Are Objectivists Also Libertarians?

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The second Atlas Shrugged movie has now come out. Should this be viewed as a cause for celebration within the libertarian movement? Well, to know that we must first answer whether Objectivists are also libertarians. Is Objectivism a part of libertarianism?

Many people who claim to be Objectivists vehemently say No, it is not. My first reaction, on hearing them say that, is to think, “This is preposterous!” But it is hard to “answer” the question, because there is so much political and intellectual baggage caught up in it. In order to say “Objectivism is a type of libertarianism” you would need to define the two terms, and definitions vary so much that most people won’t agree on any two you give. And naturally, one doesn’t want to start a fight.

But let me put on my Objectivist hat for a moment and say: “In the next part of this essay I am going to demonstrate that reason and reality say that Objectivism is, in fact, a form of libertarianism, and I will be presenting the objective, neutral honest Truth.”

Here goes.

1. If “libertarian” means “extreme and radical defender of capitalism,” and “Objectivist” means “a follower of Ayn Rand,” then because Rand was an extreme, radical defender of capitalism, all of her true followers must be this type of person also. So all Objectivists are libertarians.

2. If “libertarian” means “a believer in the idea that aggression should never be initiated and violence should be used only in self-defense,” and this thought can be seen at the heart of Rand’s politics (consider the Project X episode in Atlas Shrugged, for example), then she was a libertarian and those who accept her philosophy are libertarians.

3. If “libertarian” refers to a belief that property comes from natural rights and human nature, a belief that mirrors one of Rand’s core beliefs, then the same conclusion can be drawn: she was a libertarian and her followers are also libertarians. Rothbardian libertarianism and Objectivism are like brother and sister, and Rothbard’s anti-Rand play “Mozart Was a Red” was merely a case of brother being mean to sister.

4. If “libertarian” refers to a belief that property rights are practical, pragmatic, and utilitarian, in the tradition of Hayek and Friedman, then yes, on the surface one might say that this is different from Objectivism. But let’s look more closely. The utilitarians say that capitalism will produce wealth and make people happy. Objectivism holds that capitalism is the system for “life on this Earth.” Translation: capitalism will make people happy. Rand bases her ethics on what will work in practical reality, although she takes this practicality and dresses it in the language of strict, almost puritan “morality.” Utilitarians like to say that they will obey whatever idea works best, whether it be capitalist or socialist, but in practice Hayek and Friedman were some of the most passionately idealistic and principled of capitalism’s defenders. Libertarian utilitarians take practicality and mold it into a theoretically consistent ideology based on the idea that capitalism will make people happy. Even in this sense, Objectivism is a type of libertarianism, if interpreted correctly.

5. If “libertarian” refers not to specific ideas but to a historical political movement and that movement’s members, then how can anyone ignore the steady foot traffic from Rand’s novels to the libertarian movement, during at least the past 50 years? This is the reason why It Usually Begins with Ayn Rand was so popular among libertarians. I suspect that an accurate poll of movement libertarians would reveal that at least 25% to 30% are post-Randian Objectivists, which is probably just as many as are Rothbardians or Ron Paul fanatics.

The truth is that the “official” Objectivist movement is a subset of libertarianism that, unfortunately, seeks to exclude and cast out anyone who disagrees with it, in an effort to preserve its ideological purity, which revolves around the quasi-worship of Rand; and that the “unofficial” Objectivist movement is overtly libertarian. Another truth is that many, perhaps most, of the other subsets of the libertarian movement are also obsessed with ideological purity and seek to cast out nonconformers. Anarchists hate minarchists, and vice versa, and some followers of Rothbard and his vision of anarchy are as stubborn as any Randroid. A more detailed account is beyond the scope of this essay, but can be found in Brian Doherty’s history of libertarianism, Radicals for Capitalism.

But all these people, including the Objectivists, are libertarians, whether they like it or not. Any contrary belief is illogical, self-contradictory, and blatantly irrational — precisely the type of thinking Rand preached against, although she herself had a spotty and checkered history of applying her theory of strict rationality in her personal life.

Some Objectivists reason in this form:

  1. Rand defined Objectivism.
  2. Rand said that Objectivists are not libertarians.
  3. Therefore Objectivists are not libertarians.

This sequence of assertions has a remarkable simplicity, of the kind that often appeals to the young. But, of course, the truly Randian thought would be: what matters is not what people believe or say, even about their own ideas; what matters is what exists in objective reality. I couldn’t agree more with this essential Objectivism. And I hope I have selected an appropriate way to provide an “unanswerable” question with an objective and obvious answer.




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Atlas Huh?

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Cloud Atlas is an ambitious project, encompassing half a dozen story lines spanning hundreds of years but played by the same actors.

The story concept reminded me of an engagement video I saw recently in which a young man induced his friends to create a dance video for his girlfriend. As the romantic pair walked along a path together toward a beach, friends danced for them and then ran ahead to appear in the next scene of the video. It looked as though hundreds of people were involved, but they were actually the same friends appearing over and over, with the entire crowd gathering at the beach for the final chorus. In Cloud Atlas the 6 billion people who live on earth today are an accumulation of all the people who have ever lived, reincarnated to return and play out yet another scene in earth's continuing saga.

But at nearly three hours, Cloud Atlas is overlong and often hard to follow. As with another "Atlas” film that was released this month, viewers who have read the book before seeing the film enjoy a distinct advantage. The opening scenes jump from character to character and scene to scene with virtually no exposition. And because there are so many disparate scenes, the result is disjointed and incoherent.

Early in the film a bombastic author, Dermot Hoggins (Tom Hanks), complains about a critic who has written a poor review of his book, Knuckle Sandwich. The critic has called it "flat and inane beyond belief." I considered it a brave move on the part of the scriptwriter to include that phrase from Cloud Atlas in its book form, since it invites the same critical assessment of the film itself — which is, for the most part, flat and inane beyond belief. It tries to be profound, with high-sounding quotable quotes. But most of it amounts to philosophical mumbo jumbo on par with "it takes a village." Here is just a sampling:

This world spins from the same twine that twists our hearts.

Our lives are not our own. From womb to tomb we are bound to others.

Knowledge is a mirror. For the first time in my life I was allowed to see who I am, and who I could become.

You have to do what you can't not do.

Only those who have been deprived of freedom have the barest inkling of what it is.

To know thyself is only possible through the eyes of the other.

Something as important as this [a musical piece called "The Cloud Atlas Sextet"] cannot be described as yours or mine, but ours. (Shades of "You didn't build that" . . .)

The philosophy behind the film is that "death is just a door to another room" where one encounters many of the same souls one knew in a previous lifetime, but in different guises and with different purposes and relationships. But this is no Somewhere in Time, where two people who have fallen in love in the past fall in love with each other again in the future; instead, the characters switch roles entirely, playing significant characters in one scenario and minor parts in another.

Tom Hanks, for instance, plays a murderous antagonist in two scenarios, a classic protagonist in two others, a minor character in a fifth, and a woman in a sixth. Although he does fall in love with characters played by the same actress (Halle Berry) in two of his scenarios, he does not have meaningful relationships with her in the others. In other words, the film does not seem to imply, as other reincarnation films have, that finding one's soul mate across the eternities is the main purpose of life.

The controlling theme in these stories is not just the idea of finding the same lover in different lifetimes, but of fighting against tyranny in every age. In each scenario someone brave is needed to stand up against evil groups. This might seem a libertarian theme. But the cosmic conflict between "rebel good" and "societal evil" lends Cloud Atlas an undeserved gravitas, since the film never fully or accurately identifies the underlying philosophies or actions that lead to tyranny. In one scene, for example, the protagonist sneers at her society's rule that "the first catechism is to honor thy consumer," an obvious dig at free market principles, not tyranny. (And apparently no one knows what a “catechism” is.)

Despite its philosophical inanity, Cloud Atlas can be admired and even enjoyed artistically. The film is worth seeing for the disguises alone; they are stunning, and will surely garner Oscar nominations for costume and makeup. And halfway through, the stories and characters begin to sort themselves out enough to become compelling and empathetic. The acting is superb on all counts. This is a tour de force for Tom Hanks, who revels in his makeup and accents, although there is an unfortunate hint of Forrest Gump in one of his characters. Halle Berry is gorgeous, as always, and so, for that matter, is James Sturgess. It is a pleasant surprise to see Hugh Grant outside the familiar romantic comedies where he has been most comfortable. Moreover, the music, cinematography, and special effects are splendid. Be sure to stay for the credits, where you may be surprised to see which actors played which characters.


Editor's Note: Review of "Cloud Atlas," directed by Lana Wachowski, Andy Wachowski, and Tom Twyker. Warner Brothers, 2012, 164 minutes.



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Distorting the Energy Market

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The government is hurting our ability to develop new sources of energy; and both the Republicans and Democrats are to blame.

In the most general terms, Republicans support continued tax breaks and subsidies for the oil and gas industry, and Democrats support grants, subsidies, and tax breaks for such new forms of energy as wind and solar. Neither party has a good energy policy. Both are blocking the path of innovation.

To create a fossil fuel alternative we must find an energy source that is cheaper, easier, and better than fossil fuel. But when government is picking which alternatives are worth pursuing, in addition to funding traditional energy sources, our view of what energy sources may work out becomes clouded. As long as government provides subsidies and tax loopholes to oil and gas

companies, they will hold an advantage in the market. Not only does government intervention in this manner make fossil fuels a highly lucrative industry, thus attracting many bright businesspeople, engineers, and scientists, but it makes the introduction of alternatives more difficult, since potential new competitors find working in an unbalanced market nearly impossible. Even if there were an energy alternative that consumers would want, the alternative would not be able to seize enough market share to turn a profit, because the coalition of government and big oil cannot be challenged by a newcomer.

With few exceptions, people agree we need to move away from burning fossil fuels if we want to meet future energy needs with as little disturbance to existing ecosystems as possible or beyond what we might consider desirable. And because oil and gas receive government benefits, the conventional thinking goes, so too should alternative energy exploration, in order to “level the playing field.” But what the best alternative might be is still unclear. One reason why it is unclear is that government involvement clouds the picture.

Think of ethanol. For years, because of Iowa's importance in the presidential nomination process, ethanol was highly subsidized by the government. Now we discover that it was not a workable, standalone alternative to fossil fuels. Consider all the resources that were misallocated because of this pursuit. Private resources, such as time and expertise, were focused on making ethanol work — in order to procure government money. If there had been no government money in ethanol research, engineers and scientists in the energy industry would have had a greater incentive to look elsewhere for a good alternative. But when the government creates a market there is no need to look elsewhere. The only problem is that the government lacks anything like a good record as a venture capitalist.

If it is true that necessity is the mother of invention, then the government is stripping us of that necessity. What is necessary for every company to operate is money, and if it doesn’t have a strong need for money, because government is supplying all it needs and then some, its incentive for invention is stripped away. If we want to find the best energy source, both long-term and short-term, the government needs to stop trying to control which sources come to market, or stay in the market.The government needs to divest itself of all financial interests in the energy industry.




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Argo F*** Yourself

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One part compelling documentary, two parts zany Hollywood comedy, and three parts suspenseful spy thriller, Argo is one hundred percent excellence in filmmaking.

Although the events depicted in Argo occurred 33 years ago, they could not be more timely. In 1979 we had a likable but inept president whose policies could not avert double-digit interest rates, double-digit inflation, and the doubling of gas and oil prices; today we have a likable but inept president whose policies have led to stagnant growth, high unemployment, doubling of the national debt, and another doubling of gas prices. Both presidents dealt with turmoil and crisis in the Middle East as they campaigned for reelection.

When Ben Affleck set out to dramatize a recently declassified covert operation that took place within the context of the Iranian hostage crisis over 30 years ago, he could not have known that a similar crisis would erupt in the same part of the world exactly one month before his film was released. Watching hostages in Argo quake with fear as they are blindfolded by their tormentors and dragged before a firing squad, viewers cannot help but think of Ambassador Chris Stevens being dragged through the streets of Benghazi on his way to a horrifying death just last month. This unintended melding of the two stories adds to the suspense created in this well-made film.

Argo begins with a brisk montage of historic photos, film footage, and newspaper headlines taken from the days and weeks of the Iranian hostage crisis that began November 4, 1979. A young Walter Cronkite and an even younger Ted Koppel report the news from old-fashioned television screens. Many people have forgotten that ABC's “Nightline” began as a temporary nightly update about the hostage crisis; 444 days later, when the hostages were released (on the day of Ronald Reagan’s inauguration), the news show had become so entrenched that it stayed on as a serious alternative to NBC’s “Tonight Show” with Johnny Carson and the CBS “Late Movie,” which eventually gave way to Letterman's “Late Show.” Ted Koppel earned his stripes reporting the Iranian hostage crisis and paved the way for all-news cable shows.

As the crisis begins, embassy personnel are busy doing other things: processing visas, filing reports, and interviewing local Iranians who wait patiently in the outer rooms. When angry mobs threaten to storm the building, embassy workers rush to shred documents, burn files, break metal plates used for counterfeiting documents, and destroy computers. Ignoring threats to their own lives, they focus intensely on eliminating all sensitive material that could lead to the torture and death of Americans and local residents who are friendly to Americans. This is absolutely essential for national security and for the safety of regional operatives (local spies) in Iran.

The film deftly portrays the rising panic among security personnel inside the building while angry young men climb the walls and breach the compound. “We need some security, and you’re responsible!” one man screams into a phone, presumably to someone in the State Department. During a security briefing another man warns, “Don’t shoot anyone. Don’t be the one to start a war. If you shoot one person, they will kill everyone in here.” As a result, security personnel seem afraid to act. They hold their guns, but they don’t use them. One goes outside to try reasoning with the mob, but of course that just feeds the frenzy. In short, the fear of being responsible for diplomatic consequences is crippling.

During this confusion, six Americans slip out a back door and run for safety. But in a country overpowered by anti-American sentiment and energized for a fight, where might safety be found? Several embassies turn them away before the Canadian ambassador and his wife (Victor Garber and Page Leong) agree to take them in. But they are still far from being free, or even safe. Forced to hide in a room beneath the floorboards, they cannot leave the ambassador’s residence. They live in constant fear that local domestic workers will reveal their presence to Iranian insurgents, putting Canadian embassy personnel in danger as well. The scene is reminiscent of Jews hidden in attics and basements by friendly neighbors during the Holocaust. Spiriting these six unexpected hostages out of Iran becomes an even stickier problem for the US State Department than negotiating for the 52 publicized hostages.

Evidently saving face is more important than saving victims, at least to these State Department officials.

