fiscal years 2009, 2010, and 2011.

Because fiscal years end on the September of their year, this program ended at the end of FY2011, or September 2011. Indeed, the caseload reporting exemption in §2101(b) was struck from the text by §2101(d)(2), which is explicitly effective October 1, 2011.

To summarize where we’ve been so far: the 80% Stimulus TANF bonus, defined by a $5 billion total block grant, was subject to a 1.5-year limit (Feb 2009 – Sept 2010) and another limit having to do with specific state welfare budgets. Meanwhile, the caseload reporting exemption we just explored lasted 2.5 years (Feb 2009 – Sept 2011).

According to HHS, all $5 billion of Stimulus bonus welfare funds were drawn down by the states within the two-year limit.

So what happened in FY2011 from October 1, 2010, to September 30, 2011? The caseload reporting exemption remained, but Stimulus funds had run out.

This is where it gets interesting. During FY2011 and our current FY2012, it appears the Obama Administration has not been able to extend the TANF bonus. According to CLASP, a policy group for low-income people,

The Temporary Assistance for Needy Families block grant program was scheduled for reauthorization in 2010. Congress, however, did not work on legislation to reauthorize the program and instead extended the TANF block grant multiple times. The most recent bill, the Middle Class Tax Relief and Job Creation Act (H.R. 3630), extends the block grant through the end of fiscal year 2012 (September 30, 2012). Previous extensions included: the Claims Resolution Act (P.L. 111-291), H.R. 2943, and a two-month extension through February 29, 2012.

[These extensions] did not include the TANF Emergency Fund, created by the American Recovery and Reinvestment Act.

CONCLUSIONS & SPECULATIONS

For a year and a half, then, the Obama Administration has not successfully extended TANF as they would like — without work requirements. The Stimulus was able to extend TANF by $5 billion over two years without work requirements, but between October 2010 and today, not only was the bonus not extended, but, with a Congress unable to pass an annual budget, it hasn’t even been easy extending even the old, boring TANF program.

This must be exceedingly frustrating for President Obama, who, as early as 1999, was waging an admirable war against welfare restrictions. He must be particularly nonplussed with the fact that between 1990 and 2008, “[e]x­penditures for every program except TANF increased in real terms.” (CATO, p.6) If one’s goal is the extension of welfare, then TANF is the single greatest welfare failure of the past two decades.

President Obama has obviously been far more successful in extending other welfare programs. His troubles with TANF are only ever more stark when compared with his success, for example, in increasing food stamps, or the Supplemental Nutrition Assistance Program (SNAP) over the course of the last three years: “enrollment [in SNAP] increased by 12 million people, while spending increased by $30 billion.” (CATO, p. 8) A record 45.8 million recipients now benefit from SNAP.

With such a juxtaposition, and in conjunction with the history thus recounted, is it really such a surprise that President Obama simply decided to unilaterally lift the TANF work requirements this month? A better question is why he waited all this time.

If you want birth control for sex, go to the store a block away. Three condoms are cheaper than a beer.

If it wasn’t cheap, birth control is still not a viable candidate for insurance, because insurance is for rare issues, which affect some people or manifest at irregular times: “high-cost, low-probability,” so they say. After all, do you remember the last premium you paid for food insurance? Moreover, if birth control could economically be covered as insurance, coverage plans would already have them. But they don’t.

And birth control remains cheaper than a beer, so the point is moot.

What if you prefer prescription birth control? Then how about first lowering government regulations on birth control and government barriers to pharmaceutical entry, so the cost might naturally decrease?

Let’s say the cost of prescription birth control remains too high, and you still want it. For sex. Get a pack of condoms …it’s cheaper than a beer. Or earn some money if you want to go with the pill. Or cut down on the sex, like you might cut down on a beer in similar financial circumstances.

But let’s say you have a disease that requires treatment with birth control pills.

Well that’s a horse of a different color! Say, what’s the status of insurance policies with exceptions for contraceptives not intended to prevent pregnancy? I know of at least one such policy. According to Sandra Fluke, such a “prescription is technically covered by Georgetown insurance because it’s not intended to prevent pregnancy.” (4:15)

These are just some of the things one might consider before violating our fellow citizens’ First Amendment immunities.

PS: To Mr. Rush Limbaugh, Ms. Fluke is not a “slut.” There are many words for someone who plays fast and loose with other peoples’ money, but “slut” is not one of them.

 

Were the Pilgrims socialist? Part I of this commentary set out to prove exactly that by providing something of an annotated chronology of relevant quotations from and links to Plymouth founder, Governor William Bradford. Besides my comprehensive post, you can visit the argument as it is most skillfully written here. ReasonTV has its own fun little explanatory video. You can also read two other good explanations here and here.

Or you could have the New York Times briefly explain the argument:

…the pilgrims who came to Plymouth established a communal system, where all had to pool whatever they hunted or grew on their lands. Because they could not reap the fruits of their labors, no one had any incentive to work, and the system failed — confusion, thievery and famine ensued.

Finally, the governor of the colony, William Bradford, abolished this system and gave each household a parcel of land. With private property to call their own, the Pilgrims were suddenly very industrious and found themselves with more corn than they knew what to do with. … the moral is always the same: socialism doesn’t work.

This is the general idea, though it might do for a little more context. After the Pilgrims landed in 1620, they developed a positive relationship with the Indians, which they celebrated in the fall of 1621 — the original “Thanksgiving,” although it was more of an autumnal harvest celebration. After several years of economic hardship, the spring of 1623 saw the abandonment of collective property and the institutionalization of private property, and that summer brought the first sustainably successful harvest, which would hold steady for at least another 24 years, according to a detailed account recorded by the Governor of the colony, William Bradford. The Pilgrims’ first real thanksgiving, a solemn day of prayer for God, occurred in July of 1623. Although our Thanksgivings take the same name, it is the 1621 fall festival that we mimic.

The Times article was written last year on November 20, 2010, in an attempt to debunk the free market story. Upon reading it last year, I resolved to do my own research before this year’s Thanksgiving and I have come down on the side of the free market explanation — with a few minor reservations — for all the reasons in the links above and in my Part I of this commentary. Here, in Part II, I will critique the New York Times article and offer the few reservations I have regarding the Pilgrims-free market argument.

*****

FOUR CLAIMS

NB: Most contentions in the Times article rely on the expertise of Richard Pickering, Deputy Director of a museum on the Pilgrims’ original site at Plymouth.

CLAIM #1: The article first concedes that the Pilgrims held their property communally, but that it was “directed ultimately to private profit.”

It is true that their contract with investors in London for their voyage’s funding is rightly considered a voluntary agreement, and a free market transaction. But a voluntary agreement to collectivize property does not make collective property any less collective. Whether citizens of the Soviet Union vote for collectivization voluntarily from below or whether it is imposed involuntarily from above, a community that collectivizes property is not one that respects private property.

The argument that communities fail when they collectivize property is not affected in the least by the means of collectivization.

CLAIM #2: The Times still uses this perspective to consider the Plymouth arrangement as a corporation, where “the Pilgrims were more like shareholders in an early corporation than subjects of socialism.” Although the point of the “Plymouth corporation” remains the same, I would suggest the analogy is clearer if the London investors were shareholders and the Pilgrims were employees. Still, several questions arise.

—Who are the managers of this corporation, with sovereignty over property? The London investors? The logistics of managerial control from London were near impossible. How about any of the settlers? As we have seen, no colonist had the legal power to make new property laws.

—Could the workers of this corporation be fired? Exiling the least industrious could have been an option, but according to Gov. Bradford, the absence of work ethic was not restricted to a lone segment of the Plymouth community. Rather, the entire colony “was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort.” (Bradford, 121)

—Was there another corporation where discontented workers could apply for employment? If so, why did none of them abandon camp after half died the very first year? One of the important differences between a corporation and a sovereign community is that leaving a corporation is relatively easy.

There are plenty of ways to contrast corporations from the Pilgrim community, but one can also view standard governments generally as large corporations, whose shareholders are the taxpayer, whose employees are public sector workers, whose board of directors are elected officials, and whose managers are heads of bureaucracies. But if governments can be considered collectivist, government-corporations can be considered collectivist. And given that the Times considers the Plymouth community to be one such corporation-government, Plymouth can be considered collectivist, especially if they collectivize property, which they did. So we are back to the problem with Claim #1: how a community collectivizes its property does not change the fact that it collectivizes its property.

