Without Representation – We Need a Leader Rather Than a Politician

Without Representation

In multiple articles addressing the unaltered failure of members of Congress to uphold their oaths of office, The Committee for the Constitution outlined a series of definitive legislative agendas that if enacted would serve to “protect and defend the Constitution of the United States and the Bill of Rights according to the expressed intention of “the supreme law of the land”. From states’ rights, judicial activism, to taxes and well beyond Congress has failed. Faced with the blatant violations of Constitutional intention by the executive branch to the extent that some would call them treason, the attack on America by “enemies foreign and domestic” is clearly upon us. With freedom and “justice for all” being trampled at every level of government, loyal citizens must no longer remain tolerant.


The first ever GAO (Government Accountability Office) audit of the Federal Reserve since its inception in 1913 was carried out and released on July 21st, 2011 thanks to the Ron Paul – Alan Grayson Amendment to the Dodd – Frank bill passed in 2010. Senators Jim DeMint (R-SC) and Bernie Sanders (I-VT) sponsored the amendment in the Senate where the scope and extent of the audit in the house bill (HR1207) was diminished so that a complete audit was not accomplished. Ben Bernanke (pictured to the right), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets.

What was revealed in the audit was startling:

$16,000,000,000,000.00 had been secretly doled out to failing or at risk U.S. banks and corporations and foreign banks in the period between December 2007 and June 2010 at 0% interest. Virtually none of the money embezzled from the American public has been repaid. These unelected unaccountable bureaucrats diverted these funds exceeding the national debt while Americans were struggling to find jobs.

Putting $16 trillion into perspective, the GDP of the United States is $14.12 trillion. Spanning its 200+ year history, the United States government only within the last few years just recently amassed a $14.5 trillion national debt. By presuming to pass this incomprehensible debt on to our children, the politicians and bureaucrats have violated the intention of the Constitution as clearly expressed in the Preamble. No rational person can suggest that passing such a burden on to others in any way “secure[s] the blessing of liberty to ourselves and our posterity”. Even the similarly unconstitutional unbalanced budget repeatedly debated beyond Constitutional bounds in Congress is but a fraction at $3.5 trillion. Yet, this de facto central or national bank which the Framers opposed and rejected was created by Congress in 1913 without any oversight or accountability. Moreover, it was again a failed Congress that passed the TARP bailout bill in late 2008 giving an additional $800 billion to many of these same failing banks and companies.

When a self proclaimed Democratic socialist like Bernie Sanders states “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.” , the “domestic enemies” in our midst are exposed and Congress is without excuse!. It is a transgression of the original intention of the Constitution that cannot and must not be ignored. All elected officials failing in their oath of office must be removed. Unelected bankers and bureaucrats creating money out of thin air by rolling the printing presses with government executive sanction plundering working Americans without justice obtaining are no better than King George or the British Parliament in 1776. We are in a new civil war fighting “enemies, foreign and domestic” so “that this Nation under God shall have a new birth of freedom, and that government of the people by the people for the people shall not perish from the earth”.

The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
and many more U.S. and foreign banks

Source: http://www.gao.gov/products/GAO-11-696
FULL PDF on GAO server: http://www.gao.gov/new.items/d11696.pdf

View the 266-page GAO audit of the Federal Reserve(July 21st, 2011): http://www.scribd.com/doc/60553686/GAO-Fed-Investigation

We Need a Leader Rather Than a Politician

Political establishments from local to state to national always want the electorate to think that “experience” is important for public office. Indeed, even corporate boards of directors want shareholders to think that according to their biased incorrect definition of the word, “experience” is worth the unjust and undeserved compensation these ruling elite are willing to pay to members of their respective good ol’ boy clubs to get a crony with “experience” as corporate executive. Unfortunately, it is not about any unusual or advanced training, higher education, leadership, or any other just ability or capacity that those in positions to nominate candidates for political position are interested in. Those holding the reigns of political power in every political organization of every size and composition are solely focused on a perpetuation of the political power that sustains their own “special” economic interests. To these, the word means how that person has previously exemplified a continuation of an injustice that can best be likened to the rights of succession required in the monarchies that American colonists had sought refuge from.
The “father of our country”, our first president, George Washington most certainly had no previous experience in the many offices that he was the first to hold. Moreover, those various political positions were at the head of organizations with structures that were completely new and untried in history. This was a leader the likes of which we are now in dire need! Many biographers have unanimously extolled the attributes of this man to the extent that without his leadership it is almost certain there most certainly would not have been a United States of America. Whether as President of the Continental Congress, Commander-in-Chief of the Continental Army, President of the Constitutional Convention, our first President unanimously elected, and every office before, between, and after that he held, this was a standard to which all leaders must aspire.
Following is an article by Stephen McDowell that attempts to capture a greatness with which likely the world will never again be blessed.