This is where the zany Hollywood comedy comes in. State Department officials come up with such solutions as providing the six Americans with bicycles so they can ride to the border (300 miles away) or pretending that they are part of an agricultural team investigating crops (even though it is winter) or that they are volunteer teachers (even though all Western teachers have been withdrawn from the country). After dismissing these ideas, seasoned CIA operative Tony Mendez (Ben Affleck) suggests pretending they are members of a film crew doing a site inspection for a science fiction flick called Argo.

Mendez turns to makeup artist John Chambers (John Goodman) to act as director and Lester Siegel (Alan Arkin) to act as producer on this bogus film, and together they select a script from among genuine screenwriter submissions. Goodman and Arkin ham up their scenes with insider jokes about Hollywood while also demonstrating that they understand the gravity of the situation. Human lives are at stake, and they know it. They also impishly create a tagline with more zing than "Who is John Galt," a phrase that is reflected in the title of this review.

But the real story of this film takes place in Iran, where Mendez must first convince the six hostages that the plan will work, and then teach them how to play their roles as set designer, director, cinematographer, etc., all in a matter of two days. Tension mounts as time draws near. They must act their parts convincingly and be prepared to answer any question that might come up as they go through airport security. If one person blows it, they all go down. Audience members have to be thinking, “Could I do this? Could I make it through this intense scrutiny?” and this adds to the tension of the film.

Mendez must also convince the State Department not to give up on the plan. At one point a State official says pragmatically, “Six Americans executed at the Canadian embassy is an international incident; six Americans caught playing filmmakers with a CIA spy is an embarrassment.” Evidently saving face is more important than saving victims, at least to these State Department officials. I'd like to think they were concerned that CIA involvement would lead to retaliation against the remaining hostages. Mendez, however, refuses to leave without the people he has come to rescue.

To avert retaliation against the American hostages still held in Iran, Canada received all the credit for masterminding the rescue. Now that the case has been declassified, the true story of CIA agent Tony Mendez's daring plan for spiriting the six hostages from the Canadian embassy and onto a plane leaving Iran can be revealed. But this should not detract from the gratitude afforded the Canadian ambassador and his wife. They risked their own lives and gave up their residence to help these American strangers.


Editor's Note: Review of "Argo," directed by Ben Affleck. Warner Brothers, 2012, 120 minutes.



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The Intelligent Person's Guide to Presidential Politics

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The tradition at Liberty is to introduce every presidential election witha symposium of libertarian views about whom to vote for: the Democrat, the Libertarian, the Republican, and No One at All. This year, we are happy to follow the tradition with commentary by four expert analysts, each well known to our readers: Drew Ferguson, Jon Harrison, Wayland Hunter, and Gary Jason. There's enough here to get anyone's blood boiling. —Stephen Cox

* * *

The Case for Johnson

By Andrew Ferguson

I’m here to exhort you, reader, to vote Libertarian in the upcoming election. Specifically, I’m urging you to vote for Gary Johnson, rather than sitting out the election entirely, or writing in “Donald Duck” or something similarly hilarious.

Since I’m writing to an ostensibly libertarian audience, I assume that those are the options you’re considering. Because your individual vote contributes to the totals about as much as a decent piss does to the ocean, why bother disrupting an otherwise productive day to cast a vote in favor of either major party? They don’t care about your vote; in fact, they go as far out of the way as possible to disclaim any “libertarian” viewpoint or content in their campaigns. And whichever candidate wins, he’s going to screw you more or less in the same way: more taxes to fund more wars; more kickbacks to benefit more cronies; more tariffs to feed nativist ignorance and hike prices for consumer goods . . . in short, more for DC, and less for all the rest of us.

If those were my only two choices — as all the major media seem to believe — I’d certainly exercise my right not to vote. And in fact, I’ve done exactly that in the past two election cycles: with the major-party candidates, as always, being unconscionable, and the LP candidates being, respectively, naïve and loathsome. But this year . . . this year is different.

I am on record saying that Gary Johnson is the strongest candidate the Libertarian Party has ever recruited to head its ticket; likely, he is the strongest candidate who ever will carry the LP torch. I knew this within the first 15 seconds of my interview with him at the LP Convention, when he quickly showed himself to be neither naïve nor loathsome, nor — and this by far the most important — the sort of personality who seeks guru status, or who inspires (and accepts) cultish devotion.

Johnson will not win. And he will not place. But he must show, and show strong, to indicate that there is a future for libertarian thought in American governance.

Of course, he is in no way a perfect candidate. (Such politicians are illusions, reflections of a better universe, in which each person has the rule of his or her own house alone, and is free there to enact his or her own image of the perfect ruler.) But an America under Gary Johnson would be an America that doesn't maintain or extend its imperial military presence around the world; an America that doesn’t haul off and invade Iran or any other country on someone else’s say-so; an America that doesn’t exude a rhetoric of hatred, fear, and absolute moral certainty. His America wouldn’t lock up hundreds of dissenters or millions of victimless criminals; wouldn’t starve poor countries to prop up farm subsidies; wouldn’t hand economic policy over to Goldman Sachs to impoverish the unconnected; wouldn’t court a new Depression by inciting trade wars and deepening international divides.

Clearly such an America is too badass a country for the cultural elites to allow even a fleeting image to lodge in the minds of most American voters. But if such a vision is to get any foothold in this great land — if we are to pull back from the ledge at any moment before we fling ourselves pell-mell over it — we must show in this election that there is some opposition left, some coherent alternative to wars and prisons and empire.

With every election that goes by, the militaristic oligarchy that controls these United States grows stronger, conducting its business and screening itself from criticism behind the farcical pretense of partisan politics. Whichever party takes the present contest will further the agenda and then, since this will take our nation still closer to bankruptcy, lose big in 2016. The party assuming control at that time will misrepresent a normal response to failure — kicking the bums out — as a “mandate” to enact legislation that does yet more harm. Then matters will repeat in 2020, and 2024, and ever after, until we find out just how much ruin there is in a country — or until we shake things up, and crash the comfortable party.

So let’s get this straight: Johnson will not win. And he will not place. But he must show, and show strong, to indicate that there is a future for libertarian thought in American governance. This election, don’t waste your vote on the big guys. And don’t let it pass into nothingness. Give it to someone who can actually use it, someone who can channel the voices of millions of Americans who are fed up with the system and its phonies, its cronies, and its crooks. Vote Gary Johnson.

* * *

The Case for Obama

By Jon Harrison

I find this assignment, to make the case for voting for Barack Obama, somewhat distasteful, because I am neither a Democrat nor a strong supporter of the president. I am turned off by both of the major parties — so much so that I haven’t voted in a federal election since 1988. I could perhaps make the case for not voting. I must admit, however, that if my home state of Vermont were in danger of going Republican, I would get out on November 6 and vote for Obama.

I would’ve been happy to make the case for voting Libertarian, because I think the LP’s 2012 ticket is the best it has ever fielded (although John Hospers was a fine choice as the party’s first presidential candidate in 1972), and the party platform is one I can live with although I disagree with some of its planks. But as I believe the LP is an exercise in futility, and that libertarians would do well to devote their energies to working within the major parties in order to transform them into something like true liberty-loving movements, I can’t honestly make the case for voting Libertarian.

I can’t possibly make the case for voting Republican this year, given the manifest danger to liberty the party represents. The party is both beholden to, and largely divided between, two groups of radicals: ultracapitalists on the one hand, and protofascist populists on the other. Establishment Republicans, such as John McCain and David Brooks, are a shrinking minority within the party, and increasingly irrelevant to its deliberations. And even these people tend to hold dangerous neocon views on foreign policy.

Recall that the Republican Party gave us No Child Left Behind, Medicare Part D, exploding deficits, and two wars financed entirely on credit. Paul Ryan, the party’s candidate for vice president and the darling of the far right, voted for all these things in Congress. And Ryan, like so many Republicans, is a notorious reactionary on social issues, with a 1950s attitude toward homosexuality and women’s reproductive rights. Do we really want such a man a heartbeat away from the presidency? Do we really want a party that contains people like Todd Akin (he of “legitimate rape”) and Allen West (“there’s about 78 to 81 members of the Democrat Party that are members of the Communist Party”) running the country?

The state of the party is such that its candidate, Mitt Romney, had to become a serial liar in order to gain the presidential nomination. Romney is basically the Massachusetts moderate he was accused of being during the Republican primaries. Whatever he may say now, the fact is he pushed through Romneycare in Massachusetts, and he would keep important aspects of Obamacare on the books. He is for progressivity in the tax code. He is in favor of shoring up the welfare state, not radically restricting it. If elected, he will rely upon the Democrats in Congress to keep his own party from moving policy too far to the right.

Romney’s greatest fault is that he lacks the courage of his convictions. He should be denied the presidency because he is a man without principle: he is willing to say and do almost anything to become president, to an extent that puts even Richard Nixon in the shade. Thus we have the Mitt of the 47% recording, and the Mitt of the first presidential debate, both dwelling within the same fleshly envelope. A Janus such as this in the Oval Office would almost certainly create havoc in the body politic. Add to this his formidable ignorance of foreign affairs, and you have a man who simply must be kept from the highest place, lest we descend once more into Bushworld.

The Obama record is unquestionably a mixed one, and yet the worst has been avoided. This is no small thing, given the situation that prevailed at the beginning of 2009.

Now to the current occupant of the White House. The president has been craven on such issues as the deficit and entitlements. He has done nothing to reverse the Bush administration’s unconstitutional domestic surveillance programs. The former dabbler in illegal substances has shown neither courage nor compassion in dealing with America’s tragically misguided policy toward drug use and abuse. He allowed Congress free rein to craft a stimulus bill that amounted to the biggest pile of pork ever made into law. He responded poorly to the housing crisis, adopting a middle course that proved the worst of all worlds for real estate, and seriously hampered a recovery of the economy. He also temporized with regard to the shenanigans of the big banks, a policy that may eventually prove disastrous. He came into office even more unprepared than the man he was often compared to, John Kennedy, and he has not grown in office to anything like the extent JFK did. And yet . . .

And yet the worst has been avoided. This is no small thing, given the situation that prevailed at the beginning of 2009. I was opposed to Obama’s bailout of the auto industry, yet we must admit that it probably prevented an economic disaster (on this see Bruce Ramsey’s “Assessing the Bailouts”). The American war in Iraq has ended, and the war in Afghanistan is finally being wound down (Obama’s Afghanistan “surge” was a mistake, it now seems clear, yet unavoidable given the pressure he was under from the Republicans and certain quarters of the military). Bin Laden is dead. “Don’t Ask, Don’t Tell” has been abolished, with no noticeable effect on the morale or combat capability of the military. Above all, we have not plunged into the folly of pulling Israel’s chestnuts out of the fire in Iran. An American war to stop Iran’s nuclear program would be a catastrophe economically, causing energy prices to soar to unprecedented levels. Add to this the cost in blood and dollars of such a campaign, and the growth of radicalism in the Muslim world that it would provoke, and you have a situation even worse than the final years of Bush. We are more likely to avoid such a fate under Obama than Romney.

The Obama record is unquestionably a mixed one. The man, though personally engaging and far more “cerebral” (as former Secy. of Defense Robert Gates put it) than his predecessor, has been a mediocre first executive. Moreover, he appears worn and seems to lack fresh ideas for the future. How then to justify a vote to reelect him?

Bloomberg conducted a poll on the presidential race at the end of September. In its report it quoted a self-described libertarian, one Stephanie Martin of Virginia, who said the following:

If I have to choose between the two, I prefer Barack over Mitt. I think Mitt Romney is just so out of touch. It’s mostly a protest against him and the Republican establishment; it’s not that I think Obama has done such a great job.

Stephanie, I’m with you.

* * *

The Case for Romney

By Gary Jason

I will be cheerfully (though not enthusiastically) voting for Mitt Romney. While I don’t expect the following sketch of my reasons to convince many readers who don’t already favor him, the case is worth stating.

Let me begin by stating the obvious (but not the always recognized): in our system, voting for a third party candidate is almost always just wasting your vote. Since I have written at length on this elsewhere in this journal, let me simply reiterate that while I would favor something like a ranked voting system, in the absence of such a system, to vote for a third party is merely political theater.

Put another way, the reply to “I’m tired of voting for the lesser of the two evils” is that when you vote third party (or refuse to vote) you are helping the greater of two evils to triumph. Seems pointless, right?

Moreover, Romney (while admittedly a moderate) has a number of strong points (especially when he is compared with Obama) that make me positively want to vote for him. The most obvious of them include superior managerial competence, deeper economic understanding greater disposition to freedom, more realistic vision, and better character.

Superior managerial competence: Begin with the fact that our nation is in an enduring economic malaise, with unemployment still around 8% even after several years of recovery, and debtlevels soaring. Romney seems clearly more qualified to turn this around.

  • Romney, who earned an MBA from Harvard and had an outstanding career in business, views free market capitalism as the key to prosperity. In contrast, Obama continues his college professor rants against businesses and wealthy people, which only discourages economic expansion. In this Obama recapitulates the errors of his hero FDR, who (as Amity Shlaes has argued in The Forgotten Man) managed to extend the Depression through his class warfare rhetoric.
  • Romney is less likely by far to raise taxes. Obama in a second term would surely use his power to force increases in taxes at least on wealthier citizens.
  • Will Romney lower all tax rates by 20% and eliminate deductions? It will be great if he does, and he did do so when he was governor of Massachusetts. One of the advantages of Romney’s plan is that it would lessen the deduction of state taxes for the wealthy, which I strongly favor even though I live in the tax hell called California, because it is immoral to force citizens of low-tax states to carry part of the burden of state taxes in the irresponsible high-tax states. However, I don’t know whether and to what extent Romney’s party will control Congress, so I don’t know whether he will succeed. If he just keeps the present rates in place that would be enormously helpful.
  • Romney’s masterly handling of Bain Capital and the Olympics showed an innate talent for running organizations competently.

Deeper economic understanding: Romney shows reasonable understanding of the need for free trade, free markets, and free labor mobility — not to as great a degree as I would hope, but surely infinitely better than the economically ignorant Obama.

  • Romney will at least be open to free trade, especially with South America. I have suggested elsewhere that he should start with Brazil. An FTA with Brazil (and one with India) would do wonders. Obama by contrast started trade wars with our close partners Mexico and Canada, stalled for three long years the three FTAs he inherited from Bush, and has taken no steps to enter into FTAs with any other countries.
  • Romney clearly seems to favor free markets in energy. He would end the war on fossil fuel waged by Obama and the environmentalist ideologues he placed in power at the EPA, the Department of Energy, and elsewhere. Romney will almost surely sign off on the Keystone Pipeline. He will very likely allow more leases on federal land and offshore. He may even succeed — finally — in opening up ANWR, through (again) that will depend upon his control of Congress.
  • More generally, Romney will doubtless lighten up on regulation. Can he repeal and replace Dodd-Frank? God, I hope so — why not just repeal it and reinstitute Glass-Steagall? Again, it depends on Congress. But at least he will not push new regulatory mischief.
  • Romney seems more inclined to allow free mobility of labor, aka immigration reform. He seems sincere when he expresses support for expanding legal immigration of skilled labor, though I am not entirely sure of the depth of his feeling in that regard. But while Obama talks as if he favors comprehensive immigration reform, he really doesn’t. He had complete control of Congress for two years, and never bothered to introduce a bill. At least Romney has promised to increase the H1-B Visa limit for skilled immigrants, which is something.