A last point on the Plymouth corporation. One of the stumbling blocks of corporations is when they venture into too many sectors and overstretch their resources. For example, General Electric (GE) was bailed out over fumbles in its financial loan department, rather than in innovative technology, which is was it is generally known for. According to Governor Bradford, the Plymouth corporation similarly bit off more than it could chew by collectivizing property; thanks to land privatization, he wrote, “much more corn was planted than otherwise would have been by any means the Governor or any other could use.” (120)

CLAIM #3: “The arrangement did not produce famine. If it had, Bradford would not have declared the three days of sport and feasting in 1621.” Pickering added, “if the harvest was going to be less than enough to get them by … they would have saved it and rationed it to get by.”

Not necessarily. Recall that half of the community had died in the year before the fall festival. They had also met local natives throughout the year, with whom they inked several peace treaties, opened mutually beneficial trade exchanges, and learned farming and fishing techniques. This positive relationship between the Pilgrims and natives was good cause for celebration after the year’s harvest. Ninety Wampanoags joined the Pilgrims for the festivities and the entire party worked diligently to maintain the substantial feast.

The 1621 festival is a great case study for when the profit motive is unnecessary for productivity. Rather, to be alive in Plymouth with such good friends as the local natives was, for the Pilgrims, a blessing, and celebrating this blessing was all the motive they needed to work hard for a handful of days.

But the celebratory motive cannot be the basis of an economy because celebrations only last so long. Without either celebrations or private profit to drive the Pilgrims’ industry before 1623, the community generally suffered from what Governor Bradford termed, a “time of wants.” (111) Far from hinting at economic vitality, the 1621 feast was an aberration.

CLAIM #4: “Bradford did get rid of the common course — but … not because the system wasn’t working. The Pilgrims just didn’t like it.”

I will let Governor Bradford speak for himself:

So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length, after much debate of things, the Governor (with the advice of the chiefest amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves … And so assigned to every family a parcel of land, according to the proportion of their number, for that end, only for present use. (120)

In other words, their express purpose for land privatization was greater economic productivity, precisely because the old system wasn’t working.

Furthermore, whether or why they did not like the system is irrelevant. The question is whether or not land privatization did what the Pilgrims wanted it to do: release them from, “still thus languish[ing] in misery.” In the very next sentence, Governor Bradford explicitly believes so: “This had very good success, for it made all hands very industrious.” (120) In fact, so successful was privatization, that by 1647 — 24 years later — Governor Bradford was able to write, “any general want or famine hath not been amongst them since to this day.” (132)

Another note on the Pilgrims’ motives. As Pickering points out, it is true that the Pilgrims did not appreciate working for other members of the collective: “they deemed it a kind of slavery.” Bradford similarly spoke of the condition as “great tyranny and oppression.” (120-121) Of course, if the Pilgrims liked working for other members of the collective, the move to private property would not have been necessary. But the Plymouth story acts as a cautionary tale precisely because workers did not get along under collectivization: the community “was found to breed much confusion and discontent” (121). Conversely, private property rights later “gave both sides good content” (132) when newcomers were able to voluntarily exchange their own possessions with individual Pilgrims, rather than with the communal whole.

Pickering here unwittingly makes perhaps the greatest argument for the free market: besides respecting individual liberty and spurring unrivalled productivity, the free enterprise system also makes people in an interconnected world much happier and more harmonious than they otherwise would be. No work explains this better than Leonard E. Read’s seminal 1958 story, “I, Pencil“, which tells the tale of the millions of people with millions of skills all over the world, who work together to create a single, simple pencil, without any individual or group of individuals directing their actions. Economist Milton Friedman opened his award-winning 1980 documentary series, Free to Choose, with his own short version of “I, Pencil.” Here, he speaks to Pickering’s concern for the Pilgrims’ animosity:

Literally thousands of people cooperated to make this pencil. People who don’t speak the same language, who practice different religions, who might hate one another if they ever met. … What brought them together and induced them to cooperate to make this pencil? … It was the magic of the price system. The impersonal operation of prices that brought them together and got them to cooperate to make this pencil, so that you could have it for a trifling sum. That is why the operation of the free market is so essential not only to promote productive efficiency, but even more to foster harmony and peace among the peoples of the world.

So it was with the Pilgrims of Plymouth.

*****

FURTHER CRITICISM?

Though the New York Times critique is ultimately a weak one, I can find two potential avenues of solid criticism for the free market story.

1. The most obvious is that correlation is not causation. Just because private property rights were instilled the very year the Pilgrims’ economic fortunes turned does not mean that private property rights turned those fortunes around.

Of course, free market thinkers will point to example after example of nations around the world and throughout history in which private property was similarly correlated with success and collectivized property was correlated with failure. Many of these examples are also clear cases in which, like the Pilgrims, private owners gained industriousness as soon as they owned their own capital.

Plymouth fits right into the context of this great historical tradition. However, Mr. Pickering offered a competing explanation: “The real reason agriculture became more profitable over the years, Mr. Pickering said, is that the Pilgrims were getting better at farming crops like corn that had been unknown to them in England.”

This is likely true. But it does not disprove the private property theory any more than the private property/economic success correlation proves its own causation. Perhaps credit goes to both. Further research might uncover which caused greater economic success: better farming technique, or the turn to private property. Unfortunately, the Times article sheds no light on this.

2. A second concern may be Governor William Bradford’s bias. Most of the information we have about the causes and consequences of the turn to privatization comes from his book, Of Plymouth Plantation, 1620-1647, translated by Samuel Eliot Morison.

Did Bradford spin the truth at all? According to journalist Tom Bethell:

Among [Bradford's] books … was Jean Bodin’s Six Books of a Commonweale, a work that criticized [collective utopianism]. Bodin said that communal property was “the mother of contention and discord” and that a commonwealth based on it would perish because “nothing can be public where nothing is private.”

Yet more room for further research, however slim.

*****

APPENDICES

A. You may notice that half of the Times article deals with the story of Jamestown. I have indeed heard several arguments used to make Jamestown into a similar free market miracle, but I have chosen not to address it here because I remain unconvinced.

B. It is worth noting how the Times treats proponents of both sides of the argument.

Within the first few paragraphs, the free market side is immediately branded as partisan: “Tea Party”, “libertarian”, and “conservative.” This would not be a problem if the article also pointed out the partisan tilt of the opposing side rather than implying objectivity through omission. This suggests that the Times’ argument is mainstream thought among historians, struggling to hold the vanguard of truth against an onslaught of partisan revisionist historians who — as the Times mentions no fewer than four times without substantiation — can never keep their story straight.

On the other hand, the one and only perspective we have for the other side of the Plymouth tale is Mr. Richard Pickering, “a historian of early America and the deputy director of Plimoth Plantation, a museum devoted to keeping the Pilgrims’ story alive.” The Times does not indicate his political beliefs or the extent of his expertise, except by implication: he is involved in a Pilgrims museum. The rest of his biography informs us that he is a PhD candidate studying English and that he is a playwright, specializing in topics of 17th century American history. His specialty, therefore, in English and playwriting — though far from a vice — is not quite the specialty in Economics or History the casual reader is led to believe. Whether he is a conservative, libertarian, or liberal remains a mystery.

To add insult to injury, this doctoral candidate smartly pointed out that Governor William Bradford’s Of Plymouth Plantation, 1620-1647, from which we have most of our information, may be burdened by the bias of anti-communist paranoia, because its compiler, Samuel Eliot Morison, originally titled the relevant chapter, “Indian Conspiracy; Communism; Gorges.” Furthermore, said Mr. Pickering, “The challenges of the cold war and dealing with Russia are reflected in the text.”

Perhaps if Morison were translating a book from someone who had not written in the English language, this would be a worthwhile criticism.

Were the Pilgrims socialist? Each Thanksgiving, conservatives and libertarians make this very case to highlight the follies of socialism and justify the successes of capitalism. Or — less anachronistically and more descriptively — the follies of collectivized property and the successes of private property.