In the Hands of “Providence”

George Washington is one of the most significant men in all of history. Regarding the direct advancement of civil and political liberty in the earth, he may well be the most significant champion in all history. Certainly he was the central figure of bringing a new era of liberty to the world in modern times.1 Abraham Lincoln observed: “Washington is the mightiest name of earth – long since mightiest in the cause of civil liberty, still mightiest in moral reformation. On that name no eulogy is expected. It cannot be. To add brightness to the sun or glory to the name of Washington is alike impossible. Let none attempt it.”2

Founding Father Fisher Ames said that Washington changed the standard of human greatness.3 One biographer wrote, “Washington was without an equal, was unquestionably the greatest man that the world has produced in the last one thousand years.”4 Thomas Paine observed: “By common consent, Washington is regarded as not merely the Hero of the American Revolution, but the World’s Apostle of Liberty.”5 A figure in history like Washington did not just arise by happenstance. It was the near unanimous consent of early Americans that Washington, like Esther of old, had “come to the kingdom for such a time as this.”
After Washington’s death hundreds of commemorative orations were given all over the United States. Nearly all of them declare that Washington was a gift of God to the American people and to all of mankind. Some mention this in passing, many with this as the dominant theme. Washington is called the Moses of the American people, the Joshua who led his people into the promised land, and the savior of his country.
In his sermon “On the Death of George Washington,” Rev. Jedidiah Morse concluded his comparison of Moses and Washington by saying: “Never, perhaps, were coincidences in character and fortune, between any two illustrious men who have lived, so numerous and so striking, as between Moses and Washington. … Both were born for great and similar achievements; to deliver, under the guidance of Providence, each the tribes of their respective countrymen, from the yoke of oppression, and to establish them, with the best form of government and the wisest code of laws, an independent and respectable nation.”6
General Morgan, who fought alongside Washington during the Revolutionary War, acknowledged that Washington was key for obtaining independence, relating that while there were many officers with great talents, he was “necessary, to guide, direct, and animate the whole, and it pleased Almighty God to send that one in the person of George Washington!”7
President Calvin Coolidge summed up Washington’s contribution to mankind, under the providence of God, in a speech to Congress: “Washington was the directing spirit without which there would have been no independence, no Union, no Constitution and no Republic. His ways were the ways of truth. His influence grows. In wisdom of action, in purity of character he stands alone. We cannot yet estimate him. We can only indicate our reverence for him and thank the Divine Providence which sent him to serve and inspire his fellow men.”8
Washington’s contribution to the birth of America and the advancement of liberty in the world is unsurpassed by any man. Without Washington, America would not have won the Revolution. He provided the leadership necessary to hold the troops together, even in the most difficult situations. As one contemporary observed, Washington was “that hero, who affected, with little bloodshed, the greatest revolution in history.”9 Due to Washington’s influence, America avoided a monarchy or military rule — he rebuffed an attempt to make him king; he thwarted a military coup; and he set an example of civilian rule by resigning as Commander-in-Chief. The Constitutional Convention would not have succeeded without Washington’s influence as president of that body. America may never have set into motion her constitutional form of government, with a limited role of the president, without his example, for the unanimously elected Washington modeled how the president was to govern. Washington also set the standard for American international relations in his Farewell Address.

There would be no America, the land of liberty, without Washington, the apostle of liberty. The unique freedom, justice, and virtue incorporated into the American Republic have in the last two centuries spread throughout the world and taken root in many nations. Hence, Washington’s legacy has impacted the world, and will continue to do so for centuries to come.

His greatness did not stem from oratorical skills or superior knowledge or brilliant military tactics, but rather from his strong virtues, sense of duty, and invincible resolution. When he was offered leadership of the army and leadership of the nation, he expressed doubts in his abilities to accomplish these tasks, but once he occupied those positions, nothing could stop him from performing his duty. By sheer force of character he held the disorganized nation together during the great struggle for independence, and after victory was won, the love of the people for him provided the unifying factor necessary to set a course for the American constitutional republic.