Greater disposition to freedom: Romney seems to want to roll back the encroachments on freedom imposed by Obama’s expansion of the progressive liberal welfare state.

  • I am very sure that Romney will carry through his promise to try to repeal ObamaCare, and if he succeeds, it will be hugely important. It would be the first major defeat of the ever-advancing progressive welfare state since 1932, and would stop the process of nationalization of healthcare which, when it has happened in other countries, has proven impossible to reverse. It would also prevent a wave of built-in tax increases, such as the new federal tax on the profits from home sales, and the new tax on medical devices.
  • Regarding education, again the choice is clear. Romney favors expanding school choice, while teacher union tool Obama ended the meager DC Voucher program, and did little to expand charter schools.

More realistic vision: Regarding foreign policy, I view Romney as simply more realistic.

  • Yes, both major candidates favor withdrawing from Afghanistan, but Romney seems to recognize that to simply turn the country back over to the Taliban would not prevent future attacks. Taking the time necessary to train a proper Afghan force may take longer, but it saves lives in the long run.
  • I won’t rehash Obama’s policy of being overly attentive to Russia (in canceling the missile defense system we had arranged to put in Poland, for example) and getting nothing in return, or in tossing the tyrant Mubarak under the bus in favor of the Muslim Brotherhood — a huge mistake with ever more disturbing unintended consequences appearing every day (for example, the recent announcementby one of the Brotherhood’s leaders that he favors instituting Sharia law). Just ask the Copts — which will be easy to do, since very soonall of them will live here. And the inconsistency is breathtaking: we aided the Libyan rebels — even though Col. Gaddafi had in fact turned over his weapons of mass destruction (including an advanced nuclear program) to our country the week when Bush invaded Iraq, and ended his support of terrorists, in exchange for our tacit agreement not to invade him — but we have refused to give armed support of the Syrian rebels — even though the government they fight (the Assad regime) is a devoted supporter of Iran, which funds terrorism against us. Go figure.
  • The naiveté and hubris of Obama’s foreign policy has been evident from the day he accepted the Nobel Prize for “peace,” after doing nothing but say that he wanted peace. The sheer dishonesty of his foreign policy is sufficiently exemplified by recent events regarding Libya. Naivete, hubris, and dishonesty are assets to no one, even people who favor the president’s announced goals of peace and international harmony.
  • I can imagine the responses from some readers: You are a dirty neocon! No, in matters of foreign policy I obey a law older than neoconservatism: realism. We can’t withdraw into Fortress America, and we never could. But on the other hand we certainly shouldn’t take on the role of Captain America, world policeman. We need to exercise practical wisdom — what the Greeks called phronesis — to distinguish (among other things): vital national interests from mere national preferences; sending weapons from sending troops; encouraging alliances from establishing empires; supporting the lesser of two evils (such as Mubarak) from supporting the greater of two evils (the Brotherhood); and maintaining peace through free trade from courting war through protectionism.

Better character: Can anyone doubt that Romney has superior character to Obama?

  • Obama has proven himself to be arrogant, snarky, cheap, infantile, and narcissistic. Romney seems none of those things, appearing essentially modest, decent, and generous — actually having given $50 million of his own money to charity — as well as mature.
  • The mainstream media have been trying to dig up dirt on Romney for many months now, and cannot find one iota of dirt to display. Hence their pathetic attempts to use his wealth and Mormonism to attack him.
  • We might also mention Obama’s disgusting corruption — learned no doubt as a community organizer and player in Chicago’s political cesspool. In numerous cases, government loans and grants have gone to companies headed by prominent cronies of Obama. Not a scintilla of this has ever attended Romney’s tenure in any of the enterprises (for-profit, non-profit, or governmental) that he has run. Maybe knowing you can earn a quarter of a billion bucks legally and honestly makes you less inclined to corrupt dealings.

I know many people are nervous about Romney, especially those on the political right. Romney may possibly be lying across the board. Maybe he will not sign Keystone, not try to repeal ObamaCare, let all the tax increases happen, not allow more skilled immigrants in, block free trade agreements, and go all wobbly Green by opposing fossil fuels. Maybe — but the point I would make to the ultra-pure rightists is that Obama has shown that he will do all these things.

Nor am I under any illusion that Romney is Hayek redivivus. He has what seems to be a congenitally moderate nature, one that doesn’t adhere to a purely classically liberal ideology –more’s the pity. So I don’t expect him to get school vouchers enacted nationwide (as Sweden did years ago), or to end all farm subsidies (as New Zealand did years ago), or to enact a truly low flat tax with no deductions allowed (as Russia and numerous other countries did years ago), or to privatize Social Security (much less Medicare), or to create a vast free trade alliance of all democratic countries. I myself deeply desire all of these things, although I believe I will live to see none of them.

For this I won’t blame President Romney but my fellow Americans. They are too addicted to the welfare state, and will only change when the major welfare state programs finally fail. But Romney can do some moderate good in limiting the depth of our decline, instead of willfully accelerating it, and for this he will have my vote.

* * *

The Case for None of the Above

By Wayland Hunter

When I walk past my local polling place, I see people coming out with little stickers on their shirts, saying “I Voted!” As if that were something to be proud of.

I’m not saying that I’ve never voted, or that I feel some kind of quasi-religious objection to the secret ballot, à la 19th-century anarchist Lysander Spooner. I’m not an anarchist. I remember, maybe 30 years ago, Reason ran a poll asking its readers all sorts of things. One of them was, Are you an anarchist? Another was, Do you vote? The results were something like 40% on the first question and 90% on the second. So much, I thought, for libertarian anarchism.

I have no such “principled” objection to voting. If I find an election in which I think my vote matters, in the right way, I’ll go ahead and vote.

But right now, I feel as if I were channeling R.W. Bradford, founder of this journal. I don’t know whether, or how often, Mr. Bradford may have voted. (Seldom, I suppose.) But I recall his exposure of the “handful of votes” myth. He showed, beyond any possibility of confutation, that virtually no elections, however petty, are decided by the proverbial “handful.” The possibility of any election being decided by one vote, your vote, is similar to that of Columbus, Ohio being obliterated by a meteor strike.

There is no practical reason to vote.

But what about the alleged moral reason? Good libertarians remind us, every four years, of the categorical imperative: you must act in such a way that if everyone acted in that way, it would be good, or there would be good effects, or better effects than worse ones, or no really bad effects, or something. In other words, you shouldn’t throw your cigarette onto the sidewalk, because if everyone threw a cigarette onto the sidewalk, what would the sidewalk look like?

If you don’t see how silly that is, I’ll try to explain it, or at least to extend its logic into the absurdity it’s heading for.

Just think: if everyone ate a hamburger at every meal, every day, no cows would survive. If everyone went to the symphony, tickets would be priced out of sight. Don’t become a guitar repairman, because if everyone becomes a guitar repairman, the world will starve to death. If I don’t have children, it means I am decreeing the depopulation of the earth.

Not convinced? But why should you be? It’s a silly idea. If I had a cigarette, I would look for a decent receptacle to put it in. I wouldn’t throw it on the sidewalk. Why? Because littering is wrong in itself. I don’t care how many people do it; it’s ugly and therefore wrong. Now show me why it’s wrong in itself not to vote. Is it only wrong because if everybody else refrained from voting, that would be wrong? Have we gone in a circle here?

One of Obama or Romney will win, and the election won’t turn on my single vote. But does either of them provide enough reason for me to go to the polls and pull the lever for him? That question answers itself.

But there’s another reason why not voting is not equivalent to littering the gutters. Not voting is not doing something. If nobody voted, well, the parties would have to nominate candidates whom somebody would go ahead and vote for, willingly and unthreatened by false moral theory — and that would be a good thing, right?

To support my view, I don’t need to go in the Randian-anarchist direction and talk about how awful it is to give my “sanction” to some candidate who isn’t ideologically perfect (“moral”) by voting for him or her. All I have to do is point to Barack Obama and Mitt Romney. One of them will win, and the election won’t turn on my single vote. But does either of them provide enough reason for me to go to the polls and pull the lever for him? That question answers itself.

Well, what about the Libertarian Party nominee?

Please. When I vote LP, what am I voting for? An organization that, in forty years, has never won a significant election. An organization that occasionally appears to have thrown the election to a Democrat, rather than a Republican. This is not a compelling reason to go to the polls.

Oh, but by voting Libertarian you would be voting for your principles!

Would I? You who say that — have you read the LP party platform? Neither have I. Neither has anyone else — including, I suppose, the people who wrote it. In this case, principles are irrelevant.

I rest my case. If all the paid staff members of the Libertarian Party, and all the unpaid volunteers whom they try to organize, would devote themselves to nonelectoral work for specific libertarian causes, who would deny that more would be accomplished? So if, by not voting, I am somehow objectively voting against the LP — as the old Marxists used to say when arguing that if you don’t participate in the workers’ struggle, then you are objectively in favor of fascism — aso be it. But I don’t think I am voting against the LP. I think I am voting for the LP activists to go out and do something productive. Even the devotees of the categorical imperative should be proud of me for saying that.

And that is all I need to say.



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Persuasive Definitions

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Charles L. Stevenson coined the term "persuasive definitions" (Ethics and Language, 1944). It means: to apply words with favorable or unfavorable connotations to things or actions in such a way as to substitute for actual argument. Examples abound in political discourse nowadays.

I'll focus on just one: "invest." Politicians repeatedly tell us Americans to "invest" in our children, education, job retraining, medical and other research, defense, infrastructure, a healthy environment, clean energy, energy independence, transportation, progress, the future — whatever. Here "invest in" means "have the government spend more money on." More fully, it means "have the government spend more money on such things — money raised by taxes and by increasing the national debt."

What further examples can readers contribute?




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The Grand Old Pitch

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Only 14 Percent?

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Each time Barack Obama and his supporters sniff disdainfully at the 14% of his income that Mitt Romney paid in taxes, I want to shout at them to acknowledge the obvious: Romney does not have earned income.

In the private sector, companies expect their employees to come to work every day. Romney isn’t gainfully employed, because he has spent the past two years campaigning for office. Of course, Barack Obama has spent the past three years campaigning. He has missed important security briefings and delegated most of his duties to others. He does very little actual work and campaigns on the taxpayers’ dime. If you or I tried that, we would have to use up all our vacation days and then take time off without pay — assuming that our employers would be willing to keep us on the books (and the benefits) while we are off job hunting.

Romney paid a higher tax rate when he was working and earning an income. He pays plenty now on his investment income (the principal of which was already taxed at earned-income rates). More important to me than his 14% tax rate is the fact that he has chosen to give away nearly 30% of his income to charities and causes he believes in. He has created jobs throughout his career, and he has given failing companies a second chance. He is, in fact, a great example of how the private sector should function.




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The Pains of Proflish

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A student taking an advanced degree at a world-renowned institution sent me a news item about a math professor at Michigan State University who (allegedly, always allegedly) took off his clothes in the middle of class and ran around naked, shouting things like, “There is no f*cking God!”

No, I’m not going to claim those words as an invitation to comment on the linguistic habits of scientific atheists. To paraphrase Richard Nixon, I could do that, but it would be wrong. But I’m not sure how wrong it would be to take it as a commentary on the linguistic habits of college professors (of the which I am one). It seems to me that during the past 30 years we’ve done a lot of running around naked, intellectually speaking, and what has been revealed has not been impressive.

I can’t say I was surprised by the news my fellow Watcher sent me. What did surprise me was the reported reactions of the professor’s class. (No, I didn’t mean “were the reported reactions”; I meant was; the number of the verb follows that of the subject, which is what, and which is singular.) “We were literally scared for our lives,” one student said. “The police took about 15 minutes to get here, and during this time he continued walking around screaming.” The complaint was echoed by another student: "It took them more than 15 minutes to arrive. It could have turned into something very bad if he had a weapon on him. It was pretty infuriating to have to wait that long." And that second student wasn’t even in the professor’s presence; the professor was out in the hall, by that time, and the student was in a classroom.

The fact that the troubled pedagogue was naked didn’t seem to have allayed these young people’s fears. And as for the 15 minutes: I’m no fan of the police, but look at your watch and picture yourself getting a call, leaving your office, traveling across one of the nation’s largest college campuses, locating the place where an incident is taking place, clambering upstairs, and confronting some nut who’s running around naked . . . Now look at your watch again. Think you could make it in 15 minutes? Think that somebody has a right to complain bitterly at this complete abdication of police responsibility? Think that you and I and a bunch of fit young college kids concerned with a naked, middle-aged man possess a right to have cops show up in less than 15 minutes?

I think I’d rather take off my clothes and run around like a maniac than to utter the complaints of those college students.

But if you’re thinking just about words, and not about guts, the worst part of this report is the eight words that say, “The professor’s name has not yet been released.” Not released by whom? And why not? Everybody on the scene knew who he was. Their reactions were reported at length. A blurry picture of his apprehension was included in the news report. So why not his name?

During the past 30 years we professors have done a lot of running around naked, intellectually speaking, and what has been revealed has not been impressive.

Pity? Perhaps. But this pity, this verbal delicacy and restraint, is by no means evenly distributed. If Joe Blow from Kokomo has a fight with his girlfriend, gets a little drunk, drives down the street, and gets nailed by a passing cop, no one will withhold his name from publicity — or his mugshot either, in some jurisdictions.

The day after the scary incident, anonymous students identified the professor as a certain John McCarthy. The day after that, the really loony thing happened. An article about the affair appeared in the MSU student newspaper. You can tell MSU standards of journalism by contemplating the following sentence, which is about the weekly meeting of the “steering committee” of the university’s president: “At the Steering Committee meeting Tuesday, the conversation turned to mathematics professor John McCarthy, which students said he had a mental breakdown during a class Monday.”

“Which students said he had a mental breakdown . . .” OMG — now we know what kind of grammar MSU is teaching.

Well, let’s see what intellectual level MSU’s president is operating on. For other people, the serious issue introduced by the professor’s actions might be, “Did MSU know that at least one of its senior professors might be crazy? Does MSU have any way of discovering how many of its senior professors actually are crazy?” But that was not the issue that President Anna K. Simon wished to discuss. For her, we learn, “an incident Monday brings in to [sic] question the impact and role of social media.”