Consider me convinced after reading the words of Plymouth founder Governor William Bradford, among others, who made the case that a decisive turn to private property rights in the spring of 1623 was critical to ensuring economic productivity, where unforgiving famine reigned in years prior.

This argument is most skillfully made here. ReasonTV made a fun little explanatory video. You can read two other good explanations here and here.

In Part II of this commentary, I critique a worthy rebuttal to the free market analysis and offer a few words of advice for further research. Here, I intend only to present relevant, chronological, and annotated quotations in full as well as links to the sources.

NB: Unless I otherwise specify, the quotes below are from Governor William Bradford’s Of Plymouth Plantation, 1620-1647, translated by Samuel Eliot Morison. Bradford took over as governor in 1621, the first full year of the Plymouth colony, and largely maintained the helm until his death in 1657. His memoir is generally considered one of our most useful insights into Plymouth’s formative years.

*****

Before the Mayflower made its voyage, the Pilgrims achieved a funding deal with a London investment company, the Merchant Adventurers. The contract, signed July 1, 1620, would last 7 years. Of the contract’s ten points, two specify the nature of the commune the Pilgrims agreed to set up:

3. …all profits and benefits that are got by trade, traffic, trucking, working, fishing, or any other means of any person or persons, remain still in the common stock until division…

10. That all such persons as are of this colony, are to have their meat, drink, apparel, and all provisions out of the common stock and goods of the said colony. (p.40-41)

The Pilgrims did not like these terms, for they preferred private property rather than common stock, but abided by the rules nonetheless. The deal was the best they could do.

Most of us are familiar with both the challenges of surviving in New England and the blessings of cooperation with local natives. In the fall of 1621, less than a year after the Pilgrims hit shore, 90 natives joined the Pilgrims (about half of the original 102 Pilgrims had survived by then) for a substantial harvest festival that lasted three days. Though not technically a “thanksgiving,” this festival is generally considered the original precursor to our Thanksgiving.

The event was a success, but unfortunately did not reflect their overall economic reality, which was one of constant uncertainty, as subsistence depended on too many unreliable factors. According to Gov. Bradford, by the summer of 1622, growing corn remained an amateur pursuit, trade with natives was suffering, and thievery was rampant. Moreover, hunger made the settlers weak and lethargic. The summer harvest in 1622 was underwhelming during what Bradford termed, a “time of wants”:

Now the welcome time of harvest approached, in which all had their hungry bellies filled. But it arose to a little, in comparison of a full year’s supply; partly because they were not yet well acquainted with the manner of Indian corn (and they had no other), also their many other employments; but chiefly their weakness for want of food, to tend it as they should have done. Also, much was stolen both by night and day before it became scarce eatable, and much more afterward. And though many were well whipped, when they were taken for a few ears of corn; yet hunger made others, whom conscience did not restrain, to venture. So as it well appeared that famine must still ensue, the next year also if not some way prevented, or supply should fail, to which they durst not trust. Markets there was none to go to, but only the Indians, and they had no trading commodities.” (p. 111-112)

Luckily, an unexpected ship from England made its way into Cape Cod that summer to temporarily alleviate their dependence on trade with the natives.

Uncertain conditions remained the following year. This time, however, trade was actively disrupted thanks to “Standish’s Raid” in March of 1623. (The story of the Wessagusset raid is beyond the scope of this post, though it is a worthwhile episode to learn.) The brutality of the incident spooked local natives, who fled their grounds. According to historian Nathan Philbrick, trade relations suffered:

In the immediate aftermath of the Wessagussett raid, the Pilgrims were astonished to discover that they had, at least temporarily, ruined their ability to trade with the Indians. “[W]e have been much damaged in our trade,” Bradford wrote to the Merchant Adventurers, “for there where we had [the] most skins the Indians are run away from their habitations, and set no corn, so as we can by no means as yet come to speak with them.” Without furs as a potential source of income, the Pilgrims looked to codfishing—with the usual disastrous results. (p. 154-155)

This is when the Pilgrims decided to partially abandon their contract with the Merchant Adventurers. The financiers had originally thought collectivized property would best guarantee them a return on their investment, but the Pilgrims had other ideas from the start. Eventually, poor output in the first few years forced the Pilgrims to experiment with private property. In the following critical passage, Gov. Bradford explains the reasons for their fateful decision and the social and economic successes it brought the community throughout the rest of his life. He even manages to criticize utopian idealists like Plato for reaching conclusions he knew firsthand to be faulty:

All this while no supply was heard of, neither knew they when they might expect any. So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length, after much debate of things, the Governor (with the advice of the chiefest amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves; in all other things to go on in the general way as before. And so assigned to every family a parcel of land, according to the proportion of their number, for that end, only for present use (but made no division for inheritance) and ranged all boys and youth under some family. This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression.

The experience that was had in this common course and condition, tried sundry years and that amongst godly and sober men, may well evince the vanity of that conceit of Plato’s and other ancients applauded by some of later times; and that the taking away of property and bringing in community into a commonwealth would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. For the young men, that were most able and fit for labor and service, did repine that they should spend their time and strength to work for other men’s wives and children without any recompense. The strong, or man of parts, had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labors and victuals, clothes etc., with the meaner and younger sort, thought it some indignity and disrespect unto them. And for men’s wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it. Upon the point all being to have alike, and all to do alike, they thought themselves in the like condition, and one as good as another; and so, if it did not cut off those relations that God hath set amongst men, yet it did at least much diminish and take off the mutual respects that should be preserved amongst them. And would have been worse if they had been men of another condition. Let none object this is men’s corruption, and nothing to the course itself. I answer, seeing all men have this corruption in them, God in His wisdom saw another course fitter for them. (p. 120-121; also cross-referenced here)

This was not completely private land, for it still fell to the collective after the owner’s death; only later were laws written for the inheritance of property. Still, property was privatized for the short term in order to unlock the Pilgrims’ industry, and the community never looked back.

It is worth pointing out the role of God, which is evident in Gov. Bradford’s words at the end of both the excerpt above and below. After they switched to privatization and found their new work ethic, a terrible drought descended from late May until mid-July, causing further suffering. That July, Bradford called for a day of fasting and prayer. He recounts that the very evening of his colony’s day of fasting and prayer brought the first drops of an unexpected, steady, and reviving rain. The Pilgrims took the rejuvenation of their crops as a sign of God’s grace, and by the end of July 1623, they held their first day of thanksgiving — a solemn day of prayer — to express gratefulness to God.

A day of thanksgiving was again celebrated years later and only in the 1630s did it become more of a regular tradition. I mention this to contextualize the autumn harvest festival of 1621, a one-off event that we now commemorate as, “Thanksgiving,” with later thanksgivings, which only began in the summer of 1623 after land privatization and the remarkable drought-fasting episode.

I will not quote Bradford’s entire passage regarding the drought, fasting, and thanksgiving because it is not entirely relevant to our main economic analysis; you may find it on pages 131-132.

The first thanksgiving in 1623 also preceded the arrival of newcomers. In the following passage, Bradford relates a concern both the settlers and the newcomers had for their own private possessions. Neither group wanted to share except through voluntary exchange — a critical staple of the free market. Further, he recounts the success and contentment this arrangement distilled:

On the other hand the old planters were afraid that their corn, when it was ripe, should be imparted to the newcomers, whose provisions which they brought with them they feared would fall short before the year went about (as indeed it did). They came to the Governor and besought him that as it was before agreed that they should set corn for their particular [for themselves], and accordingly they had taken extraordinary pains thereabout, that they might freely enjoy the same, and they would not have a bite of the victuals now come, but wait till harvest for their own, and let the newcomers enjoy what they had brought; they would have none of it, except they could purchase any of it of them by bargain or exchange. Their request was granted them, for it gave both sides good content; for the newcomers were as much afraid that the hungry planters would have eat up the provisions brought, and they should have fallen into the like condition.