The providence of God and Washington’s Christian faith were key to his character, career, and accomplishments. His faith, heart, and humility are revealed in the “Circular to the Governors of the states” in 1783 when he prayed that God would protect them and “most graciously be pleased to dispose us all to do justice, to love mercy, and to demean ourselves with that charity, humility, and pacific temper of mind, which were the characteristics of the Divine Author of our blessed religion, and without an humble imitation of whose example in these things, we can never hope to be a happy nation.”10 In his famous “Oration on the Death of General Washington,” Gen. Henry Lee said that Washington was “first in war, first in peace, and first in the hearts of his countrymen. Vice shuddered in his presence, and virtue always felt his fostering hand; the purity of his private character gave effulgence to his public virtues.” Washington was first because, as Lee said, he was “the man designed by Heaven to lead in the great political, as well as military, events which have distinguished the area of his life. The finger of an overruling Providence pointing at Washington was neither mistaken nor unobserved.”11

Washington himself had a sense of how God used him providentially to advance the cause of liberty to mankind as well as an understanding of the providential purpose of America, writing in March 1785: “At best I have only been an instrument in the hands of Providence, to effect, with the aid of France and many virtuous fellow Citizens of America, a revolution which is interesting to the general liberties of mankind, and to the emancipation of a country which may afford an Asylum, if we are wise enough to pursue the paths [which] lead to virtue and happiness, to the oppressed and needy of the Earth.”12

America set in motion a new example of religious, civil, and economic liberty that the nations have attempted to embrace during the last two centuries. The advancement of liberty in the world is directly related to the establishment of liberty in America, which owes its beginnings in large part to George Washington. Paine’s epithet of “World’s Apostle of Liberty” is, therefore, most fitting. Americans and citizens of the world who value liberty must forever keep alive in their hearts this great man and seek to follow his example.
The article above is taken from Apostle of Liberty: The World-Changing Leadership of George Washington, Stephen McDowell. This book can be ordered from the Providence Foundation, www.providencefoundation.com or 434-978-4535.


1. Lucretia Perry Osborn, Washington Speaks for Himself (New York: Charles Scribner’s Sons, 1927), xi.
2. Abraham Lincoln, Washington Temperance Society speech, Springfield, Illinois, February 22, 1842
3. Works of Fisher Ames, as published by Seth Ames (1854), edited and enlarged by W.B. Allen, vol.1 (Indianapolis: Liberty Classics, 1983), 527.
4. William Wilbur, The Making of George Washington (DeLand, Florida: Patriotic Education, 1973).
5. “George Washington: Deist? Freemason? Christian?” by James Renwick Manship, in Providential Perspective, Vol. 15, No. 1, Feb. 2000, Charlottesville: Providence Foundation.
6. Jedidiah Morse, “A Prayer and Sermon, Delivered at Charlestown, December 31, 1799, On the Death of George Washington . . . With an Additional Sketch of His Life” (London: Printed by J. Bateson, 1800).
7. Recollections and Private Memoirs of the Life and Character of Washington by George Washington Parke Custis, Benson J. Lossing, editor, (Philadelphia: Englewood, 1859), 322.
8. Osborn, p. iv. A facsimile of the peroration of President Coolidge’s Address to the Sixty-ninth Congress, Second Session, on Washington’s Birthday, February 22, 1927.
9. Letter of Dr. Letsom of London to a friend in Boston, in E. C. M’Guire, The Religious Opinions and Character of Washington (New York: Harper & Brothers, 1836), 326.
10. Circular to the States, June 8, 1783, The Writings of George Washington from the Original Manuscript Sources, 1745-1799, John C. Fitzpatrick, Editor (Washington: United States Government Printing Office, 1931), 26:496.
11. “Oration on the Death of General Washington, Pronounced before Both Houses of Congress, on December 16, 1799” by Major-General Henry Lee, in Custis, 622, 618-619.
12. Letter to Lucretia Wilhemina Van Winter, March 30, 1785, The Writings of George Washington, 28:120.



Buffett’s Bank of America

Warren Buffett’s Net Worth Jumps $154M Thanks to Mortgage Settlement

BY: – February 10, 2012

Warren Buffett’s stake in Bank of America Corp. increased in value by $154 million after President Obama and the U.S. Justice Department announced a $25 billion foreclosure abuse settlement with the five largest U.S. banks Thursday, records show.