Huh? As far as I can make out from Simon’s murky remarks, murkily reported, the problem is information control: “’The complication of social media, with everyone with a camera and a cell phone, is one that we continue to struggle with in terms of information because the event would not, under (normal) circumstances, trigger one set of alerts,’ Simon said. ‘There’s also the need for more crisp communication about what the outcome was. Whether that would have controlled some of the rumors, tweets and other things, I’m not quite sure.’”

Did Michigan State know that at least one of its senior professors might be crazy? Does Michigan State have any way of discovering how many of its senior professors actually are crazy?

Let’s look at this in another way. Suppose you’re concerned about the quality of some public institution. You want to find out whether there’s any quality control. You learn that a teacher, policeman, bureaucrat, or other publicly employed personality, may have done something egregiously stupid and wrong, and perhaps illegal, while exercising his or her official duties. She’s said to have told her students to vote for Obama. He’s said to have beaten a homeless person for “resisting” some “order.” She’s accused of making a “questionable” transfer of city funds. He allegedly takes off his clothes in front of his students and runs around screaming.

You’d like more facts. But how long do you have to spend just trying to confirm this person’s name? A week? A month? Three months? Forever? Unless there’s a miracle, the information control artists will keep you from knowing what it is until virtually everyone has forgotten the episode — and then the data will be stored in a closed file, no longer accessible to the public. In the meantime, you will be informed that personnel regulations do not allow release of that information, or, pending possible legal action, the city cannot comment on this case, or some other nonsense that never applies to a normal person in a normal job (or didn’t, until the “standards” of “public service” bureaucracies spread into big private companies). And, to top it off, some CEO will entertain the media by looking at her navel and meditating about how tough the times are, what with all these cameras and phones and computers around, ready to convey the truth to anyone online . . .

So what do you think? What are we supposed to say about that? What are we able to say, since if we do comment we can always be told that we do not have all the facts?

The chair of John McCarthy’s department presumably has all the facts. These facts lead him to be concerned “about the way some people made jokes about the incident. An incident like this often teaches us who we are and what we represent. I hope we can all use what transpired after this incident to reflect on our values and our role as members of an institution that strives to be among the best of the world.”

Gosh, don’t you feel guilty? Your making jokes about a figure of authority at an institution that strives to be among the best of the world has hurt the feelings of an institution that strives to be among the best of the world. Or something.

But to continue with college professors, which I can easily do, considering that I am one, have you been following the curious case of Professor Amy Bishop? She’s the one who was recently convicted of killing three of her colleagues and wounding three others at a meeting of the Biology Department at the University of Alabama, Huntsville. That happened in 2010, and there were plenty of witnesses, because she didn’t manage to kill them all, but it took two and a half years to convict her. I don’t know why, except that it may have something to do with the cultural and verbal universe in which she lived.

Perhaps the EEOC is still trying to find out whether the woman who wasted her brother and killed or did her best to kill six of her colleagues is in “unstable mental health.”

In 1986, in Massachusetts, where’s she’s from, she killed her brother Seth with a shotgun, then went to a local auto dealership and tried to commandeer a car so she could escape. Apparently because of her family’s ties to the local power structure, she wasn’t even questioned about the shooting for 11 days. Then it was called an “accident.” Eight years later, she was implicated in an attempt to pipe bomb an academic supervisor in Boston. He had suggested she was “mentally unstable.” Four months after the attempted bombing, investigators finally showed up at her house. She was uncooperative, and the investigation was inconclusive. It went away. Seven years later, she was arrested after assaulting a woman in a fight over a high chair at an International House of Pancakes in Peabody, MA. She was sentenced to probation and an anger management class (which she probably didn’t take). In the restaurant, she had yelled, “Don’t you know who I am? I’m Amy Bishop!”

Now she gets to the University of Alabama, Huntsville, where she is known as “difficult” by “some.” A good piece of reporting tells the story. Bishop didn’t publish very much; she listed her children as first and second authors on one of her publications; a student filed a grievance against her; she was detested by almost everyone.

Then, as our reporter says — and this is the cream of the jest:

In September 2009 Bishop filed a complaint with the Federal Equal Employment Opportunity Commission. Someone on her departmental tenure committee had called her "crazy" in her tenure review, and would not retract the statement when an administrator gave him a chance to back down. The anonymous professor maintained that Bishop's unstable mental health was apparent on their first meeting.

The EEOC is still looking into that complaint.

I have been unable to learn whether the federal agency is still looking into it. Perhaps it is still trying to find out whether the woman who wasted her brother and killed or did her best to kill six of her colleagues is in “unstable mental health,” or, in plain terms, insane, bonkers, off her rocker, completely gone, in the zone, out of her skull, a desperate lunatic, and otherwise, well, crazy, or if she is, whether anyone should have said it.

A Martian appears in your kitchen and tells you that the folks back on the slopes of Olympus Mons have been following the Amy Bishop story on their nightly news. He wants to know what is so weird and touchy about that word crazy. He wants to know how somebody who uses it in its clearest and most self-evident application could possibly be investigated by a government of 300 million people (which presumably ought to have other things on its mind), because the word might have been discriminatory against the woman who killed four people. What words would you use to explain this?

Maybe you wouldn’t be able to find them, but we professors would — or at least keep anyone else from doing so.

On October 2, I was watching a CNN segment about why more security wasn’t provided to our diplomatic installation in Benghazi, when it was obvious that the place might be in danger from fanatic Muslims. The interviewer asked a professor — or someone who talked so much like a professor that he should immediately be given tenure — what he thought about all the warnings that came in, and apparently were not adequately heeded. Well, he said, “you have to parse the different kinds of violence that were taking place.”

That was his response.

What would you have to do to interpret that for your Martian friend?

I suppose you would start by noting that the key word was “parse.” In normal English, “parse” means to identify the grammatical functions of the words in a sentence. But in Proflish, the professor tongue, which is the status language of planet earth, the language to which all other languages aspire, “parse” means anything you want it to mean. In this case, it appears to mean something like “look at.”

Well, says the Martian, why can’t he just say “look at”?

That’s sort of a puzzler, but I can think of two, related reasons. One, he would be understood immediately, and that is not the goal of anyone speaking Proflish. Two, he would reveal the fact that he is saying nothing. Suppose I do look at or inspect various kinds of violence. Suppose I go further, and distinguish one kind of violence from another. So what? That isn’t enough. I haven’t really said anything. But a word like parse will keep everyone, or at least the interviewer, impressed with me. And that’s the point of talking, see? Ya see?

Yes, says the Martian. I’m parsing it all.


Editor's Note: Word Watch will comment on the presidential and vice presidential debates after the disease has run its course.



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The Second Reel of Atlas

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The two questions I have been hearing from my libertarian friends all week are these: Have you seen the new Atlas Shrugged? Is it any good?

My answers are Yes! And Ye-es.

I was invited to attend a posh private screening with the producers in Manhattan two days before the official opening. David Kelley, founder of the Atlas Society (neé the Institute for Objectivist Studies) and script consultant on the film, introduced the screening to a friendly audience of Rand enthusiasts. Esai Morales, who plays Francisco d’Anconia to perfection, also attended. It was a festive event honoring the Herculean efforts of producer John Aglialoro to bring this book to the screen.

As the lights dimmed and the film began, my biggest concern was whether the film could stand on its own merits, despite its being the middle chapter of a three-part story. Adding to the difficulty is the fact that the entire cast and director were changed from Part I, making it virtually impossible to use flashbacks for exposition.

I am happy to report that it does indeed work as a standalone film. Three main subplots drive this episode: Dagny Taggart’s quest to uncover the secret of a mysterious engine that could solve the world’s energy crisis; the government’s enactment of “Directive 10-289,” which freezes all employment, wages, and even personal spending at the previous year’s rate, thus making it illegal for anyone to quit, retire, be fired, be promoted, earn less, earn more, or even spend less or more than in the previous year; and the inexplicable, almost spiritual, disappearance of the world’s brightest and most creative thinkers at the hands of a mysterious stranger.

I would love to see a film inspired by Ayn Rand’s Atlas Shrugged, but not wedded to it.

Rand purists will be relieved to hear that the plot remains faithful to the original (almost to a fault). Some lines of dialogue have been inserted intact from the novel, and even the changes made in the name of streamlining remain true to Rand’s intent. Hank Rearden’s speech in front of Congress, in which he defends (or, rather, refuses to defend) his right to determine who will buy the metal he produces, is powerful and thrilling. It should resonate even with viewers who have never heard of Ayn Rand.

A few welcome adjustments have been made in the casting to acknowledge 21st-century racial integration, without drawing special attention to race. Dagny’s assistant, Eddie Willers (Richard T. Jones), for example, is black, but the film places no greater significance on the fact than if he were blonde or brunette. He just is.

Similar updating of the story itself would make this film more accessible to non-Randians. Yes, Ayn Rand loved trains. Without trains, Atlas Shrugged would not be Atlas Shrugged. And yet, for audiences who don’t care one whit about the author of the foundational work, a 21st-century setting in which trains are the primary mode of transportation simply doesn’t make sense. The film’s producers attempt to explain this with a note in the opening credits saying that in the future, trains have become the most economical form of travel, but come on. No one is going to buy that. Train travel is luxurious and impractical, especially in a country as vast as the United States. Cars and planes can go almost anywhere; trains are limited to where the tracks can take them. It’s especially laughable when Dagny travels by herself to Colorado in her private rail car. How could it possibly be more economical for one person to take a train than a car?

Modern audiences will also have a hard time believing that a single man — such as Rearden (Jason Beghe), Ellis Wyatt (Graham Beckel), Ken Danagger (Arye Gross), and Francisco d’Anconia, could control the entire markets in metal, shale oil, coal, and copper respectively. I think my friends and colleagues, the ones I would like to convince by inviting them to see a film like this, would be able to relate to the story more if the heroes were adapted so as to represent smaller, more sympathetic businesses. I would love to see a film inspired by Ayn Rand’s Atlas Shrugged, but not wedded to it. Such a film would be true to the purpose of the book, but would not be held back by the setting and technology of 60 years ago. Rand set her novel in a dystopian near future; it is disconcerting to find it mired in the technology of the past.

Coincidentally, I happened to see Henrik Ibsen’s An Enemy of the People on Broadway the day after I saw Atlas Shrugged II. Several critics have complained about how the language of this classic play has been updated to modern vernacular for this production. I disagreed. Ibsen was a realist. He rejected the larger-than-life heroes and cosmic issues of classic drama to write about everyday people experiencing everyday conflicts. His protagonists spoke in current language about current issues. If he were writing today, he would be using today’s idioms and swear words. So while director Doug Hughes’ version is not true to the language of Ibsen’s play, it is true to the spirit and intent of Ibsen’s play. The result is fast-paced, tense, and very modern.

So YES! I have seen the new film, and I had a great time. And ye-es, it is good, but with some caveats. The story stands on its own. The main points about the sovereignty of the individual are strong and intact. It injects some delicious ironic humor, such as the placard held by a picketer that says, “We are the 99.98 percent!” John Galt is both mysterious and inspiriting — I can’t wait to see what D.B. Sweeney does with the role in the final installment. Exposition is handled deftly, using dialogue to bridge the gaps between Part I and Part II.

But I’m still not pleased with the casting. Diedrich Bader, best known for portraying intellectually challenged characters like Oswald on “The Drew Carey Show,” Jethro in The Beverly Hillbillies (1993), and Rex Kwon Do in Napoleon Dynamite (2004), draws laughter when he first appears as Quentin Daniels, the scientist working to unlock the secret of the engine. Similarly, Teller (the silent half of Penn and Teller) creates a stir with his small speaking role as Laughlin. Both acquit themselves well as dramatic actors, but they create a distraction when they appear onscreen, pulling audiences out of the scene.

Rand set her novel in a dystopian near future; it is disconcerting to find it mired in the technology of the past.

Far from being cool and sophisticated, the new Dagny (Samantha Mathis) is frumpy, and she lacks chemistry with Rearden. Nor is there any chemistry between Dagny’s brother James (Patrick Fabian) and his new wife Cheryl (Larisa Oleynik), the shopgirl with whom he falls in love, despite their social differences. In fact, none of the characters is particularly passionate, with the exception of Francisco, who moves and speaks with a natural intimacy, and Galt, who manages to inject more charisma and personality with his unseen, offstage voice than Dagny is able to create with all her screen time. Not surprisingly, Francisco and Galt are brought to life by the most seasoned actors of the crew, and it shows.

Despite these shortcomings, Atlas Shrugged II is an admirable work, made more difficult by the rigorous expectations of Rand’s hard-to-please fans. The original score by Chris Bacon is strong, and the special effects are impressive. I applaud the efforts of the producers and all those responsible for the script.


Editor's Note: Review of "Atlas Shrugged: Part II," directed by John Putch. Atlas Distribution Company, 2012, 112 minutes.



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The Law School Biz

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One of the necessary requirements for fundamental reform of a dysfunctional institution is self-reflection among the individuals within that institution. It is now quite obvious to knowledgeable spectators that the American system of higher education is desperately in need of fundamental reform. But this realization has yet to sink into the heads of most of the key players in that institution, the faculty and the administrators. This, I think, is mainly because they are not yet generally self-reflective.

One of the main impediments to self-reflection in the academic world is the tendency among its inhabitants to view higher education — indeed, all education — not as a business but as a kind of quasi-religious institution. Under this view, the key players (especially the faculty) are not agents delivering a service and subject to the same motivations as agents in any other business (chief among which is self-interest), but are instead disinterested and selfless individuals educating young minds as a noble calling.

That is why it is always useful to report data that demonstrate that in fact college is a business like any other, and the agents in it (the faculty, staff, and administrators) as well as the customers — the students — behave as agents and customers do in other businesses, i.e., as rational maximizers of their personal preferences. Recent data on the changing reality of law schools are very illustrative in this regard

Consider first the data on the market for law school graduates, as reported by Deborah Jones Merritt. If you look at the percentage of recent law school grads who land a full-time job requiring bar admission (as opposed to those who get any sort of full-time job, say, as a waiter or bus driver), you see a declining market. In 2001, only 75.9% found such jobs within the nine months after they graduated. In 2002, the figure dropped to 75.3%. In 2003, it was 73.7%; in 2004, it was 73.1%. In 2005, it ticked back up to 74.2%, in 2006, to 75.3%; in 2007, back down to 74.2%. But in 2008, it dropped to 71.2%; in 2009, to 65.2%; and in 2010 it slid to 62.3%. Now; in the 2011 figures, it has sunk to 59.8%. That is, over 40% of law school grads last year could not find full-time work for which their costly education was appropriate within nine months of graduation.

This means that during the past four years, nearly 74,000 law school grads could not find appropriate full-time work (again, requiring bar admission). This represents huge direct costs in terms of money spent to educate these students (and the wages they have forgone in law school) and in even greater opportunity costs. (Most people bright enough to get through law school could have gone instead into medical, business, or technical trades.)