This ship was in a short time laden with clapboard, by the help of many hands. Also they sent in her all the beaver and other furs they had, and Mr. Winslow was sent over with her, to inform of all things, and procure such things as were thought needful for their present condition. By this time harvest was come, and instead of famine, now God gave them plenty, and the face of things was changed, to the rejoicing of the hearts of many, for which they blessed God. And the effect of their particular planting was well seen, for all had, one way and other, pretty well to bring the year about, and some of the abler sort and more industrious had to spare, and sell to others, so as any general want or famine hath not been amongst them since to this day. (p. 132)

The final line is worth repeating: “…so as any general want or famine hath not been amongst them since to this day.” This is remarkable for a community that had only months before, “languish[ed] in misery.” Since the final date of Bradford’s journal stretches to 1647, this would indicate at least 24 years of productivity, free from “any general want or famine,” even with a population that had expanded more than ten-fold by then. What else but a radical break from collective to private property rights could transform two and a half years of uncertain survival into at least a quarter-century of confident growth and productivity, especially when the cause coincided so perfectly with the effect?

Click here for Part II, in which I deconstruct a New York Times critique of this kind of free market analysis and offer other potential avenues of rebuttal.

The prudence of rent control policy is currently beyond me. However, media bias is not.

From a straining-objectivity City Room blog at the NY Times:

Democrats Press Cuomo on Rent Regulations

By Nicholas Confessore March 16, 2011, 2:25 pm

ALBANY — A coalition comprising nearly every Democratic state lawmaker from New York City urged Gov. Andrew M. Cuomo in a letter, posted below, on Wednesday to press for extending and tightening the state’s rent regulation laws as part of the budget deal he is negotiating with the Legislature.

If the state does not act, millions of working- and middle-class New Yorkers will be at immediate risk of losing their homes,” warned the lawmakers, about 90 of whom signed the letter to Mr. Cuomo. “We ask that you act boldly on tenants’ behalf by requiring these reforms to be a part of any budget agreement.”

The article provides no statistic to justify this claim.

The closest we come to concrete evidence is from the actual letter to Gov. Cuomo: “No one knows how many apartments have been illegally deregulated by dishonest landlords, but the best estimates are that more than 300,000 apartments have been lost since 1994.”

Dismissing the tenuousness of these figures, they come out to almost 19,000 illegally deregulated apartments per year, a far cry from the “millions…at immediate risk.”

But even these values are irrelevant because they do not indicate how many families lost their homes under deregulated price-gouging. Indeed, neither the article nor the letter indicate historical cases of rent deregulation and tenant exodus. Why is that?

Mr. Cuomo this month rebuffed suggestions by tenant advocates that he include a rent law extension in his amended executive budget, released March 3.

The state budget is due at the end of March. The regulations, which limit the rent that landlords can charge on over one million apartments in New York City and its immediate suburbs, are set to expire on June 15, raising fears that hundreds of thousands of tenants will face substantial rent increases that they cannot afford.

At the present rate, it will take 6 paragraphs to lower the number of tenants at risk of eviction to the hundreds. Perhaps the entire problem could be solved before we reach the end of the article.

Landlords, who have invested millions of dollars in lobbying state officials on rent regulation, have argued that the laws have discouraged them from investing in improvements to rental apartments and ultimately depress the supply of affordable apartments.

You see, these are not worthy concerns. They are merely the concerns of greedy lobbyists.

Of course, there are no lobbyists funneling money to Democrats on the other side of the issue. Otherwise the NY Times would have mentioned it.

By the way, the Times does not explain what the landlords mean when they claim the laws “ultimately depress the supply of affordable apartments.” It’s likely not important for a city that is, according to the letter to Gov. Cuomo, in a state of “housing emergency,” given the dangerously low levels of vacancy.

The letter to Mr. Cuomo reflects growing concerns among Democrats who support rent regulation that they will find their backs against the wall should they be forced to negotiate an extender bill separately from the budget, as they did in 2003, the last time the laws faced expiration.

Then, Gov. George E. Pataki and the Republican-controlled State Senate ultimately agreed to renew the laws, but they forced the Democratic-controlled Assembly to accept changes that tenant advocates believe have allowed landlords to start charging market rates on tens of thousands of formerly regulated apartments in recent years…

My, how evil are those Republicans. And my, how elusive are those statistics.

Along with extending a temporary income tax surcharge on high-earning New Yorkers, the rent regulations stand as one of the major priorities of Assembly Democrats this legislative session. But unlike the way the [sic.] handled the income tax surcharge, Assembly Democrats did not include a package of rent regulations in the one-house budget bill the chamber approved on Wednesday

Their goal, the Democrats said, was to persuade Mr. Cuomo to include the rent regulations in any emergency budget bill, essentially using his leverage to force Senate Republicans to accept extended and strengthened rent laws

[Assemblyman Brian] Kavanagh added: “We think there’s an endgame here that the governor’s going to put out language in place that neither house of the Legislature will be in a position to change. And we believe that rent regulation needs to be part of that.”

That’s a fine how-do-you-do to the governor from the Democratic legislators. Why didn’t they take care of this “major priority” themselves?

For Mr. Cuomo, the rent laws may represent an opportunity to mollify Democratic lawmakers who are uncomfortable — and in some cases openly opposing — his cuts to education and health care spending, but without breaking his campaign pledges to rein in spending and oppose new taxes.

Or this is a test of Gov. Cuomo’s left-wing credentials.

Yet the issue is not without complications: Mr. Cuomo, like past governors, has raised hundreds of thousands of dollars of from [sic.] real estate interests and from landlords who oppose expanding the rent regulation.

Moreover, the Committee to Save New York, a business coalition allied with the governor that has dedicated millions of dollars to defending Mr. Cuomo’s budget proposal, includes real estate developers and trade associations that staunchly oppose strengthening rent-law expansion. Thrusting the measure into his budget negotiations could fracture the coalition just when Mr. Cuomo most needs its help.

Surely, Cuomo has never received funds from tenant interest groups. Never from the NAACP, the ACLU, or (incarnations of) ACORN. After all, these lobby groups do not exist, according to the NY Times, and they certainly do not fund advocates of rent regulations.

But supporters of the rent laws said they feared that allowing them to expire would force many New Yorkers out of their homes, especially in Manhattan.

This article has eroded the risk of rent deregulation than any state policy could ever hope to accomplish.

“I think it will signal the demise of the city as a place for middle-income people to live,” said Assemblywoman Linda B. Rosenthal, a Manhattan Democrat. “It will suck the life energy out of this city eventually. People who come to the city with dreams of invention and creation and innovation will not be allowed to live here.

Of course, landowning is not one such dream according to Rep. Rosenthal, who is effectively advocating for higher landowning startup costs.

And where are the advocacy groups, who fear for many lower-income landlords, who will be forced to give up the landowning profession without the ability to charge market-level rents?

From the struggling to be objective City Room blog at the

“You and I have a rendezvous with destiny. We will preserve for our children this, the last best hope of man on earth, or we will sentence them to take the first step into a thousand years of darkness. If we fail, at least let our children and our children’s children say of us we justified our brief moment here. We did all that could be done.”

In 1964, Ronald Reagan unveiled himself as the epicenter of conservatism in his now-famous “Time for Choosing” campaign speech for Barry Goldwater.

By that time, World War II, the Cold War, Keynesianism, and big government policies had riled the conservative base of America. In the late 1940s, the dangers of the Soviet Union and its allies in America were clearly highlighted by the trials of the Rosenbergs, Alger Hiss, and others, once again stimulating the cause of liberty in heartland America.

Harnessing this spirit was the great task for conservative leadership. Standing in their way was the entire media, a majority of the Democratic Party, and the Republican establishment (i.e. Eisenhower). The pressure came down on early Cold Warriors, such as Sen. Joseph McCarthy and Rep. Richard Nixon, who were scorned by the media (as well as by history). The first true conservative leader was William F. Buckley, an academic out of Yale, who launched the crucially important National Review magazine in 1955. In defiance of the American establishment, Buckley wrote that his magazine, “stands athwart history, yelling Stop, at a time when no one is inclined to do so, or to have much patience with those who so urge it.” His allies were the common American people and his goal was to replace Washington with leaders borne of the heartland, not of cocktail parties.