Buffett invested $5 billion in Bank of America (BofA) on Aug. 25, 2011. As part of his investment deal, Buffett gained warrants that allow him to buy 700 million shares of Bank of America stock at a strike price of $7.14 a share. However, on Dec. 19, 2011, it was reported that Buffett was $1.5 billion underwater on his stock warrants, with shares of BofA stock trading at $4.94. But on Thursday, after President Obama personally announced the details of the settlement, BofA stock closed at $8.13 a share. The stock opened Friday morning at $8.31 and reached as high as $8.35 a share.

If Buffett had exercised his warrants Friday morning, he would have made $847 million. $154 million of that profit would have been related to the foreclosure deal.

This is not the first time Buffett has profited from Obama administration policies. In November 2011, it was reported that President Obama’s two-year postponement of the deadline to determine the future of the proposed Keystone XL pipeline would force North Dakota oil producers to rely more heavily on the Burlington Northern Santa Fe Railroad. Buffett’s Berkshire Hathaway Inc. holding company purchased the Burlington Northern Santa Fe Railroad Corp. in a total package worth $44 billion in 2009.

Buffett has personally contributed $5,000 to Obama this election cycle, while Berkshire Hathaway has contributed $30,800 to the Democratic National Committee.

This summer, Obama will accept the Democratic Party’s 2012 presidential nomination with a speech at Bank of America Stadium in Charlotte, N.C.


Krauthammer On Obama

Krauthammer On Obama
Obama offers a tripartite social democratic agenda: nationalized health care, federalized education (ultimately guaranteed through college) and a cash-cow carbon tax (or its equivalent) to subsidize the other two. Problem is, the math doesn’t add up.

The Obamaist Manifesto

By Charles Krauthammer
Friday, February 27, 2009
Not a great speech, but extremely consequential. If Barack Obama succeeds, his joint address to Congress will be seen as historic — indeed as the foundational document of Obamaism. As it stands, it constitutes the boldest social democratic manifesto ever issued by a U.S. president.

The first part of the speech, justifying his economic stabilization efforts, was mere housekeeping. The economic crisis is to Obama a technocratic puzzle that needs to be solved because otherwise he loses all popular support.

Unlike most presidents, however, he doesn’t covet popular support for its own sake. Some men become president to be someone, others to do something. This is what separates, say, a Bill Clinton from a Ronald Reagan. Obama, who once noted that Reagan altered the trajectory of America as Clinton had not, sees himself a Reagan.

Reagan came to office to do something: shrink government, lower taxes, rebuild American defenses. Obama made clear Tuesday night that he intends to be equally transformative. His three goals: universal health care, universal education, and a new green energy economy highly funded and regulated by government.

(1) Obama wants to be to universal health care what Lyndon Johnson was to Medicare. Obama has publicly abandoned his once-stated preference for a single-payer system as in Canada and Britain. But that is for practical reasons. In America, you can’t get there from here directly.

Instead, Obama will create the middle step that will lead ultimately and inevitably to single-payer. The way to do it is to establish a reformed system that retains a private health-insurance sector but offers a new government-run plan (based on benefits open to members of Congress) so relatively attractive that people voluntarily move out of the private sector, thereby starving it. The ultimate result is a system of fully socialized medicine. This will probably not happen until long after Obama leaves office. But he will be rightly recognized as its father.

(2) Beyond cradle-to-grave health care, Obama wants cradle-to-cubicle education. He wants far more government grants, tax credits and other financial guarantees for college education — another way station to another universal federal entitlement. He lauded the country for establishing free high school education during the Industrial Revolution; he wants to put us on the road to doing the same for college during the Information Age.

(3) Obama wants to be to green energy what John Kennedy was to the moon shot, its visionary and creator. It starts with the establishment of a government-guided, government-funded green energy sector into which the administration will pour billions of dollars from the stimulus package and billions more from budgets to come.

But just picking winners and losers is hardly sufficient for a president who sees himself as world-historical. Hence the carbon cap-and-trade system he proposed Tuesday night that will massively restructure American industry and create a highly regulated energy sector.

These revolutions in health care, education and energy are not just abstract hopes. They have already taken life in Obama’s $787 billion stimulus package, a huge expansion of social spending constituting a down payment on Obama’s plan for remaking the American social contract.

Obama sees the current economic crisis as an opportunity. He has said so openly. And now we know what opportunity he wants to seize. Just as the Depression created the political and psychological conditions for Franklin Roosevelt’s transformation of America from laissez-faireism to the beginnings of the welfare state, the current crisis gives Obama the political space to move the still (relatively) modest American welfare state toward European-style social democracy.