Students have apparently heard about the declining chances of employment in the field. Law school applications are way down over the past two years, dropping by nearly 16% last year alone.

More interesting still, the biggest drop in applications is not among the least but among the most qualified applicants — at least as measured by the ubiquitous Law School Admissions Test (LSAT). Among those who scored at the highest level (175–180), applications were down by nearly 14%; at the next highest level (170–174), they were down a whopping 20%. But at the next to lowest level (140–144), applications were down only about 6%, and at the lowest level (140 and below), only about 4%.

This leads to an interesting conjecture, especially for those who can’t believe that law schools are just businesses like any other. If law schools were run as quasi-religious institutions, solely devoted to the public good, they would respond to the obvious oversupply of attorneys and the resultant decline in the quality of applicants by cutting back on the number of students admitted. But if they are like other businesses that face a declining customer base, they will do what they have to do to attract the same number of buyers.

Specifically, my guess is that at the top-tier schools (especially the top 14, admittance to which usually requires an LSAT score of at least 165), you will see not a reduction in the size of the entering class but simply a reduction in the quality of that class, reflected in lower mean LSAT scores for those students.

We’ll see.




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Negligence of the Inept

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Most people, including many Obama supporters, were stunned when the Obama administration blamed the Innocence of Muslims video for the 9/11 attack on our Benghazi consulate. With his recent swagger ("bin Laden is dead" and "Al Qaeda is on the path to defeat"), Mr. Obama seemed to be telling us that his conciliatory diplomacy was winning the day. Surely no one could have predicted that an obscure internet video, based on an obscurer film, would cause the murders of Ambassador Stevens and three other Americans. But that was the administration’s explanation for the shattering of its Middle Eastern policy.

As for the film: all of us should have been stunned by the administration's betrayal of our First Amendment. Instead of defending free speech, Hillary Clinton denounced the film as "disgusting and reprehensible." Many liberals, of all people, condemned the producer, Nakoula Basseley Nakoula, for the violence he allegedly incited — the equivalent of yelling "Fire!" in a crowded theater. Nakoula is, by all accounts, a sleazy character. But if a third-rate, 14-minute trailer can thrust thousands of Muslims into a barbaric, murderous rage, then "Fire!" is precisely what should be shouted; the theater is already in flames.

Tiny Denmark defended the free speech of Jyllands-Posten, publisher of the Muhammad cartoons, doing so in the face of violent threats by Islamic extremists. America didn't have the spine to do; we apologized for the film, asked Google to remove it, and arrested the filmmaker.

A conflicted Google defended free speech in refusing to remove the video in the West, but caved to White House pressure in pulling it from several Arab-Muslim countries. A confused Nakoula was arrested in a disgraceful, groveling attempt to appease the Islamic world. When it comes to politically incorrect films, Muslims everywhere can now look to America for intolerence rivaling their own.

The foreign policy ineptitude of the Obama administration was exposed by its use of both the film and the arrest: the former as a pretense for causing the attack; the latter as a pretense for calming Muslims sympathetic to the attackers. White House and State Department officials were no doubt heartened by the spectacle of the Los Angeles Sheriff's Department taking Nakoula from his home, perhaps hoping that it would quench post-Arab Spring hatred of Americans. But the true spectacle was ironic: the number of law enforcement officials hustling Nakoula off to jail in the US exceeded the number of security guards protecting the four Americans murdered in Libya.

If a third-rate, 14-minute film trailer can thrust thousands of Muslims into a barbaric, murderous rage, then "Fire!" is precisely what should be shouted; the theater is already in flames.

In America, where inflammatory artwork such as Andres Serrano’s "Piss Christ" is celebrated, the moral enlightenment of the politically correct usually comes back to bite them in the ass. So it was with Hillary Clinton, who once pasionately defended the free speech right of "The Holy Virgin Mary," a painting by Chris Ofili that depicts a black Madonna smeared with elephant dung and surrounded by collaged pornographic images of female genitalia. That passion is now a distant, hypocritical memory. In the Obama era of apology and appeasement, Mrs. Clinton is embarassed by free speech. On Pakistan's “Day of Love for the Prophet,” she ran an ad featuring President Obama blathering about our tradition of religious tolerance, and herself, pleading that our government had nothing to do with The Innocence of Muslims.

The day of Muslims loving their prophet ended with 23 people killed in Pakistan alone and revealed the deep folly of Obama's Middle East policies. Violent anti-American protests spread throughout the hyper-senstitve, irony-challenged Muslim world. People burned American flags, ransacked American businesses, attacked American embassies, etc. It's hard to imagine that a more "disgusting and reprehensible" display would have happened, if Mrs. Clinton had run a free speech ad instead.

To the consternation of Barack Obama, the sons of men who hated, but respected, George Bush, have become men who both hate and disrespect him. Subsequent to the Benghazi attack, "Obama, Obama, We Are All Osama" became the chant of the new liberal Arab youth. To many, perhaps millions, of them, Obama's achievement is an abomination. He murdered bin Laden, the spiritual champion who lives in their hearts — hearts that will be inconsolably inflamed upon the release of Zero Dark Thirty, a movie celebrating the killing of their hero. That will be the day when Obama's "bin Laden is dead" mantra will come back to bite him in the ass.

And it is Obama's movie. According to documents obtained by Judicial Watch http://www.judicialwatch.org/press-room/press-releases/judicial-watch-obtains-4-to-5-inch-stack-of-overlooked-cia-records-detailing-meetings-with-bin-laden-filmmakers/, the White House worked closely with director Kathryn Bigelow and screenwriter Mark Boal to incorporate administration talking points and play up the president's role as the gutsy decision maker. To the dismay of Mrs. Clinton, our government is not innocent in the case of Zero Dark Thirty.

What, then, will the Obama administration do to prevent the rampant violence that this film will certainly incite? Pressure Sony to stop its distribution? Perp-walk Bigelow and Boal to jail? These steps may be unnecessary, if the administration succeeds in shifting blame to the intelligence community. Finally admitting that the Benghazi massacre was a terrorist attack, administration officials now tell us that they were unaware of terrorist threats converging on the consulate with the anniversary of 9/11. Had they known, measures would have been taken to protect the Americans stranded in Benghazi.

But, dashing hopes for an Obama Oscar (to go with his Nobel Peace Prize), they did know. There were numerous intelligence and DoD reports warning of the intense al Qaeda buildup in Libya during the six months prior to the Benghazi attack. According to reports such as “Al Qaeda in Libya: A Profile” (released in August), al Qaeda terrorists were probably bumping into each other in Benghazi. Ansar al Sharia held a June demonstration at Liberation Square; 15 militias showed up. Recent news reports reveal that, contrary to its repeated claims of ignorance, the administration was well aware of 13 threats or attacks on western diplomats and officials in Libya during the period. This is where president Obama's "Al Qaeda is on the path to defeat" mantra comes back to bite him, viciously.

Not only was the Obama administration cognizant of the emerging al Qaeda threat, it was aware of repeated requests from Benghazi for additional security — requests that were denied. Moreover, as al Qaeda forces were advancing, US forces were being withdrawn. According to CBS News, the State Department removed three Mobile Security Deployment teams and a 16-member Site Security Team between February and August. In the sobering aftermath of such blunders, a stern Obama warned of the consequences to countries that fail to protect Americans: we will send the FBI three weeks later, after reporters have left, examine the crime scene for an hour, and write a nasty report condemning the murders (after the election).

Not only was the Obama administration cognizant of the emerging al Qaeda threat, it was aware of repeated requests from Benghazi for additional security — requests that were denied.

Audaciously taking credit for the death of bin Laden, Obama purposefully evades responsibility for the deaths of Ambassador Stevens and his three colleagues. It is a shameless coverup for monumental ineptitude. He conceals his failed conciliatory policies, his misreading of the Arab Awakening, and his lack of interest in actionable intelligence information. Calls to seek justice and form yet another investigatory panel ("We're still doing an investigation," said President Obama, yukking it up on “The View” while FBI agents fretted in Tripoli) merely hide the negligence that left four Americans stranded in a pathetically unprotected facility to die valiantly and alone, murdered by a horde of terrorist cowards. Negligence, and ineptitude — the ineptitude that has transformed America's "Don't Tread on Me" into Obama’s "Grin and Bear It."

quot;bin Laden is dead




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Neither Real nor Right

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Won’t Back Down is a feel-good film about the power of a single individual, armed with a vision and a voice, to move a bureaucracy.

Jamie Fitzpatrick (Maggie Gyllenhaal) is a working class mother of a dyslexic second grader, Malia (Emily Alyn Lind). Malia has been assigned to the classroom of the weakest teacher in the school, and Jamie wants desperately to find a solution for her failing child. She asks the teacher to help Malia after school; she tries to have Malia transferred to the classroom of a better teacher; she signs up for the lottery of a successful charter school, where Malia must compete with 100 applicants for just three open slots. She even begs the administrator of her former school to take Malia back.

Eventually Jamie hears about a “parent-trigger law,” which provides a way for parents to take over a failing school. (“Parent-trigger law” is perhaps a poor choice of name, considering the level of frustration many parents experience, and the number of shootings that have occurred in schools recently!)

Parent-trigger laws are a fairly new concept in US public education. They were first introduced in California a few years ago, and six other states have followed so far. They apply only to failing schools, and require a majority of the parents to sign a petition and support the change. A successful bid can result in replacing the administration or faculty, creating a charter school, or closing the school and reassigning the students to better schools. Of course, teachers and their unions oppose these takeover bids, sometimes with threats and repercussions against the children of the most vocal parents.

Tenured teachers can’t be fired for being poor teachers, so they are moved from school to school. Woe to the children who are stuck in their classrooms for an entire year!

In the film, Jamie says “Let’s take over the school” with the same spritely optimism as Mickey Rooney and Judy Garland saying “Let’s put on a show.” Through sheer force of personality and salesmanship, Jamie convinces a tired and frustrated teacher, Nona (Viola Davis), to join her, and together they work to gain the support of teachers and parents. But it isn’t that easy. They must first recruit 400 parents and 18 teachers, and file a 400-page document describing their new school — while fighting union leaders and school administrators with six-figure salaries to protect and an arsenal of dirty tricks to employ.

Along the way she cheerfully tramples the property rights of her two employers by giving away free booze to potential supporters at her bartending job and working on the school project during her receptionist duties at a car dealership. Her boss is portrayed as a sharp-nosed busybody, but she has a right to expect an employee’s full attention at work, doesn’t she? And what about Jamie’s responsibility as a mother? She complains about her daughter not getting extra help from the teacher, but shouldn’t she be helping her own child learn to read? How hard is it to read with a child at a second grade level?

The film addresses most of the right problems, with union bylaws and tenure protection at the top of the list. A teacher refuses to stay after school to help a dyslexic student with her reading; it turns out that teachers are actually prevented from staying after school by their union contract. An administrator responds to each complaint with the same tired phrase, “We are addressing that,” as a way to placate the parent while promising nothing. He acknowledges that tenured teachers can’t be fired for being poor teachers, so they are moved from school to school. Woe to the children who are stuck in their classrooms for an entire year!

(Years ago I complained about a teacher who showed movies almost every day, while she played games on the computer. When I told the administrator that she showed The Lion King that day, his face darkened. “Lion King??” he raged. “I told them they couldn’t show Lion King!” Then he shrugged and added, “I know she’s a lousy teacher. There’s nothing I can do. She has tenure.” And she was the department chair to boot. I moved my daughter to a private school. But many parents can’t afford that option.)

So why don’t more parents and teachers take over their failing schools? Time is the biggest deterrent. It usually takes three to five years to get through the process of gathering support, filing papers, writing a charter, hiring teachers, and selecting curriculum. By that time, most children will have moved on to middle school. It requires a person with genuine dedication to the neighborhood to be willing to go through this effort for someone else’s kids. In the film, one teachers’ union administrator complains cynically, “When students start paying union dues, I will start protecting the interests of children,” and he’s right about that. One of the biggest problems with the public school system is that the payer is not the recipient of the service.

Moreover, it takes skill and experience to teach a class or manage a school. That same union administrator suggests that having parents take over a school is “like handing over the plane to the passengers,” and to a certain extent, he is right about that, too. Consider the kinds of neighborhoods that harbor failing schools. Parents with good educations, good jobs, and good incomes will simply move to another neighborhood, or deposit their children in private schools, as I did. They are too busy earning a living to have time to run a school.

Nevertheless, this film ends with cheering crowds and a crescendo of violins. (But is it any surprise that they manage to succeed? In a matter of months? Does Secretariat win the Triple Crown?) But there is no true victory in this film. A charter school may be better than a failing public school, but it is still based on a failing premise: although they are run by parents and teachers, these are still government schools. Salaries are still funded by local property taxes, and students are still tested according to federal standardized guidelines. The film even ends with a rap version of Kennedy’s famous message: “Ask not what your country can do for you, ask what you can do for your country.” The first is socialism, the second is feudalism. Neither bodes well for creativity and individual success. Whatever happened to “Do what you can to take care of yourself”?

The biggest deterrent to good education — standardized testing — isn’t even addressed in this film. I could write a whole treatise on the unintended consequences of “No Child Left Behind.” We now have an entire generation of young people who have been taught that there is only one correct answer to any question: the one they have been spoonfed by the teacher. Creativity and innovation are rewarded with an F.

A charter school may be better than a failing public school, but it is still based on a failing premise.

As for the teachers? They’re getting burned out too. I attended an early evening screening. Just before the film began, several groups of women walked into the theater. All of them talked to each other throughout the screening, looked at their cell phones, and went out to buy treats or visit the bathroom. I would have been more distracted, had I not been used to this kind of behavior; I’m a teacher. I interviewed these ladies after the show. You guessed it: most were teachers. They probably didn’t even realize that they were acting like their students.

Won’t Back Down is an earnest little film, one that is well intentioned but overlong and overacted. Viola Davis looks too tired to be a fighter; and Holly Hunter, normally such a fine actress, is particularly posed and affected in her delivery, her trademark speech impediment, and her gigantic hairstyle. Maggie Gyllenhaal does her best to ignite the enthusiasm of the cast in the same way her character tries to ignite the enthusiasm of the community, brightening her eyes and smiling until her face nearly explodes with goodwill. But it doesn’t work. At just over two hours, the film is 30 minutes too long for a story with no action and little suspense.

Moreover, although Won’t Back Down claims to be “inspired by true events,” it is neither true nor realistic. I couldn’t find a single actual case in which parents have successfully taken over a school under a parent-trigger law. Some have tried, but my research did not turn up any that have succeeded.

If you are genuinely interested in films about failing school systems and want to know how to fix them, I recommend two recent documentaries: Waiting for Superman (2010, directed by Davis Guggenheim) and The Cartel (2009, directed by Bob Bowdon).