The grassroots anti-communist, pro-liberty sentiment in America was so palpable that Cold War fever took even Democrat John F. Kennedy. Kennedy remains touted to this day as a shining example of the Cold Warrior Democrat. Although the conservative base embraced his venture in Vietnam, conservatives generally dismiss his efforts there, as well as in relation to Cuba, as relatively weak. Perhaps more revealing is that his party’s emphasis on the welfare state (i.e. LBJ’s Great Society) was seen as something of a concession to the communist mold. For instance, Ronald Reagan tied socialized medicine to totalitarian threats from abroad in a 1961 radio broadcast:

Until the Civil Rights movement transcended the legislative victories in 1964 and 1965, the main modern schism between the Right and Left in America was forming over two policies: whether to deal aggressively or accommodatively with the Soviet Union and whether to limit or expand domestic government. Buckley’s National Review did its part to sow the intellectual seeds of the Right. Meanwhile, in 1960, Sen. Barry Goldwater released his influential Conscience of a Conservative, ghost-written by L. Brent Bozell Jr., Buckley’s partner and brother-in-law. Conscience and National Review laid the ground for Goldwater’s defeat of establishment Republican Nelson Rockefeller in the 1964 Republican primary. It was the first major political victory for modern American conservatism.

This was when Ronald Reagan made his grand entrance as a conservative leader. Just as the Tea Party today lacks a single, charismatic leader to symbolize the movement, conservatism lacked one back then. Yet unlike the Tea Party, conservatives did not have an internet in the 1950s and 60s to sustain interest in the movement without a charismatic leader, and even Goldwater, who was plagued by a vulnerable armoire of inartful comments, was not prime leadership material.

But on October 27, 1964, having honed his public persona as a Hollywood actor, corporate speaker, and radio host, Reagan captured a national audience with “A Time for Choosing.” Today, conservatives reverently call it, “The Speech.”

The Speech, which raised $8 million for the Goldwater campaign, critically portrayed big government as the domestic onset of the totalitarian menace we were so desperately fighting abroad at the time. Though this idea was nothing new by 1964, what was refreshing was the clarity and charisma with which the speech was delivered. After Goldwater lost the general election, the conservative movement had its sights locked on Ronald Reagan, who then immediately ran for governor of California in 1966.

In 1976, he lost the Republican nomination to Pres. Gerald Ford, but won the next two general elections in landslides, cementing himself as the great hero of the conservative movement. By the time of his death, even the media and the Left, which had maligned him as old, stupid, and dangerous throughout his presidency, lauded him as a great uniting leader.

Why was he so successful? Does it have anything to do with the type of person that he was? Peggy Noonan believes that “[b]eing a good man helped him become a great one.” The Washington Post’s birthday tribute to him today includes an article on “Five myths about Ronald Reagan,” each of which dissects a different aspect of his personality. The NY Times published, “Remembering the Reagan We May Never Know” this week, lamenting, “[l]ately, the best-known thing about Ronald Reagan is that he was unknowable.”

As important as his fundamental personality may be, I prefer to heed Reagan’s own words on what is most important:

“I won the nickname the great communicator. But I never thought it was my style that made a difference – it was the content. I wasn’t a great communicator, but I communicated great things, and they didn’t spring full blown from my brow, they came from the heart of a great nation, from our experience, our wisdom, and our belief in the principles that have guided us for two centuries.” [emphasis mine]

In other words: His values are those of liberty. Liberty is great. Liberty is American. He understood this viscerally and he happened to express it exceptionally well. His values captured the hearts and minds of America. Ronald Reagan was merely the articulate vessel.

I have yet to come across a better illustration of this than Reagan’s nascent speech, “A Time for Choosing.” It is only half an hour in length, but it is all you need to know about how Ronald Reagan stirred the nation out of its slumber in 1964.

Bill Maher, at the top of this segment, voices the most condescending climate change/global warming argument: there is a difference between climate and weather:

I don’t want to sound condescending to the Republicans when I say, “do you understand the difference between climate and weather?”

Man alive! Imagine Bill Maher when he wants to sound condescending.

For those lagging behind Mr. Maher’s high horse: climate is temporary weather changes, aggregated in patterns over time. Hence, weather v. climate. Get it?

So let’s examine climate. What span of time determines climate change? A decade? A century? A millennium? Hundreds of millennia? You will notice that evidence for climate change is unquestionably present, but evidence for man-caused (anthropogenic) climate change is inconclusive at best.

Pick the last decade, and you will notice the Earth’s average temperature generally flatlining.

Pick a quarter century, and you will notice the last quarter century generally warming and the one before that generally cooling.

Pick a millennium, and you will notice a massive warming period during the Middle Ages comparable to today’s disaster scenario.

Indeed, the data is so inconclusive, that an attempt to tweak the numbers to falsely prove a warming apocalypse is exactly what landed the Climategate scandal on front page news in late 2009…if only for a week or two. The University of East Anglia’s Climate Research Unit (CRU) spun their data, and then hid it from the public. At the time, Bill Maher sneered: I don’t want to sound condescending to the CRU when I say, “do you understand the difference between climate and weather?” (Just kidding. He would never malign his go-to source on climate data.)

Thus, despite an irrelevant insistence on the difference between “climate” and “weather,” Mr. Maher was unable to produce the evidence to link patterns in climate change to patterns of human behavior (again). In an unrelated development, Mr. Maher has proved why smugness is a hopeless argumentative strategy (again).

But perhaps not always. Let’s try smugness out for ourselves, shall we?

I don’t want to sound condescending to Bill Maher when I say, “do you understand the difference between reality and fantasy?” Surely, he does not deem the Climategate scandal a product of someone’s dream. But instead of retracting our culture of hysteria, warming advocates have doubled down and have dubbed global warming a misnomer for a phenomenon that has always been climate change. Thus, released CRU data actually proves climate change, while thoroughly disproving global warming. Understand? The apocalypse remains. Climate change is real.

Well if that’s the point, then global warming skeptics will also agree. Does Bill Maher know the difference between climate change advocates and skeptics, who both agree that climate changes?

The difference is that climate change advocates tie recent climate change to the burning of fossil fuels. Skeptics do not.

But in order for advocates to prove this cause-and-effect relationship, the following 3 conditions must be met:

1. Climate must be considered extreme during the era of fossil fuel use. Otherwise, any cause for concern is imprudent.

Well what is extreme? Is every instance of extraordinary weather now evidence of climate change? Even the crushing force of the last two years’ winters and other weather phenomena do not prove anything out of the ordinary if compared to other similarly extraordinary instances of weather throughout history. Why do we rarely hear climate change advocates putting today’s weather into its broader historical context? (Did they forget the definition of climate?) More importantly, if climate change is, by definition, erratic weather, then will the fires of the climate movement only be quelled with the impossible: perpetually moderate weather?

Bill Maher seems to believe we are stupid enough to accept this unreasonable logic.

A great example of an unusual ecological phenomenon comes from a few months ago, when many hundreds of fish and birds died at once in several places across the country. Of course, climate change was a candidate theory. But it turned out that these were normal occurrences. We are merely more in tune to such phenomena today because of how telecommunications have developed, and, frankly, because we’re looking for crazy ecological phenomena. Without historical context, contemporary biases tend to hide the truth while illuminating everything else.

2. The use and disuse of fossil fuels must be directly correlated to climate change. This was the failed goal of the CRU at the University of East Anglia. No one has yet to prove their fudged results to be accurate.

A peculiar discrepancy is that despite a considerable worldwide decline in industrial production and use of fossil fuels due to the recession, global warming is said to be worse than ever. Good theories lack such obvious contradictions.

3. Other explanations, besides fossil fuels, must not adequately correlate with climate change patterns. Though the climate change community remains immune to other explanations, I have heard several alternative theories worthy of consideration. These theories involve shifting currents of material below the earth’s surface, sunspots and sunshine, regularly oscillating wind streams, and the sun’s expanded magnetic field.

In sum, we need to know (1) that there is extreme climate change, (2) that it is correlated with fossil fuel usage, and (3) that this correlation is more substantial than alternative theories.

Until these three conditions are met with some scientific analysis, anthropogenic climate change cannot possibly be proven, regardless of how many people know the difference between weather and climate.

I don’t want to sound condescending to Bill Maher when I say, “do you understand the difference between hypothesis and observation-based theory?”

P.S.: Bonus points for anyone who sticks around to listen to Mr. Maher resort to an argument against evolution to prove his point on climate change.