In the European Union, government spending has declined slightly, from 48 percent to 47 percent of GDP during the past 10 years. In the United States, it has shot up from 34 percent to 40 percent. Part of this explosive growth in U.S. government spending reflects the emergency private-sector interventions of a Republican administration. But the clear intent was to make the massive intrusion into the private sector temporary and to retreat as quickly as possible. Obama has radically different ambitions.

The spread between Europe and America in government-controlled GDP has already shrunk from 14 percent to 7 percent. Two terms of Obamaism and the difference will be zero.

Conservatives take a dim view of the regulation-bound, economically sclerotic, socially stagnant, nanny state that is the European Union. Nonetheless, Obama is ascendant and has the personal mandate to take the country where he wishes. He has laid out boldly the Brussels-bound path he wants to take.

Let the debate begin.


Obama’s Radical Agenda

By Charles Krauthammer
Friday, March 6, 2009
Forget the pork. Forget the waste. Forget the 8,570 earmarks in a bill supported by a president who poses as the scourge of earmarks. Forget the “2 trillion dollars in savings” that “we have already identified,” $1.6 trillion of which President Obama’s budget director later admits is the “savings” of not continuing the surge in Iraq until 2019 — 11 years after George Bush ended it, and eight years after even Bush would have had us out of Iraq completely.

Forget all of this. This is run-of-the-mill budget trickery. True, Obama’s tricks come festooned with strings of zeros tacked onto the end. But that’s a matter of scale, not principle.

All presidents do that. But few undertake the kind of brazen deception at the heart of Obama’s radically transformative economic plan, a rhetorical sleight of hand so smoothly offered that few noticed.

The logic of Obama’s address to Congress went like this:

“Our economy did not fall into decline overnight,” he averred. Indeed, it all began before the housing crisis. What did we do wrong? We are paying for past sins in three principal areas: energy, health care and education — importing too much oil and not finding new sources of energy (as in the Arctic National Wildlife Refuge and the Outer Continental Shelf?), not reforming health care, and tolerating too many bad schools.

The “day of reckoning” has arrived. And because “it is only by understanding how we arrived at this moment that we’ll be able to lift ourselves out of this predicament,” Obama has come to redeem us with his far-seeing program of universal, heavily nationalized health care; a cap-and-trade tax on energy; and a major federalization of education with universal access to college as the goal.

Amazing. As an explanation of our current economic difficulties, this is total fantasy. As a cure for rapidly growing joblessness, a massive destruction of wealth, a deepening worldwide recession, this is perhaps the greatest non sequitur ever foisted upon the American people.

At the very center of our economic near-depression is a credit bubble, a housing collapse and a systemic failure of the banking industry. One can come up with a host of causes: Fannie Mae and Freddie Mac pushed by Washington (and greed) into improvident loans, corrupted bond-ratings agencies, insufficient regulation of new and exotic debt instruments, the easy money policy of Alan Greenspan’s Fed, irresponsible bankers pushing (and then unloading in packaged loan instruments) highly dubious mortgages, greedy house-flippers, deceitful home buyers.

The list is long. But the list of causes of the collapse of the financial system does not include the absence of universal health care, let alone of computerized medical records. Nor the absence of an industry-killing cap-and-trade carbon levy. Nor the lack of college graduates. Indeed, one could perversely make the case that, if anything, the proliferation of overeducated, Gucci-wearing, smart-ass MBAs inventing ever more sophisticated and opaque mathematical models and debt instruments helped get us into this credit catastrophe.

And yet with our financial house on fire, Obama makes clear both in his speech and his budget that the essence of his presidency will be the transformation of health care, education and energy. Four months after winning the election, six weeks after his swearing-in, Obama has yet to unveil a plan to deal with the banking crisis.

What’s going on? “You never want a serious crisis to go to waste,” said chief of staff Rahm Emanuel. “This crisis provides the opportunity for us to do things that you could not do before.”

Things. Now we know what they are. The markets’ recent precipitous decline is a reaction not just to the absence of any plausible bank rescue plan, but also to the suspicion that Obama sees the continuing financial crisis as usefully creating the psychological conditions — the sense of crisis bordering on fear-itself panic — for enacting his “Big Bang” agenda to federalize and/or socialize health care, education and energy, the commanding heights of post-industrial society.

Clever politics, but intellectually dishonest to the core. Health, education and energy — worthy and weighty as they may be — are not the cause of our financial collapse. And they are not the cure. The fraudulent claim that they are both cause and cure is the rhetorical device by which an ambitious president intends to enact the most radical agenda of social transformation seen in our lifetime.