Editor's Note: Review of "Won’t Back Down," directed by Daniel Barnz. Walden Media, 2012, 121 minutes.



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Sticking It to Wall Street

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Hardly a day goes by without President Obama blaming our economic woes on the "failed policies of the past." He has made Wall Street reform a top priority. In contrast to the George Bush economic delinquency that abandoned Main Street, his policies will stick it to Wall Street. He will (allegedly) prevent the financial shocks of credit bubbles and real estate booms. Ever-watchful of deceptive mortgage lenders, he will hold them and all other greedy plutocrats accountable for their financial shenanigans.

In truth, the policies of the past engendered regulations that were ignored, unimplemented, unenforced, and, more recently, applied against the wrong people. This travesty was compounded by politicians, regulators, and DOJ lawyers who failed as well. They failed miserably, yet suffered no consequences. Only the people whom regulations were supposed to protect suffered. But this time, as he campaigns for reelection, Mr. Obama tells us, incessantly, he has our back.

The policies that created the too-big-to-fail banks and the scurrilous practices that collapsed the housing market were enacted in the late 1990s, during the Clinton administration. Treasury Secretary Robert Rubin was responsible for the 1999 reversal of the Glass-Steagall Act, which had previously separated retail and investment banking. Its repeal legalized the formation of today's giant banking conglomerates. Rubin's successor, Lawrence Summers, then gave us the Commodity Futures Modernization Act (CFMA), which exempted derivatives from regulation.

With energy derivatives, Enron went on to perpetrate the largest corporate fraud in history. With collateralized debt obligations, giant banking conglomerates (Bank of America, Citigroup, Goldman Sachs, etc.) went on to become giant contributors to the sub-prime mortgage meltdown. Robert Rubin went on to earn over $126 million at Citigroup for a tenure spanning the company's Enron involvement and "merga-mania" phase and proceeding to its near bankruptcy in 2008. This was around the time when candidate Obama began blaming President Bush for the financial crisis. Obama went on to form an economic team led by people who helped create the crisis — economic geniuses such as Rubin protégésLawrence Summers and Timothy Geithner. As Washington Postwriter Steven Pearlstein put it: “The ultimate irony, of course, is that just as Rubin and Co. at Citi were being bailed out by the Bush administration, President-elect Barack Obama was getting set to announce a new economic team drawn almost entirely from Rubin acolytes.”

As an attorney, Obama represented "affordable housing" slumlords, one of whom evicted 15 poor families from their apartments in the dead of a subzero Chicago winter, two months after turning off their heat and water.

What qualified Obama to assemble a team that would, supposedly, stick it to Wall Street? As the Washington Examiner discovered in its 'The Obama You Don't Know” exposé, it was also during the Clinton years that Obama developed his knowledge of real estate and finance. In the early 1990s, heleft the community organizing business for the housing market — as an attorney representing "affordable housing" slumlords, one of whom evicted 15 poor families from their apartments in the dead of a subzero Chicago winter, two months after turning off their heat and water. This experience no doubt proved invaluable when, as president, he led our nation's efforts to recover from "the worst financial disaster since the Depression" — by selecting and relying on the very people who caused the disaster.

Geithner, who became Obama's treasury secretary, was recruited from the New York Federal Reserve Bank, where, as chairman, he was the principal government official responsible for regulating Citigroup. After years of doing nothing to deter the antics that almost bankrupted that firm, he helped forge a deal (with Treasury Secretary Henry Paulson, another Rubin colleague) that stuck it to taxpayers: a $45 billion bailout with an additional $306 billion guarantee against toxic assets.

Unfortunately, Geithner wasn't the only regulator asleep at the switch. All of them were. All of the 18 or so financial regulatory agencies charged with protecting us from Wall Street's sordid schemes failed abysmally. And they did so despite repeated warnings by the Bush administration, from April 2001 throughDecember 2007. At least the Bush administration suspected the coming crisis.

Maybe the regulators thought that Christopher Dodd and Barney Frank,the nation's top Wall Street watchdogs, would actually bark. But this fatuous duo thwarted the Bush attempts to rein in Fannie Mae and Freddie Mac. Under their feckless supervision, the capital inadequacies of the two government-backed mortgage giants crippled the housing market. And as homeowners and the real estate industry lost trillions of dollars, Barney Frank took it upon himself to cause further damage. In July 2008, when Fannie Mae and Freddie Mac stock was selling for $10.25 a share and $9.00 a share, respectively (down from $60 and $67, in January), the ever-vigilant Barney proclaimed, “I think they are in good shape going forward.” How did this ringing endorsement pay off for the many thousands who subsequently scarfed up these stocks? Today, they are selling for about $.25 a share.

For his signature Wall Street reform law, president Obama turned to Messrs Dodd and Frank, entrusting the two who didn't prevent the last crisis with preventing the next one. In a just world, they would have been impeached for the harm caused by their feckless oversight of Fannie Mae and Freddie Mac. But in Obama's world of social justice and economic fairness, they stuck it to us with the Dodd-Frank Wall Street Reform and Consumer Protection Act — an oppressive 2,300 page regulatory monstrosity that exacerbates the dominance of the "too-big-to-fail" oligopoly, reduces the competitiveness of smaller banks, and passes its immense compliance costs on to consumers. And it exempts from regulation — wait for it — Fannie Mae and Freddie Mac.

While 8 million private sector jobs have been lost, inane regulators still hold theirs, further rewarded with raises and promotions brought by the flood of new Dodd-Frank regulations.

Obama brays at the Bush trickle-down policies, but the benefits of Dodd-Frank are illusory, especially to Middle America, which remains stuck in the nightmare of Obama's regulatory trickle down: a stagnant economy, horrific unemployment, and the specter of a returning recession. Regulators are paid obscenely high salaries to protect supposedly powerless investors, bank account holders, and consumers from the wrongdoings of banks and financial institutions. Yet the latter have, in the main, gone unharmed, and so have the regulators. While 8 million private sector jobs have been lost, inane regulators still hold theirs, further rewarded with raises and promotions brought by the flood of new Dodd-Frank regulations.

If the bailout wasn’t reward enough for risky Wall Street practices, immunity from prosecution will make up the difference. After over three years of relentless investigation, Obama's Financial Fraud Enforcement Task Force has not convicted a single Wall Street miscreant of a single crime, even the imaginary crimes that regulators like to invent. Instead of the stereotypical wolves of Wall Street, Eric Holder has chosen to go after the likes of a Connecticut women who allegedly conducted a gifting table Ponzi Scheme, and a Nevada group accused of trying to control condominium home owners’ associations. Scrambling to comply with Dodd-Frank regulations, big banks are firing, not high level executives likely to commit widespread fraud, but thousands of low-level employeeswith jobs far removed from significant transactional crime. For example, Wells Fargo recently fired a 68-year-old customer service representative after discovering that he had been convicted of using a fake dime in a laundromat in 1963. Meanwhile, the legal fees for lawsuits against executives of Fannie Mae and Freddie Mac (which received over $150 billion in taxpayer bailout money) now exceed $109 million. Those fees are paid by — again, wait for it — the taxpayers.

The banking oligarchy is doing quite well under President Obama. So too is his ever-expanding regulatory leviathan. The rest of us are left to struggle through the slowest economic recovery since the Great Depression. It is a struggle exacerbated by stifling regulations, unprecedented compliance costs, and the knowledge that none of the people responsible for the financial crisis (certainly corrupt Wall Street executives, but also incompetent politicians and inept regulators) are in jail. All the sticking has been to us. Still, as the election approaches, many believe that Obama is the right man for the job. They fear Mitt Romney, who wants less regulation. Obama, of course, demands still more — especially after the shock that his Dodd-Frank reforms failed to prevent the MF Global and JP Morgan scandals. Evidently, he needs four more years to deal with Wall Street. Perhaps his supporters believe that, with his brilliant legal mind, he will find enough laws to do so. After all, he got the slumlord off with a $50 fine.




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Dear Leader

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I’m sure that the president's choice last night to rein in his brilliance and heart and allow Romney to “win” the debate is part of a brilliant strategy. I’ve understood Barack Obama’s brilliance from the very beginning — I bought a copy of The Audacity of Hope and Change in, like, early 2008. Before everybody else did. Some regular people are intimidated by his brilliance. And his heart. But I’m not. I understand it.

I mean, some people are saying that the president will have to lower himself to that liar Romey’s level and lie to get votes. But Barack Obama can’t lie. I mean, he just can’t — he’s too brilliant and has too much heart. Some people don’t understand that, but I do. I have an original Obama sticker on my Prius — not the Obama/Biden sticker and not a 2012 sticker, but the original “O” sticker that only charter supporters could get.

I know that some people are saying that Obama should have “hit back” at Romney in the debate. But those people aren’t true Obama supporters. They’re just pretenders who only care about the horse-race qualities of an election and don’t understand Obama’s brilliance. And heart. The man has so much heart that he can’t help being so much bigger than people like Romney. Romney and his mean-spirited dismissal of the 47%. What an elitist snob. I can’t believe he got the Republican nomination!

I realize that, at times like last night’s debate, Obama’s brilliance is a cross he has to bear. And his heart. I know that feeling — it’s something people like me and the president have in common. I mean, I’m not going to say I’m as brilliant as Barack Obama. Or have as much heart. But we do share a few similar traits.

I was on Facebook this morning, reading what Michelle had to say about how rude Romney was last night, just ignoring the rules and talking right over that weak moderator. I’m part of Michelle’s true friends circle on FB — not the one that’s open to the public, but the one where you had to have been a charter supporter to get invited. So I get to read what she really thinks. Michelle is so brilliant. Anyway, while I was reading what Michelle really thinks about the debate, I realized something: politics is beneath Barack Obama. His heart is so much bigger. And he’s so much more brilliant.

I understand something now that regular people probably don’t. You have to have been with Barack and Michelle from the beginning to get this — I mean, Michelle gets it. And Sasha and Malia probably get it, but regular people don’t understand. Barack needs a platform worthy of his brilliance and heart. If he chooses not to demean himself and pander in a vulgar popularity contest, it will prove that his brilliance and heart are just too brilliant for the common American voter.

I’ve kind of known that all along, before all the regular people started figuring it out.




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Round One: Romney

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The first of three presidential debates between Barack Obama and Mitt Romney was held last night. New Jersey governor Chris Christie had boldly predicted that the event would be a “game-changer” for the Romney campaign. As it turned out, Christie was probably overstating things. Nevertheless, Romney’s energetic performance put new life into his quest for the White House, while Obama let slip an opportunity to finish off his Republican opponent.

The immediate post-debate analysis seemed to stress style over substance. Romney, pundits agreed, looked happy to be on the University of Denver stage, while Obama appeared to endure the 90-minute debate. Romney smiled; Obama scowled. Romney was aggressive and weighed in on issues with gusto; Obama was rather detached and professorial. Romney ran roughshod over moderator Jim Lehrer; Obama was more diffident in dealing with the aging and rather incompetent PBS journalist. The performances left MSNBC’s coterie of lefties in a state of near-apoplexy, while at Fox there was smug satisfaction.

This observer thought Romney started and finished strong, while Obama scored some important points in between. The debate was to be divided into six segments. The first three concerned aspects of the economy (jobs, the deficit and debt, and entitlements) followed by healthcare, the role of government, and “governing.” The first segment ran over time — no surprise, given the flabby moderator — and time pressure caused the segment on governing to be dropped. Romney scored substantive points on Obama’s persistent deficits, his energy policy (billions thrown away on green energy boondoggles, lack of oil and gas drilling on federal land), and feeble job growth. Indeed, during the first half of the debate he dominated the stage, despite the fact that some of his arguments and assertions didn’t quite pass the smell test.

About halfway through the debate the subject of Medicare was introduced, and here Obama fought back by eviscerating the Paul Ryan voucher scheme. The president helped himself with seniors, a critical constituency that had already begun moving his way after the selection of Ryan to be Romney’s running mate. Obama also touched a populist chord with some well-chosen words regarding the regulation of Wall Street, and without having to explain or justify the absurd aspects of his main regulatory tool, the Dodd-Frank legislation passed in 2010.

That said, Obama muffed the chance to finish off Romney and end the race a month before Election Day. Obama never mentioned the notorious 47% recording, giving Romney free rein to express (which he did over and over) his love and compassion for everyone in America. He failed to mention the Republican-led House of Representatives, despite the fact that Congress is the most unpopular institution in America. He said nothing about Romney’s tax returns or overseas accounts — juicy populist targets that could have energized not just the Democratic base, but many white working-class voters who lean Republican. For Obama, this debate was definitely an opportunity lost.

Romney, down for the count coming in, picked himself up off the mat and is now back in the fight. For true conservatives — not to mention libertarians — his performance had to grate, for he tried (as usual) to be all things to all people. He was once again short on details about his major policy proposals. And he refused (understandably, since it would be political suicide) to make clear the stark choices America faces, particularly on the fiscal front. His success last night was not, with apologies to Governor Christie, a game-changer, but it does give him hope and the opportunity to make the race competitive again.

Was Obama rusty, as some pundits postulated last night, or did he hold back for fear of appearing to be an “angry black man,” something that he and his handlers have been concerned about since he first declared his candidacy for the highest office? We’ll probably never know, but the betting here is that he will be much more aggressive in the remaining two debates. That and the tendency of Mitt Romney to place his own foot firmly in his mouth will, this observer believes, lead to a second term for Barack Obama.




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Europe’s Next Tax Horizon

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If they weren’t so snide, smug, and supercilious, you would almost be tempted to pity the wretched Europeans — you know, the culturally superior members of the human race. I mean, they are more or less bankrupt, what with their “generous” and “compassionate” welfare states now running out of tax money. And, brother, do they have taxes — in the matter of taxation, they are the wet dream of Obama-worshipers. They have confiscatory income taxes (in France, now set at 75% for the highest bracket), massive property and gas taxes, and national sales taxes (aka VAT taxes) in the mid-20% range that is standard in the rapidly declining continent.

The idea of cutting the sickeningly bloated welfare state is unpopular in these benighted regimes, and normal tax sources are now taxed to the max. So the challenge to the welfare statists is to come up with new tax sources.

The Germans — ever keen and crafty — may have solved the problem. It was recently reported that the more left-wing German political parties (the Social Democrats and the Greens) are now suggesting a wealth tax of 1% on total assets of 2 million Euros or more. So even if you are retired or otherwise unemployed, but along the way you and your spouse have managed to buy a nice home, jewelry, perhaps a portfolio of stocks and bonds, maybe some artwork — the total value will be assessed (at no doubt inflated valuations — remember, the entity doing the assessment will be precisely the one that pockets the money), and looted.