This is one of those issues that should be huge and should receive coverage for years as an example of the worst kind of Congressional corruption.

By now you might have seen Rep. Anthony Weiner’s (D, NY) outburst on the floor of the House July 29, 2010. It was an impassioned response immediately after Rep. Peter King’s (R, NY) own relatively passionate speech. You can view both here.

Weiner was enraged at the Republicans’ obstinacy in voting for a bill that would pay for 9/11 first-responders’ medical care, and seemed incensed at King’s use of procedural rhetoric to fight the bill

Weiner, whose constituency I belong to, has now become somewhat of a (temporary?) hero among some of my friends. In the middle of his performance, King interrupts, and Weiner responds: “The gentleman will observe regular order and SIT DOWN…The gentleman will SIT. The gentleman is CORRECT in sitting.” One of my best friends quoted the last line on his Facebook wall and followed with: “lmfao my new hero.”

The speech was admittedly an entertaining performance, worthy perhaps of an Oscar for best House actor. Furthermore, he is 20 years Rep. King’s younger, and the two of them together on television creates an image dichotomy as lopsided as the Nixon-Kennedy debates. From what I can tell, Weiner successfully scored political points with constituents, fellow Democrats, his fans at CNN, and even his friends at the UAE. Skim the comments on any video of Weiner’s speech and you’ll see how maverick-like he comes off. (If you must.)

However, there is far more to this issue that not only exonerates the Republican stance (somewhat) but makes Weiner’s tirade look more like the Congressional version of a misbehaving child diverting attention by blaming his parents for bothering him with questions: “Can’t you see I’m trying to fix it?? God! Leave me alone.”

Unfortunately, this episode might soon fade into obscurity before the truth permeates society. The House will vote on the bill again after the August break, and it will most likely be passed. So before this becomes just another minor footnote in the encyclopedic history of Congressional outrages, here are the details that I am afraid will be forgotten:

THE BILL

The bill under debate is H.R.847, The James Zadroga 9/11 Health and Compensation Act of 2010. From the summary of the bill on the House page, it is a program that would provide, “medical monitoring and treatment benefits to eligible emergency responders and recovery and cleanup workers who responded to the World Trade Center terrorist attacks on September 11, 2001″ and “initial health evaluation, monitoring, and treatment benefits to residents and other building occupants and area workers who were directly impacted and adversely affected by such attacks.”

The Daily News lays out the specifics: “The bill would spend $3.2 billion on health care over the next 10 years for people sickened from their exposure to the toxic smoke and debris of the shattered World Trade Center. It would spend another $4.2 billion to compensate victims over that span, and make another $4.2 billion in compensation available for the next 11 years.” This amounts to $11.6 billion for 21 years in total.

Given the tragic nature of any hero suffering for selflessness in the downtown chaos of 9/11, such a well-meaning bill should face absolutely no opposition from anyone with a conscience. Additionally, this bill is a long time coming, given that it is 9 years in the making.

Official Jargon Warning!! The vote on Thursday was “On Motion to Suspend the Rules and Pass” the bill.

THE PROCEDURE

To the chagrin of CNN’s Ali Velshi (see below), I am going to discuss the specifics of the procedure, for it effectively prevents the very heart of Republicans’ concerns from being debated.

According to the Huffington Post, “a procedural maneuver [was] made by Democrats to suspend the rules before consideration of the [Act].”

What are the 3 NEW rules to be aware of? According to Wikipedia, “Once a member makes a motion to ‘suspend the rules’ and take some action, debate is limited to 40 minutes, no amendments can be offered to the motion or the underlying matter, and a 2/3 majority of Members present and voting is required to agree to the motion.”

In other words, the Democrats in the House limited (and thus expedited) debate on this matter, with the caveat that they would need 16% more votes than they would normally need if rules were not suspended.

Wikipedia also explains why anyone would want to suspend the rules: “Most often, bills ‘on suspension’ are non-controversial legislation — such as naming Post Offices of the United States Postal Service or federal buildings — and nearly all bills that are considered under suspension rules have bipartisan support.”

THE PROBLEM

Of course, it turned out that this bill was controversial. Instead of getting the requisite 66% of votes, the bill only garnered 59%, with votes largely along party lines.

Weiner vented because he did not see the bill as controversial.

(It is also interesting to note that the bill garnered far more than 50% of the vote. More on that below.)

There are a few amendments to the bill that the Republicans believed were essential. These amendments, of course, were suspended under the procedural maneuver.

1. One change to the bill would have adjusted the funding for compensation. “To pay the bill’s estimated $7.4 billion [immediate] cost over 10 years, the legislation would have prevented foreign multinational corporations incorporated in tax haven countries from avoiding tax on income earned in the U.S.”

The Daily News reports that Republicans saw this as, “a tax hike on foreign companies that hire Americans.” Supporters of the bill saw it as closing a tax loophole: “Democrats savaged the other side, saying they were turning their backs on heroes to protect foreign tax cheats.”

In the end, this particular Republican concern centered on the economic and employment effects of the bill’s tax.

2. Another issue the Republicans saw with the bill was its lack of protection from use by illegal immigrants: “King said Democrats were ‘petrified’ about casting votes as the fall elections near on controversial amendments, possibly including one that could ban the bill from covering illegal immigrants who were sickened by trade center dust.”

3. This is tied to the larger issue of preventing the scamming of money from this bill. Rep. Lamar Smith (R, TX) worried that the bill “does not contain the necessary protections to safeguard taxpayer dollars from abuse, waste and fraud.” Republicans objected that the compensation created a “slush fund” under current provisions.

It is important to understand that scamming this fund and allowing its money to go to illegal immigrants does not just reward the undeserving, but specifically punishes the suffering 9/11 heroes. I have yet to hear this point being made clearly, but it would be the single worst consequence of passing the bill as is, if Republican concerns about oversight are truly well-founded.

Of course, debate has been stifled on the House floor, so we do not know just yet.

THE ALTERNATIVE

Regular rules call for what is known as a simple majority vote, which means that if more than half of the Congressmen vote “aye,” the bill is passed. 59% voted “aye” this time around and the Democrats control the House. As they have done plenty of times since January 2009, they could have voted to keep every single provision in the bill as is.

On this basis alone, it would seem that Weiner has no one to yell at except for those who motioned to suspend the rules (the Democrats).

(Rep. Peter King, Weiner’s nemesis in this battle, has been making this very case. Interestingly, King is not merely Weiner’s prime opponent. He happens to be a sponsor of the bill. He was one of the 12 Republicans that voted for it. It is this fact that should convince anyone that perhaps there really was a problem with the bill’s procedure.)

THE SPIN

Instead, Weiner rants that the Republicans defeated the bill.

If you look at this without a grain of nuance, you might be tempted to agree.

Unfortunately for the truth, Rep. King is not the greatest spokesman, so he was not able to make his case as well as Weiner did on the House floor and in interviews thereafter.

Weiner’s game plan has been to point out the Republicans’ failure to vote for the bill, while dodging questions about procedure with either a full disregard or a dismissive: ‘you know, we could talk about procedure until we all doze off, but the bottom line is that Republicans are cold. Heartless, really.’

Given the situation as it appears today, almost everything Weiner says on this issue is a misconstruction of the facts and/or is hypocritical. He blames Republicans for (a) politicizing the bill, (b) finger-pointing, and (c) stalling, while (a) he is the one making a spectacle, despite the fact that bills are often voted down on procedural grounds and despite the fact that the bill is now scheduled for further debate after recess, (b) he is constantly citing how many Republicans voted for the bill and how few Republicans were needed to pass the bill, and (c) he belongs to the party that has held power in Congress since 2007 and only now decided to bring the bill up for a vote in a pre-recess rush (again, Democrats can vote the bill through the House without a single Republican supporter).

Anthony Weiner had the opportunity to explain himself in an interview with a fawning Ali Velshi at CNN. A few points here reveal so much about his character in this narrative.

Weiner paints Republican obstructionists as complaining about tedium as the only reason for voting down what is obviously a humane bill. He does not talk about any specific issue Republicans had with the bill as it was:

The fact that the excuses that were being made… “Well we don’t like this being done so quickly”; “we don’t like it being made on this calendar”; “we don’t like it on this day.” At the end of the day, I think the American people want us to stand up and vote for what we think is right, and that’s what got my goat last night.