Obama’s Ultimate Agenda

By Charles Krauthammer

Friday, March 6, 2009

Five minutes of explanation to James Madison, and he’ll have a pretty good idea what a motorcar is (basically a steamboat on wheels; the internal combustion engine might take a few minutes more). Then try to explain to Madison how the Constitution he fathered allows the president to unilaterally guarantee the repair or replacement of every component of millions of such contraptions sold in the several states, and you will leave him slack-jawed.

In fact, we are now so deep into government intervention that constitutional objections are summarily swept aside. The last Treasury secretary brought the nine largest banks into his office and informed them that henceforth he was their partner. His successor is seeking the power to seize any financial institution at his own discretion.

Despite these astonishments, I remain more amused than alarmed. First, the notion of presidential car warranties strikes me as simply too bizarre, too comical, to mark the beginning of Yankee Peronism.

Second, there is every political incentive to make these interventions in the banks and autos temporary and circumscribed. For President Obama, autos and banks are sideshows. Enormous sideshows, to be sure, but had the financial meltdown and the looming auto bankruptcies not been handed to him, he would hardly have gone seeking to be the nation’s credit and car czar.

Obama has far different ambitions. His goal is to rewrite the American social compact, to recast the relationship between government and citizen. He wants government to narrow the nation’s income and anxiety gaps. Soak the rich for reasons of revenue and justice. Nationalize health care and federalize education to grant all citizens of all classes the freedom from anxiety about health care and college that the rich enjoy. And fund this vast new social safety net through the cash cow of a disguised carbon tax.

Obama is a leveler. He has come to narrow the divide between rich and poor. For him the ultimate social value is fairness. Imposing it upon the American social order is his mission.

Fairness through leveling is the essence of Obamaism. (Asked by Charlie Gibson during a campaign debate about his support for raising capital gains taxes — even if they caused a net revenue loss to the government — Obama stuck to the tax hike “for purposes of fairness.”) The elements are highly progressive taxation, federalized health care and higher education, and revenue-producing energy controls. But first he must deal with the sideshows. They could sink the economy and poison his public support before he gets to enact his real agenda.

The big sideshows, of course, are the credit crisis, which Obama has contracted out to Treasury Secretary Tim Geithner, and the collapse of the U.S. automakers, which Obama seems to have taken on for himself.

That was a tactical mistake. Better to have let the car companies go directly to Chapter 11 and have a judge mete out the bitter medicine to the workers and bondholders.

By sacking GM’s CEO, packing the new board, and giving direction as to which brands to drop and what kind of cars to make, Obama takes ownership of General Motors. He may soon come to regret it. He has now gotten himself so entangled in the car business that he is personally guaranteeing your muffler. (Upon reflection, a job best left to the congenitally unmuffled Joe Biden.)

Some find in this descent into large-scale industrial policy a whiff of 1930s-style fascist corporatism. I have my doubts. These interventions are rather targeted. They involve global financial institutions that even the Bush administration decided had to be nationalized and auto companies that themselves came begging to the government for money.

Bizarre and constitutionally suspect as these interventions may be, the transformation of the American system will come from elsewhere. The credit crisis will pass and the auto overcapacity will sort itself out one way or the other. The reordering of the American system will come not from these temporary interventions, into which Obama has reluctantly waded. It will come from Obama’s real agenda: his holy trinity of health care, education and energy. Out of these will come a radical extension of the welfare state; social and economic leveling in the name of fairness; and a massive increase in the size, scope and reach of government.

If Obama has his way, the change that is coming is a new America: “fair,” leveled and social democratic. Obama didn’t get elected to warranty your muffler. He’s here to warranty your life.


Barack Obama’s ‘New Foundation’ – a Sting in Four Parts

By Charles Krauthammer

Friday, April 17, 2009

Franklin Roosevelt gave us the New Deal. John Kennedy gave us the New Frontier. In a major domestic policy address at Georgetown University this week, Barack Obama promised — eight times — a “New Foundation.” For those too thick to have noticed this proclamation of a new era in American history, the White House Web site helpfully titled its speech excerpts “A New Foundation.”

As it happens, Obama is not the first to try this slogan. President Jimmy Carter peppered his 1979 State of the Union address with five “New Foundations” (and eight more just naked “foundations”). Like most of Carter’s endeavors, this one failed, perhaps because (as I recall it being said at the time) it sounded like the introduction of a new kind of undergarment.