Anyway, that’s where it will start. Remember, the original American federal income tax started very low (top rate of 7%). So did the VAT tax in all the European countries cursed with it. What happens is that the burst of new revenue always results in not just the expansion of existing social welfare programs but the creation of whole new ones, which — like bay cockroaches — will only grow and multiply further.

Indeed, one German “thinktank” has called for a one-time tax of 10% on all wealth over 250,000 Euros. This would likely bring in about the equivalent of 9% of GDP, and an eager exit of capital from the country.

But again, who believes it would be done just once? The same egalitarian arguments for doing it once will be used to justify doing it (say) every other year, or even every year, or even every 6 months, or even . . .




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Reverse Order

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Grace, a new play by Craig Wright, opens to a minimalist set of simple bamboo furniture, the kind you might find in a Florida beach rental. A front door and a sliding glass door stand alone, but there are no actual walls. Dominating the set is a halo of blue sky and puffy white clouds projected on the back wall and suggesting a hint of heaven. This is appropriate, because the idea of heaven dominates the theme of this play. In fact, for the first ten minutes, the audience sees nothing else. People fidget, waiting for the show to start, wondering why it is delayed. But in fact, like a Pirandello play, it has already begun.

Suddenly the halo of light turns ghastly green. Three characters, two men and a woman, enter the stage and immediately collapse to the floor. After a few moments one of them, Steve (Paul Rudd), rolls up onto the couch in a slumped position and then sits upright. His body shudders, a shot rings out, and he points a gun to his head. The scene is about to rewind. Dialogue is spoken in reverse order. The words are cosmic in timbre but out of context and confusing. More shots ring out and then everyone is standing. It is one of the most stunning opening scenes I have ever witnessed.

And then the sky is bright blue again. Sara (Kate Arrington) is cheerfully folding laundry as Steve enters their apartment with happy news. They have come to Florida to start a chain of “gospel-themed” hotels, and an investor has just committed to sending them $9 million. They are perky and happy and in love. And they believe. Oh, do they believe!

As they praise God and pray their gratitude for being guided to this place at this time for this purpose, Tim (Michael Shannon) limps onto the set shouting “Thank you Jesus F-ing Christ!” It is a primal scream of ineffable pain. His arm is secured in a sling and his face is covered in a mask to heal what appear to be hideous wounds. The set, we learn, functions simultaneously as Steve and Sara's apartment and as Tim’s apartment next door. It isn't a staging shortcut but a metaphor for how lives intertwine. It also suggests that life is far from fair or equal, despite Declarations to the contrary.

Graceis billed as a comedy, probably to attract the fans of Paul Rudd, who is best known for his comic rolls in Judd Apatow's popular and often raunchy movies (Knocked Up, The 40-Year-Old Virgin, Anchorman). Grace does have moments of biting irony. Moreover, with Ed Asner cast as Karl, the crotchety old pest control man, one would expect a play filled with offensive anti-Christian jokes and rants. Indeed, when Karl calls Steve "Jesus Freak" — and he does so frequently — the audience roars its approval. "Gospel-themed hotels"? This is, after all, what they came for.

But it isn't what they get. Grace has more in common with Greek tragedy than with light comedy. As the characters come to know one another, the play asks the audience to consider the cosmic questions: What is the purpose of earth life? Does God exist? If so, why do people suffer? If God is going to interfere in the affairs of men, why would he use a miracle to make Steve and Sara rich, but not intervene to prevent Tim’s tragedy? As Robert Frost asks in his poem “Design,” “What but design of darkness to appall? — / If design govern in a thing so small.”

Another question the playwright asks us to consider is whether the world is governed by fate or choice. Several times characters plead, "Can't we just start over?" The opening scene itself is a rewind, suggesting that a do-over would be the greatest miracle of all. Would we change things if given a second chance? Or are our actions predestined?

Although Grace poses the questions, it wisely does not try toprovide the answers. Instead, what we have is a riveting story presented through deftly acted characters who seem as though they could indeed live next door. Tim, a rocket scientist, represents the atheistic view. His earthbound job of filtering out the data noise that interferes with “pure communication” from space is a perfect foil for the worldly noise that believers filter in order to hear the “pure communication” of the spirit. Karl provides not only comic relief but a poignant back story. Asner fans will be sorry to see that he is onstage only briefly, but his part is the subtle heart of the story.

Graceis a brilliant show with brilliant staging and a brilliant cast. Paul Rudd is particularly natural as the earnest and affable young Jesus Freak — er, Christian — who feels compelled to invite everyone he knows to accept the reality of Jesus Christ. He has his standard arguments that seem to prove the existence of God — at least to him. His open smile and eager enthusiasm reveal a surface-bound testimony. Sara is the one who presents the deeper meaning of what it is to be spiritually converted. Perhaps the real gift of miracle lies not in being protected from suffering, but in being helped to endure it.


Editor's Note: "Grace," written by Craig Wright, directed by Dexter Bullard. At the Cort Theatre on Broadway, New York City, until January 6.



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The Shape of Things to Come

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On August 1, the City of San Bernardino, California, filed for protection under Chapter 9 of the U.S. Bankruptcy Code. Chapter 9 is designed for municipalities and other local governments; the federal government can’t declare bankruptcy. At least that’s what most bankruptcy experts claim.

City officials gave media outlets the same explanations that CEOs of bankrupt companies often do: the mayor explained that the City would continue to meet its payroll and pay essential bills. He said that the main reason the City was seeking bankruptcy protection was to prevent lawsuits from being filed by a couple of angry creditors.

Asked to explain the cause of the crisis, San Bernardino officials passed the buck. They said that, because of budget shortfalls at the federal and state level, California Gov. Jerry Brown and the state legislature had made changes to vehicle tax money and redevelopment agencies that stripped local governments of hundreds of millions in state funding.

One of the most destructive qualities of statism is its tendency to turn good intentions into disastrous results.

This was true. But not everyone accepted the official explanations as the whole truth. Some conspiracy-minded sorts hinted darkly about criminal wrongdoing in City offices. Others looked through San Bernardino’s filing and pointed to one of its largest creditors: the City owed the California Public Employee Retirement System (CalPERS) some $143 million in unfunded pension obligations.

For its part, CalPERS claimed that San Bernardino was using a misleading “actuarial” calculation of its obligation and actually owed something closer to $320 million.

Now, that was a fiscal emergency.

San Bernardino also drew media attention because it was the third California city in as many months to file for bankruptcy protection. In June, Stockton had sought bankruptcy protection because it couldn’t come to agreement with its employee unions on a plan to close the $26-million gap in its general fund; in July, the ski-resort town of Mammoth Lakes had filed bankruptcy (its story was slightly different, though; the Mammoth Lakes meltdown was triggered by a court judgment the town couldn't pay).

Welcome to the late stages of American statism. Government and quasi-governmental agencies battling in bankruptcy court. Political rhetoric piling high. Bureaucrats talking evasively about where tens or hundreds of millions of dollars have gone.

* * *

On July 26, San Bernardino’s Interim City Manager, Andrea Miller, and Director of Finance, Jason Simpson, delivered to the mayor and city council a report called the Budgetary Analysis and Recommendations for Budget Stabilization. The report lays out the City’s problems and various possible solutions — including several that might have avoided bankruptcy. It’s a dense and important document, a harbinger of trouble ahead for spendthrift municipalities and states.

At the start, the report notes:

The City of San Bernardino has been affected by the serious economic recession as have other cities and has taken steps over the last several years to reduce costs. Nevertheless, costs continue to outpace revenue due to increased operational expenses and significant rapid declines in property tax revenues as a result of a drop in property values and decline in sales tax revenue. Deficits of major proportions are projected in all five years of the forecast created as part of this project. To ensure basic operational service levels are maintained and anticipated cash flow requirements are met, steps will be needed immediately to reduce costs. . . . If these measures do not achieve immediate and substantial cost savings, then the City will have to explore other alternatives to deal with its fiscal crisis.

They didn’t. And, less than a week later, the city council decided to declare bankruptcy.

A quick side note: I’ve read Miller and Simpson’s report numerous times in the preparation of this piece; and, each time I read through it, I’m more impressed. It’s an honest assessment of how a municipal government (or, by extension, any government) can stumble into insolvency, despite the best intentions of several generations of leadership — including leadership that fancied itself reform-minded. Indeed, one of the most destructive qualities of statism is its tendency to turn good intentions into disastrous results. That tendency is on full display in the San Bernardino story.

While the report does take off on some tangents of bureaucratic jargon, most of its 49 pages are a fairly common-sense narrative of what happened. And what needs to be done to get the City back on an even financial footing.

This is how the report describes San Bernardino’s financial circumstances:

Reserves in the General Fund were exhausted years ago, reserves in the internal service funds were also depleted and the City has encumbered itself with various debt obligations and labor agreements putting additional and unnecessary risk on the General Fund.

The City has declared numerous fiscal emergencies based on fiscal circumstances and has negotiated and imposed concessions of $10 million per year and has reduced the workforce by 20% over the past 4 years. Yet, the City is still facing the possibility of insolvency due to a variety of issues including accounting errors, deficit spending, lack of revenue growth, and increases in pension and debt costs. . . .

Over the past several years, the City has utilized General Fund reserves, asset sales and one time revenues to maintain City services. To address the projected deficits in previous fiscal years, the City has reduced positions, negotiated compensation reductions, and implemented new revenue measures. Unfortunately, the decline in taxable sales and property values over the last several years has resulted in revenue losses of $10 to $16 million annually.

In other words, it had used the usual one-time, off-budget legerdemain and accounting gimmicks that spendthrift governments — and spendthrift people — instinctively employ when they expect some future windfall to make everything okay. In San Bernardino’s case, the one-time tricks had been played . . . and there was no windfall coming.

According to the report, for the 2012–13 fiscal year, the City’s expenditures would exceed revenues by $45 million. And that annual shortfall would only increase over time.

The report lays out some of the most critical financial weaknesses facing the City:

  • Because the City has used reserve funds to balance previous budgets, there are no reserves in place to balance current and future budgets.
  • Budget choices made in previous years have left the City with high capital lease balances for equipment — and no effective way to refinance or otherwise resolve those expenses.
  • Because of the loss of federal and state redevelopment funds, the City has insufficient economic development programs in place to project stronger tax revenues in the future.
  • Since the City has a current deficit in its General Fund, it does not have sufficient unrestricted cash available to pay its ongoing obligations.
  • The City has an unemployment rate above state and county averages.
  • The City has an unusually high ratio of public safety costs to overall General Fund revenues.
  • The City’s expenses were over budget in FY 2011–12 and would be massively more so in 2012–13 and following.
  • The City’s failure to complete its FY 2010–11 budget audit on time delayed necessary budget reductions, further depleting cash.
  • The starting General Fund balance has been erroneously stated for each the previous two fiscal years.

In mid-July, the San Bernardino County sheriff’s office announced that it was involved in a multi-agency criminal investigation of the City government. The sheriff’s announcement didn’t indicate whether the investigation was related directly to the City’s bankruptcy filing. It referred to “allegations of criminal activity within departments of the San Bernardino city government” and confirmed that it would focus on those General Fund balances, which had been “erroneously stated.”

And, then, the hardest truth: “It is atypical practice for cities to have adopted [sensible] budget policies” like these. That may be the biggest problem that the United States faces today.

But the City’s financial problems aren’t (or aren’t entirely) the result of malfeasance. Many of its problems are structural. San Bernardino’s population is approximately 211,000; that number has been increasing rapidly since the 1970s. Because the City is a bedroom community and has never had a substantial commercial or industrial base, its population growth has outpaced growth of tax revenues needed to provide essential services.

According to the report, the largest employers in the City — in roughly descending order — are local government agencies, California State University San Bernardino, the San Manuel Band of Mission Indians, and San Bernardino Community Hospital. The common thread? There’re all either government agencies or government-dependent entities, relying directly or indirectly on public money for the majority of the revenues.

* * *

An important strategy for avoiding structural budget deficits is to adopt a budget philosophy that can serve as a meaningful framework for maintaining financial discipline.

This may sound elementary: Reporting on a government entity’s finances clearly and for public discussion is a way for the fiduciary responsibilities of elected officials and executive managers to be understood by the public and organization. But many government entities have become so decadent that they no longer look at financial reporting in that way.

The San Bernardino report describes some “best practices” in public-entity financial management:

  • Structurally Balanced Budget. The annual budgets for all City funds should be structurally balanced throughout the budget process. Ongoing revenue should be equal to or exceed operating expenditures in both the proposed and adopted budgets. If a structural imbalance occurs, a plan should be developed and implemented to bring the budget back into structural balance.
  • Multi-Year Financial Forecasting. To ensure that current budget decisions consider future financial implications, a five-year financial forecast should be utilized by the staff and Council. The annual General Fund proposed budget balancing plan should be presented and discussed in context of the five-year forecast. Any revisions to the proposed budget should include an analysis of the impact on the forecast out years.
  • Use of One-Time Resources. One-time resources (e.g., revenue spikes, budget savings, sale of property, and similar nonrecurring revenue) should not be used for current or new ongoing operating expenses. Examples of appropriate uses of one-time resources include rebuilding reserves, retiring debt early, making capital expenditures (without significant operating and maintenance costs), and other nonrecurring expenditures.
  • Established Reserves. San Bernardino has multiple funds, based on different revenue sources and requirements. Because there are risks (both known and unknown), it is important that reserve levels in all funds be maintained as a hedge against such risks. Without proper reserves, there can be major disruptions in services when unforeseen financial demands emerge, requiring immediate attention.
  • Debt Issuance. A municipality should not issue long-term (over one year) debt to support ongoing operating costs (other than debt service) unless such debt issuance achieves net operating cost savings and such savings are verified by appropriate independent analysis. All debt issuances shall identify the method of repayment (or have a dedicated revenue source) without an impact to operations.
  • Employee Compensation. Negotiations for employee compensation should continue to consider total compensation bargaining concepts and focus on all personnel services cost changes (e.g., step increases and the cost of benefit increases). Compensation costs should be included in the five-year financial forecast to ascertain affordability to the municipality, within context of expected revenues.

Summing up these points, the report concludes:

To resolve its structural budget deficit and prevent a recurrence in the future, the City needs to adopt a budget philosophy similar to the measures above to help elected and appointed officials maintain the financial discipline crucial to a growing community like San Bernardino.

And, then, the hardest truth: “It is atypical practice for cities to have adopted budget policies” like these.

That may be the biggest problem that the United States faces today.

* * *

For decades, the City of San Bernardino — like many of its residents — counted on rising real estate prices to subsidize the shortfalls in its day-to-day operations. For the City, these subsidies took the form of sharply increasing property tax revenues; the rising revenues allowed the City’s senior officials to grow sloppy.