The opposition is portrayed as a mass of powerful misanthropes in black cloaks pointing out minutia to prevent any semblance of positive progress. Vintage propaganda.

My favorite part of the interview is when Ali Velshi directly asks Weiner for what it was about the procedure that the Republicans took issue with, “without getting arcane and into House rules.”

Haha! ‘What?? CNN has no time for these petty details! Do go on, Mr. Weiner, please.’

Instead of giving an arcane and drab answer, like, “under this procedure, the House does not have time to adjust the bill as some of its members would like,” Weiner gives this brilliant and direct analysis of the problems of suspension of House rules:

The fact is that we have a special procedure for things that are non-controversial, so they don’t go on for months and months and months of debate; things that we basically agree upon. And this was one of those bills – or so we thought — and we were very very close. You know, people don’t realize that if only 21 of the 155 Republicans that voted “no” changed their position and voted “yes,” maybe if Peter King did more time calling them rather than calling names of Democrats [sic], then this thing would have passed. This is a common procedure; it’s used all the time. It was used today a couple of times already. Because, frankly, it was beyond a lot of peoples’ understanding why anyone would want to politicize this and make it a long, drawn-out fight. It’s already been nine years. It’s already gone through two committees. It’s already had many amendments to it. The time is done for stalling. We need to provide these first responders, who were my neighbors, with the care that they need. [my emphasis]

His answer to why the procedure did not work started by explaining the purpose of the procedure. How perfectly irrelevant. But Ali Velshi did not want to go into House rules, so he was probably satisfied with the answer, and did not think to pursue the subject further.

Weiner then spends most of his answer pointing a finger at Republicans while complaining about Republicans, “calling names of Democrats.” He chides them for politicizing the matter, as though he was not guilty of the very thing at the moment, and complains that Republicans were stalling, when it is true that, again, the Democrats can pass the bill whenever they want because they have enough votes for a simple majority.

Phew. One more quote! For the record, this one would be my favorite soundbite of the interview it wasn’t for Velshi’s inane question above…

Weiner says, “Why don’t they [Republicans] just vote ‘yes’ and then complain about the procedure later once the bill gets passed… A lot of those people voted no, simply because Democrats are in charge.”

Is the idea of representing the wishes of a constituency so foreign to Rep. Weiner? I think it’s time for me to move from his district.

Anyway, it’s good to know that Weiner believes that the time to complain about procedure is after the vote has already taken place. It’s good to be aware that he knows exactly what he’s talking about.

THE FINAL SLEAZE

On its face, this episode centers around a bill with a very humane idea and the King-Weiner exchange makes the Democrats look great and the Republicans look awful.

But the Democrats could pass the bill whenever they like. Instead, they used an “arcane,” yet apparently standard, procedure that prevents debate. Republicans had serious issues with several of the provisions and oversights of the bill and debate will take place later.

Did the Democrats know Republicans would vote this down? Were they trying to score political points? If they were, then kudos to them.

Did the Democrats merely want to stifle debate because they did not want to go on record supporting illegal aliens benefiting from this bill or vice versa? Did the Democrats not want to go on record supporting what might be viewed as a tax increase and unemployment booster? Did the Democrats not want to fight the certain “abuse, waste and fraud” of a 9/11 health slush fund?

This is upsetting to me as a New Yorker and as a human being in general. The only people who lose out are those brave and unfortunate men and women that abandoned their personal duties and helped the country on September 11th. It is time the country repaid them, and any sort of politicization of this is simply unacceptable.

I would like to quickly plug the website of one Craig Steiner, who has an impressive-looking site (especially for someone, who doesn’t seem to have any sponsors or financial incentive for his work).

My plug is specifically for his article, titled, “The Myth of the Clinton Surplus.”

I often like to use the adage, if ye repeat something often enough, ye eventually believe it. The first time I ever heard that, the included example was that of slave owners convincing themselves that slavery in the Americas saves Africans from the savage and ultimately poorer conditions of their homeland. I don’t even know if they generally did convince themselves of this. But it’s been repeated often enough that I believe they did.

There is also the idea that if you hear a falsehood in the absence of contradicting evidence, the falsehood tends to sound damn convincing. This is largely how our most worthless teachers operate.

I suspect that knowledge of the Clinton surplus entered modern social consciousness due to a combination of these two factors. I am basing this solely on my own experience. Perhaps this diagnosis rings true for the rest of you too?

Luckily, I found Craig Steiner’s brilliant article debunking the surplus myth.

Although I cannot accept the conclusions of this page with absolute certainty because it is still only one source, the evidence seems spot-on and frankly straightforward. I fully recommend at least a skim-through.

I post this on my site because it will hopefully be the template for my own blogs. Like Steiner, I hope to fill my articles with novel analyses, and comprehensive and straightforward evidence, all linked with citations.

Also like Steiner, I mostly do this sort of work anyway to consolidate my thoughts and arrive at logical conclusions. And like Steiner, I recognize my limitations as a human being and enjoy the prospect of receiving criticism and feedback to strengthen my blog.

But unlike Steiner, I might have to put in some work to come off as such a nice guy ;-)

It was literally like realizing Santa Claus does not exist. For years, I would arrive at the facts by checking Snopes.com and mindlessly following their pronouncements of “true” or “false.” It was easy and socially acceptable.

But no longer.

The Snopes article in question debunks Glenn Beck’s June 21, 2010 program, in which Beck details a conspiracy tying President Barack Obama’s moratorium to George Soros’s bank account.

(Beck does a nice introduction on the general conservative view of George Soros, in case you’re wondering who the dude is. In a nutshell, Soros is the root of all evil to the Right, for he uses his multinational wallet to fund organizations, campaigns, think tanks, etc. on the Left.)

THE ISSUE

The order of events goes as follows: Soros buys tons of stock in national Brazilian oil company Petrobras in 2008 >>> Obama loans tons more money to Petrobras in 2009 >>> Obama establishes his Gulf oil drilling moratorium >>> Petrobras stands to profit >>> George Soros stands to profit.

Pretty simple to follow. Assiduous news hounds with impeccable memories wouldn’t be surprised by this, but, fortunately or unfortunately for us lazy folk, there’s Glenn Beck’s show.

Immediately after Beck’s show on the matter, Snopes, MediaMatters, and FactCheck came out with their own versions of generally similar myth-busting information: Soros had been decreasing his Petrobras holdings within the year before Obama’s loan; it wasn’t even “Obama’s loan,” in that it was made by Bush appointees at the Export-Import (Ex-Im) Bank; Petrobras can only use the loaned money to buy American products, so this move is there to help American jobs. …It’s not evil. It’s strictly business.

I am not interested in MediaMatters or FactCheck, because they have long ago proven their selectivity and partisanship.

But Snopes…??

The cognitive dissonance was too much, so I did my own sniffing around.

THE FACTS – SOROS’S PETROBRAS HOLDINGS

The first, most important detail to acknowledge is that Soros’s stake in Petrobras is currently his single largest stake.

Snopes claims that Soros sold off 5 million Petrobras shares in May 2009 (just after the Ex-Im loan). But according to information from the end of June 2009, these were his holdings:

  1. Petroleo Brasileiro S.A.Petrobras (PBR) – 9,818,323 shares, 15.42% of the total portfolio
  2. Hess Corp. (HES) – 5,123,198 shares, 10.56% of the total portfolio
  3. Petroleo Brasileiro S.A.Petrobras (PBR-A) – 5,884,700 shares, 7.53% of the total portfolio
  4. Potash Corp. of Saskatchewan Inc. (POT) – 1,978,053 shares, 7.06% of the total portfolio
  5. Plains Exploration & Production Company (PXP) – 6,526,400 shares, 6.84% of the total portfolio

This means that the loan was made when Petrobras was dominating Soros’s portfolio.

Snopes also claims that Soros sold 22 million more stocks in August 2009. Something about the math seems fuzzy to this finance amateur, given all the above figures, but regardless! After all is said and done, by the end of September 2009, Petrobras still filled 7.7% (7.4 million shares) of Soros’s portfolio, maintaining it as his largest investment.