Undaunted, Obama offered his New Foundation speech as the complete, contextual, canonical text for the domestic revolution he aims to enact. It had everything we have come to expect from Obama:

The Whopper: The boast that he had “identified $2 trillion in deficit reductions over the next decade.” It takes audacity to repeat this after it had been so widely exposed as transparently phony. Most of this $2 trillion is conjured up by refraining from spending $180 billion a year for 10 more years of surges in Iraq. Hell, why not make the “deficit reductions” $10 trillion — the extra $8 trillion coming from refraining from repeating the $787 billion stimulus package annually through 2019.

The Puzzler: He further boasted of his frugality by saying that his budget would reduce domestic discretionary spending as a share of GDP to the lowest level ever recorded. Amazing. Squeezing discretionary domestic spending at a time of hugely expanding budgets is merely the baleful residue of out-of-control entitlements and debt service, which will increase astronomically under Obama. To claim these as achievements in fiscal responsibility is testament not to Obama’s frugality but to his brazenness.

The Non Sequitur: “To make sure such a crisis [as we have today] never happens again,” Obama proposes his radical health-care, energy and education reforms, the central pillars of his social democratic agenda. But Obama’s own words contradict this assertion. Notes The Post: “But as his admirable summation of recent history made clear, these pursuits have little to do with the economic crisis, and they are not the key to economic recovery.” Obama rarely fails to repeat this false connection. A crisis — and the public’s resulting pliability to liberal social engineering — is a terrible thing to waste.

The Swindle: The Obama administration is spending money like none other in peacetime history. Obama is smart. He knows this is fiscally unsustainable. He has let it be known privately and publicly that he intends to cure the imbalance with entitlement reform.

An excellent strategy. If it takes throwing nearly $1 trillion of “porky” (to quote Sen. Charles Schumer) stimulus spending to soften up a Democratic Congress and make it amenable to real entitlement reform, then fine. Reforming Social Security, Medicare and Medicaid would save tens of trillions of dollars, and make the current money-from-helicopters spending almost trivial by comparison.

In the New Foundation speech, Obama correctly (again) identifies the skyrocketing cost of Medicare and Medicaid as the key fiscal problem. But then he claims that Medicaid and Medicare reform is the same as his health-care reform, fatuously citing as his authority a one-day meeting of handpicked interested parties at his “Fiscal Responsibility Summit.”

Here’s the problem. The heart of Obama’s health-care reform is universality. Covering more people costs more money. That is why Obama’s budget sets aside an extra $634 billion in health-care spending, a down payment on an estimated additional spending of $1 trillion. How does the administration curtail the Medicare and Medicaid entitlement by adding yet another (now universal) health-care entitlement that its own estimate acknowledges increases costs by about $1 trillion?

Which is why in his March 24 news conference, Obama could not explain how — when the near-term stimulative spending is over and his ambitious domestic priorities kick in, promising sustained prosperity and deficit reduction — the deficits at the end of the coming decade are rising, not falling. The Congressional Budget Office has deficits increasing in the last seven years of the decade from an already unsustainable $672 billion annually to $1.2 trillion by 2019.

This is the sand on which the new foundation is constructed. Obama has the magic to make words mean almost anything. Numbers are more resistant to his charms.


Obama: The Grand Strategy

By Charles Krauthammer

Friday, April 24, 2009

Unified theory of Obamaism, fifth (final?) installment:

In the service of his ultimate mission — the leveling of social inequalities — President Obama offers a tripartite social democratic agenda: nationalized health care, federalized education (ultimately guaranteed through college) and a cash-cow carbon tax (or its equivalent) to subsidize the other two.

Problem is, the math doesn’t add up. Not even a carbon tax would pay for Obama’s vastly expanded welfare state. Nor will Midwest Democrats stand for a tax that would devastate their already crumbling region.

What is obviously required is entitlement reform, meaning Social Security and Medicare/Medicaid. That’s where the real money is — trillions saved that could not only fund hugely expensive health and education programs but also restore budgetary balance.

Except that Obama has offered no real entitlement reform. His universal health-care proposal would increase costs by perhaps $1 trillion. Medicare/Medicaid reform is supposed to decrease costs.

Obama’s own budget projections show staggering budget deficits going out to 2019. If he knows his social agenda is going to drown us in debt, what’s he up to?