Warren Buffett has a famous quote that’s relevant to this sloppiness (though it pains me some to quote such a chiseling crony capitalist): “It’s only when the tide goes outthat you discover who’s been swimming naked.” When the southern California real estate market collapsed, the tide went out. And San Bernardino was caught without its shorts.

The report takes a hard look at the City’s prospects for regaining some of the property revenues it lost to the collapsing California real estate bubble:

There are actually two bottoms for housing. The first is new home sales, housing starts and residential investment. The second is sale prices. Sometimes these can happen years apart.

Calculaterisk.com [an economics web site cited by one of the City’s property tax consultants] reports that the first housing bottom was spread over a few years from 2009 until 2011. They believe the second bottom, prices, hit in March 2012. This doesn’t mean prices will increase significantly any time soon. Usually, toward the end of a housing bust, normal prices mostly move sideways for a few more years. Real prices adjusted for inflation could even decline for another 2 or 3 years. . . .

Because we do not anticipate much growth with housing new starts or employment in the near future . . . we should assume construction-related permit activity will also be flat or possibly continue with its decline. Permit activity within most California cities has been very volatile with trends pointing to decreasing activity.

This is an interesting and useful discussion of cycles in the real estate market. But it hints at one of the many problems that come when a government agency tries to “time” a market. If San Bernardino’s consultants are right and a real estate market has a two-part bottom — and if those two parts occur years apart — predicting trends in property tax revenues at or near the bottoms is practically impossible.

In the end, all the report could conclude is: “The rate of revenue growth has not been sufficient to meet the contractual and debt obligations of the City.”

* * *

Every financial crisis — whether it involves a municipality, a company or a family — has two parts: expenses that are too high and revenues that are too low. The drop in property tax revenues was only half the reason for San Bernardino’s lurching deficit. The other half was the City’s expenses. And expenses are the thing bankrupt entities of any sort have to address first when they’re trying to emerge from their crises.

Here’s how the report describes San Bernardino’s expenses:

Roughly half of the annual deficit is attributed to unfunded liabilities in City Retiree Health, Workers’ Compensation and General Liability accounts.

The remaining half is attributed to increasing operational costs and the end of employee concessions. As early as FY 2009–10, expenditures exceeded revenues and the City had begun to utilize prior year fund balances to avoid service cuts or delays in projects. Because expenditures continue to exceed revenues, fund balances have been depleted and have reached a critical point in 2012–13 where the City will begin the year with an actual deficit and significant cash flow constraints.

Put into perspective, this projected deficit in 2012–2013 represents almost 38% of the General Fund budget for that year. The remaining fund balances cannot pay for ongoing operating costs and large sustained reductions will be required. Reducing ongoing expenses must largely come from ongoing reductions in personnel costs since these costs represent about 75% of total General Fund expenditures. Of the personnel costs in the General Fund about 78% are for public safety.

City of San Bernardino Public Safety and Fire expenditures consume the majority of the budget, some 73% of the General Fund in FY 2011–12. And personnel costs in total account for about 85% of the General Fund.

When the southern California real estate market collapsed, the tide went out. And San Bernardino was caught without its shorts.

“Public Safety” is, of course, bureaucratese for “police.” The problem that San Bernardino and other bankrupt local governments face is that the most essential service they provide citizens is police and law enforcement. Everything else — education, parks, growth management plans, performing arts centers, and sports stadiums — pales in comparison to keeping cops on the streets. And crime to a minimum.

Here’s the report’s suggestion for cutting the cost of law enforcement in the City:

To substantially reduce costs in the public safety services, the City will need to reduce staffing, or seek out contract opportunities for the City’s Police Department to provide services to adjacent communities. In recent years, several municipal police departments have provided services to others under contracts for service. In fact, its common place for public safety departments to share dispatch services.

This is an important point to consider for the future of local governments. Cities, at least smaller ones, may not be the most efficient mechanism for financing law enforcement. As the report suggests, a regional law-enforcement infrastructure may be more cost-effective. This suggestion won’t sit well with many mayors and city councils, since their authority over the local constabulary is often their strongest source of political power.

But, when a bankrupt city like San Bernardino has three-quarters or more of its financially unsustainable budget dedicated to “public safety” expenses, it has abdicated the political power that comes with being the boss of the cops.

* * *

The San Bernardino report notes that “reductions to the expenditure side of the budget are not going to produce the level of savings that will be needed to balance the budget.” And, to boost revenues, it suggests increases in or additions of the following municipal taxes:

  • Real Property Transfer Tax
  • Utility User Tax
  • Sales Tax
  • Transient Occupancy Tax
  • 911 Communications Fee
  • Fees for Recovering Paramedic Costs

With bureaucratic resentment, the report notes that “all would require voter approval.”

In the meantime, the City has to find other, more immediate, ways to raise money. In this effort, the report circles back to an idea that it’s already admitted is bad for the City’s long-term fiscal health. Even though the report warns against paying for ongoing expenses with one-time transactions, the authors can’t ignore the quick money available from privatizing real estate:

Currently the City [owns] 294 parcels with total book value of $300 million and a likely sale estimate of less than $100 million dollars. Given the City’s 18% of the property assessment, the sale of these parcels would generate roughly $18 million dollars. The City may also wish to explore selling or leasing some of the parcels at below-market rates in order to incentivize developers and other business interests to spur additional economic development and development-related revenues.

Selling assets doesn’t improve the financial prospects of a city — or a business, or an individual — in the long-term. But insolvent entities don’t have the luxury of making the long term a priority. They need to survive the near term. So, they sell things.

The report tries to inject some wisdom into the breathless discussion of raising taxes and selling off real estate. On these matters, it concludes:

. . . the pursuit of new revenue sources and/or increasing existing revenues is a strategy that can no longer be ignored. However, seeking to increase revenues that are subject to large fluctuations should not be treated as a cure-all. As was the case with revenue received during the real estate boom, some increased revenue could be short-lived.

Therein lies the problem. Governments at any level are rarely able to see past the short-term. Even — or especially — when their press releases talk about the importance of long-term vision, statist entities rarely have it. Twenty years ago, hundreds of books and thousands of articles were written about the long-term vision of Japan’s mighty Ministry of International Trade and Industry. How the mighty have fallen. MITI doesn’t exist any more.

* * *

All of this discussion is really just a warm-up act for the 800-pound gorilla at the center of San Bernardino’s problems: the expanding amount of money required to maintain the pensions owed to retired City employees. Here’s how the report describes this issue:

. . . the City is faced with increasing pension costs, as CalPERS adjusted the investment returns increasing retirement costs to all its members starting in FY 2013.

The City’s costs for employee retirement have increased from $1 million in FY 2006/07 to nearly $1.9 million in FY 2011/12. By FY 2013/14 the annual cost will be over $2.2 million. To put this into perspective, the City was spending about 9% of its General Fund budget on retirement costs in FY 2006/07. In FY 2011/12 it will need to spend 13% of the budget on those costs, and by FY 2015/16 it will require 15% of the budget for retirement obligations. [This] is basically an overhead cost over which the City has little control over in the short term.

California law grants CalPERS extraordinary powers (essentially, taxing powers) by which it can demand payments from cities, counties, schools districts, etc, if it runs short of the money needed to meet its defined-benefit pension distributions. Kind of like a cash call to members of business partnership.

This creates a great deal of moral hazard. The San Bernardino report describes this in painful detail:

To address growing public safety pension obligations, the City issued pension obligation bonds (POBs) in 2005. This is a common strategy to reduce unfunded liabilities through the issuance of fixed-rate bonds. . . . the City’s annual pension costs were reduced by $2 million after the issuance of the bonds. However, at the time of the issuance of bonds and subsequent deposit of bond proceeds into the City’s public safety account, CalPERS lost a significant amount of its pension portfolio. The market losses have negatively impacted the City beyond the losses of its deposited funds and have completely reserved all the saving realized from the issuance of POBs.

So, CalPERS’s shoddy investments negated any advantage for the City in issuing pension bonds. The City is still responsible for paying back its bonds…and CalPERS can demand additional money from the City to make up for CalPERS’s bad investments.

It’s as if you refinance your home mortgage to get a lower interest rate. But, after agreeing to the refi, the bank reneges and raises your interest rate back to where it was before and then increases the principal amount of your loan because it lost money on an investment scheme involving Greek bonds.

Twenty years ago, hundreds of books and thousands of articles were written about the long-term vision of Japan’s mighty Ministry of International Trade and Industry. Today, MITI no longer exists.

CalPERS divides the payments that it demands — which it calls “rates” but which aren’t “rates” in any insurance or actuarial sense — into two parts: employee rates and employer rates. According to the San Bernardino report:

It has been a common practice for San Bernardino and many other agencies to pay both parts of the rates. However, recently the City was able to negotiate with the employee groups for all new hires after October 2011 to pay the full employee share. . . . The City could negotiate with current employees to pay all or a portion of the employee share. Further, the City could negotiate any level of sharing with its employees and is not limited to [traditional formulas]. Some cities are planning for [their employees to pay] a greater share of PERS costs than what has commonly been referred to as the “employee share.”

This is an overlooked point. CalPERS can raise the “rates” it demands from local governments as much as it needs to; and those local governments can simply pass CalPERS’s higher demands onto their workers. Or file bankruptcy.

In the years leading up to its bankruptcy filing, San Bernardino did what conventional wisdom suggested for getting its pension obligations in order. It negotiated a “two-tier” retirement benefit program wherein newly-hired employees receive a smaller retirement benefit than more senior employees. But the effects of these new deals are still years away. According to the report:

Savings under this program will build with workforce turnover, as employees under the current system retire and are replaced by employees at the new rate. Therefore, initial cost reductions are minimal but savings to the City in the long term will be significant.

Long-term solutions for near-term problems — the opposite of what a prudent financial manager should propose. In the meantime, the City was still desperate to cut costs. Immediately.

As California’s local governments downsize their employee bases, even slightly, a shrinking number of remaining employees end up paying CalPERS “rates” to support the pension demands of a growing number of retirees. This system is not sustainable. In fact, it’s a bubble . . . if not a Ponzi scheme.

Some senior elected officials in California — including, to his credit, Gov. Jerry Brown — have started to discuss “pension reform” as a pressing issue for the state. But their talk remains rather academic; in the real world, for San Bernardino, annual pension costs have grown from $1 million in FY 2006-07 to $2.2 million in FY 2012-13. That’s a shocking increase in a sunk cost — and one that’s not affected by anything the City does today, including layoffs, restructurings, assets sales, etc.

As the report notes: “costs are increasing at rapid rates significantly beyond increases in revenue and are no longer affordable to most public agencies.”

* * *

So, downsizing local government workforces is a Gordian knot.

The layoff program used by most local governments and public agencies in California is referred to as the “Golden Handshake,” made available under the California Public Employees Retirement Law (Gov. Code, 20903). The Golden Handshake, also as known as the “CalPERS Two Years Additional Service Credit” benefit, requires a local government to provide two additional years of service credit for the calculation of pension benefits to “employees who retire during a designated window period because of imminent demotions, mandatory transfers or layoffs.” While it can provide some short-term savings, this arrangement adds to a city’s future retirement costs and limits management flexibility. For example, the Golden Handshake requires an employer to establish a “window period of at least 90 days and no more than 180 days” to solicit early retirees.

This is a kind of madness. Cities on the verge of bankruptcy don’t have six months to wait for workers to come forward for early retirement. So CalPERS’s union rules end up being largely irrelevant in the circumstances where action is needed, like the ravings against “greedy corporations” of a 30-year-old graduate student at a bottom-tier university.

As the San Bernardino report notes:

The cost-effectiveness of these programs must be examined within the context of an aging workforce. . . . the program [must] be carefully managed to ensure that the option is only offered in instances where a financial justification exists. If that is not the case, the City could be put itself in a situation where additional layoffs are needed to pay for early retirements.

That last line reads like something out of George Orwell. Or: the beatings will continue until morale improves.

Out of this Orwellian muck, the City has to keep streets open and police on them. The essential elements, to most people, of the social contract. So, for the foreseeable future, local governments like San Bernardino will be faced with firing some workers . . . or firing more. Faced with an existential threat to the notion of “city” itself. As the report concludes:

The revenue forecast shows that significantly lower costs will be required for the foreseeable future. During this period of time, it has been noted the that Council, residents and businesses in the City expect and deserve a well well-maintained street network, nice manicured parks, cultural opportunities, well-maintained neighborhoods, in addition to fundamental public safety services. The challenge to the City will be to identify what it can afford and how that relates to the type of community services it wants to provide.

Indeed.

* * *

These problems are only going to get worse in the coming years. As the federal government reaches the limits of its borrowing capacity, it will be forced to cut back on block grants and other disbursements to the states. As the states have to deal with these cuts — and structural problems of their own — they’ll cut payments to cities and counties.

And the cities and counties will go bankrupt.

Even in bankruptcy, California’s cities and counties won’t be able to correct their economic models without restructuring the pensions that they promised public employees in more prosperous (or what seemed like more prosperous) times. According to a February 2012 Stanford Institute for Economic Policy Research report, public-employee pension spending in California grew an average of 11.4% a year between 1999 and 2010. That’s twice as fast as spending growth for essential budget items like public safety, health and sanitation.

These problems aren’t limited to California. As Reuters recently noted:

CalPERS has long argued that pension contributions cannot be touched even in a bankruptcy. But firms that insure municipal bonds have strenuously objected to the idea that pension payments should come ahead of bond payments. The outcome of how CalPERS and bondholders are treated as creditors . . . and whether CalPERS receives preferential treatment . . . will have broad implications for local governments around the country.

In the weeks since its bankruptcy filing, San Bernardino has slogged along. It made payroll in August and September. Miller and Simpson are still in their jobs, trying to keep things running in some semblance of order.

The City plans to layoff more employees and shut down libraries and has reduced its annual shortfall from about $45 million to $7 or $8 million. But this still isn’t sustainable.

The multi-agency criminal investigation hasn’t produced any results. Yet. Some locals say that it has more to do with political theater (specifically, a feud between San Bernardino’s mayor and city attorney) than any prosecutable crimes.

Even in bankruptcy, California’s cities and counties won’t be able to correct their economic models without restructuring the pensions that they promised public employees.

The real battle remains between San Bernardino and CalPERS. And this is a battle that neither side seems particularly interested in joining. The City, like many bankrupt debtors, seems to believe that the longer it delays a resolution of the money it owes CalPERS, the lower the final number will be. CalPERS, on the other hand, seems to be concerned that the San Bernardino bankruptcy will expose it as another of Warren Buffett’s naked swimmers. Or, more in line with its haughty history, an emperor with no clothes.

CalPERS lawyers can cite statute and weep well-rehearsed tears over pabulum like “fairness” and “austerity” but they can’t get blood — or $320 million — from a turnip.

And the City of San Bernardino is merely the first of many turnips ahead.

p




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