[Tickerspy looks like it has the most recent information. At the time of this writing, it seems Soros has increased his holdings in Petrobras to 9.1 million shares, though it is now his second largest investment (after SPDR Gold Trust). I do not know, however, if this is Soros's only fund, and I'm probably missing some nuances here; again, finance is not my specialty. If someone could handle these details and let me know, I will update this post.]

Additionally, Snopes does not mention that the latter transaction (and the link that Snopes provides) distinguishes between the 22 million common shares that Soros sold and the 5.8 shares of preferred stock that he bought (preferred stock pays higher dividends, is less expensive, is safer, and in this case allows Soros to diversify his portfolio). Besides not making this relevant distinction, Snopes does not even mention the 5.8 million preferred shares that were bought, nor does Snopes indicate the proper perspective: Soros’s total interest in Petrobras, which is, by all accounts, substantial.

THE FACTS – SNOPES’S PREDOMINANT SOURCE IS THE EX-IM BANK

Indeed, the Export-Import Bank’s press releases and the words of the head of the bank dominate the Snopes article. This is certainly not the most trustworthy source, particularly if they are trying to cover up something as egregious as the accusation of our government colluding with a financier at the expense of a struggling economy. But you decide…

The Chairman and President of the bank, Fred P. Hochberg, made the case that “Ex-Im Bank does not make U.S. policy. In fact, our charter prohibits us from turning down financing for either nonfinancial or noncommercial reasons, except in rare circumstances including failure to meet our environmental standards.”

This is not relevant. The Petrobras loan is of a fully financial and commercial nature. Therefore, Ex-Im could have turned the loan down for any reason. Of course, they did not. They did, however, turn down a different loan recently:

Earlier this year, Ex-Im was asked to loan the development of a plant in India, which would use the products of Wisconsin jobs. $600 million and 1000 jobs were on the line, according to the Wall Street Journal. The reasoning behind the loan denial was that the coal mine used to build the plant was environmentally unfriendly.

Yet the Petrobras loan subsidized an oil company. Additionally, the Petrobras deal was worth $2 billion (with a “B”; read below for actual figure at $10 billion). Furthermore, the Petrobras loan was in exchange for jobs and products that had not yet been agreed to. This means that no American jobs or economic help was really guaranteed at the time of the loan approval, as opposed to the $600-million/1000-job Wisconsin/India deal. Yet despite both deals being similarly environmentally unfriendly, only one is turned down by the bank for environmental concerns.

All this means is that any statement by the Ex-Im Bank about environmental obligations and criteria to support loans — financial or otherwise — is merely inconsistent posturing. It is this source that is quoted extensively by Snopes.

(To be fair, it must be noted that Hochberg took his position as head of the Bank after the loan was approved. Still, the criteria he uses to justify the Petrobras loan does not seem to comport with the Ex-Im Bank’s decision under his purview in this Wisconsin/India deal.)

THE FACTS – THE DEAL ITSELF

The Ex-Im/Petrobras deal has not been finalized. According to Hochberg in July of 2009, “Final approval follows receipt of a final commitment application, review by Ex-Im Bank staff and final action by the Bank’s board of directors. “

Hochberg justifies the transaction, so we know that he is ostensibly in favor of it and likely will not overturn the final approval when Petrobras sends in its final commitment application(s) (if they have yet to do so). What is important to note is that Ex-Im’s press release that claims Bush appointees approved the loan is misleading, because it hides the fact that Hochberg’s bank could still deny final approval. Snopes does not mention this.

Additionally, Obama can call the whole thing off. No matter how politically isolated the Ex-Im Bank might be painted, revisit the Wisconsin/India case for a quick foray into Obama’s influence over the bank’s decision to approve the loan:

“The reversal came just in time for a visit by President Barack Obama Wednesday to Wisconsin, the home base of Bucyrus International Inc. [Wisconsin company], which hopes to sell the mining equipment to Reliance [Indian company] with the help of loan guarantees.”

But instead of preventing the Petrobras deal from going through, the Ex-Im bank raised the value of the preliminary loan from $2 billion to $10 billion (that is still with a “B”). According to the Latin American Herald Tribune:

The U.S. government is preparing to provide up to $10 billion in loans to finance the development of massive hydrocarbon reserves off Brazil’s coast thought to contain 80 billion barrels of high-quality crude, an amount that could lead to a six-fold increase in Brazil’s current proven reserves and transform that nation into one of the world’s 10 largest oil producers. [my emphasis]

So this loan is meant to help Petrobras become an oil powerhouse. And…

President Barack Obama’s national security adviser, Gen. James Jones, discussed the matter with officials this week [August 2009] during a visit to the South American country, Brazilian Planning Minister Paulo Bernardo da Silva told reporters.

…In case you were still wondering how much control or oversight the Obama administration had over any of this.

The $10 billion figure, by the by, matches the Chinese government’s loan to Brazil, which, Snopes makes sure to point out, was five times the amount of the Ex-Im loan.

Totally. False.

Snopes also discusses Glenn Beck’s statement that “The Chinese government is under contract to purchase all the oil that this oil field will produce, which is hundreds of millions of barrels of oil.” But then they do the following lackluster myth-busting:

China does have an agreement to buy Brazilian oil from Petrobras, but not literally to purchase the entire output of Brazilian offshore oil fields. In May 2009, the China Development Bank (CDB) agreed to lend Petrobras $10 billion (five times the amount of the Ex-Im loan); in exchange, “the two sides agreed to increase actual crude oil exports from Brazil to China.” At the same time, Petrobras and Sinopec (the China Petroleum and Chemical Corporation) signed a separate long-term export agreement providing for Petrobras to export 200,000 barrels of oil to China per day from 2010 to 2019.

Was this an attempt to try to disprove Beck? This literally amounts to an admission that China stands to profit much more from their Petrobras deal than the United States does. In fact, the U.S. did not receive any guarantees of oil from their loan transaction.

THE FACTS – THE GOOD NEWS, AND THEN THE BAD NEWS

It seems safe to take Ex-Im Bank’s word for the fact that U.S. jobs stand to profit from the Petrobras loan. The Bank claims that the money will only be given to Petrobras for products that they buy from the United States. I see no reason to disbelieve this.

Additionally, Ex-Im Bank claims, “the bank is self-sustaining and does not receive any appropriated funds from Congress.” Just above, Ex-Im notes, “The vast majority of our financing consists of guarantees of loans made by commercial lenders.” I don’t know what they mean by “vast majority,” or from where the rest of the (possibly taxpayer-subsidized?) money might arise, but I do not have any concrete reason for serious doubt.

Furthermore, I have found no hard evidence to establish that Obama spearheaded this decision. However it would be irresponsible to discount this as a possibility. Either way, I have shown above the influence he wields over the loan (at least) after the initial approval.

The bad news is that which remains public knowledge:

(a) George Soros’s largest holding at the time of the initial loan and currently is invested in Petrobras;

(b) $10bil from the U.S. federal government are on the table to help Petrobras explore potentially lucrative oil mines;

(c) Petrobras has been salivating for Gulf drilling rigs since the spill in April, so much so that it is looking for more financing to expand its drilling operations;

(d) The U.S. government’s Gulf oil moratorium has effectively given the drilling rigs an incentive to go elsewhere (at the time of this writing, two rigs have already migrated to Egypt and the Congo). Drilling rigs that leave are not expected to return for years, leaving the Gulf with less rigs and potentially older and more dangerous models;

(e) Tens of thousands of jobs are currently in limbo in the Gulf oil industry, as are tens of millions of barrels of oil. The fishing industry in the Gulf is stalled, and the tourism industry has taken a hit.

THE CONCLUSION

This administration has proven that it is deathly against U.S. oil drilling (especially after the BP spill), particularly when it comes to deepwater drilling. And yet, they are willing to send money to Brazil to drill even deeper. Whether or not this move helps U.S. jobs, the irony is too great to write it off as merely an employment booster.

The irony only becomes sinister when we consider that this loan is meant to boost the capabilities of a company that, until just recently, had been George Soros’s greatest asset for two years. It is now his second largest asset.

Final pronouncement on Snopes: Disappointingly False.

(For the record, I remain unabashedly loyal to Wikipedia.)

for serious doubt
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