He has an idea. But he dare not speak of it yet. He has only hinted. When asked in his March 24 news conference about the huge debt he’s incurring, Obama spoke vaguely of “additional adjustments” that will be unfolding in future budgets.

Rarely have two more anodyne words carried such import. “Additional adjustments” equals major cuts in Social Security and Medicare/Medicaid.

Social Security is relatively easy. A bipartisan commission (like the 1983 Alan Greenspan commission) recommends some combination of means testing for richer people, increasing the retirement age and a technical change in the inflation measure (indexing benefits to prices instead of wages). The proposal is brought to Congress for a no-amendment up-or-down vote. Done.

The hard part is Medicare and Medicaid. In an aging population, how do you keep them from blowing up the budget? There is only one answer: rationing.

Why do you think the stimulus package pours $1.1 billion into medical “comparative effectiveness research”? It is the perfect setup for rationing. Once you establish what is “best practice” for expensive operations, medical tests and aggressive therapies, you’ve laid the premise for funding some and denying others.

It is estimated that a third to a half of one’s lifetime health costs are consumed in the last six months of life. Accordingly, Britain’s National Health Service can deny treatments it deems not cost-effective — and if you’re old and infirm, the cost-effectiveness of treating you plummets. In Canada, they ration by queuing. You can wait forever for so-called elective procedures like hip replacements.

Rationing is not quite as alien to America as we think. We already ration kidneys and hearts for transplant according to survivability criteria as well as by queuing. A nationalized health insurance system would ration everything from MRIs to intensive care by myriad similar criteria.

The more acute thinkers on the left can see rationing coming, provoking Slate blogger Mickey Kaus to warn of the political danger. “Isn’t it an epic mistake to try to sell Democratic health care reform on this basis? Possible sales pitch: ‘Our plan will deny you unnecessary treatments!’ . . . Is that really why the middle class will sign on to a revolutionary multitrillion-dollar shift in spending — so the government can decide their life or health ‘is not worth the price’?”

My own preference is for a highly competitive, privatized health insurance system with a government-subsidized transition to portability, breaking the absurd and ruinous link between health insurance and employment. But if you believe that health care is a public good to be guaranteed by the state, then a single-payer system is the next best alternative. Unfortunately, it is fiscally unsustainable without rationing.

Social Security used to be the third rail of American politics. Not anymore. Health-care rationing is taking its place — which is why Obama, the consummate politician, knows to offer the candy (universality) today before serving the spinach (rationing) tomorrow.

Taken as a whole, Obama’s social democratic agenda is breathtaking. And the rollout has thus far been brilliant. It follows Kaus’s advice to “give pandering a chance” and adheres to the Democratic tradition of being the party that gives things away, while leaving the green-eyeshade stinginess to those heartless Republicans.

It will work for a while, but there is no escaping rationing. In the end, the spinach must be served.



The Coming Higher-Ed Revolution

The Coming Higher-Ed Revolution

By Stuart Butler, Ph.D.
January 13, 2012

(This article was published by National Affairs and can be found at this link:
The Coming Higher-Ed Revolution, National Affairs, Issue Number 10, Winter 2012)

In recent decades, key sectors of the American economy have experienced huge and disruptive transformations—shifts that have ultimately yielded beneficial changes to the way producers and customers do business together. From the deregulation that brought about the end of AT&T’s “Ma Bell” system, to the way entrepreneurs like Steve Jobs forever changed the computer world once dominated by IBM, to the way the internet and bloggers have upended the business model of traditional newspapers, we have seen industries completely remade—often in wholly unexpected ways. In hindsight, such transformations seem to have been inevitable; at the time, however, most leaders in these fields never saw the changes coming.

The higher-education industry is on the verge of such a transformative re-alignment. Many Americans agree that a four-year degree is vastly overpriced—keeping many people out of the market—and are increasingly questioning the value of what many colleges teach. Nevertheless, for those who seek a certain level of economic security or advancement, a four-year degree is absolutely necessary. Clearly, this is a situation primed for change. In as little as a decade, most colleges and universities could look very different from their present forms—with the cost of a college credential plummeting even as the quality of instruction rises.

If this transformation does come to pass, it could have profound and beneficial implications. It could significantly increase the international competitiveness of American workers in a world in which we need higher skills and productivity to compete. It could sharply improve the employability of those on the bottom rungs of America’s income ladder, giving them the tools they need to move up. And it could do much to restore the American Dream for those who have begun to believe that opportunity in this country is disappearing. In other words, such a change could hardly come too soon.

The Necessary Credential

A transformation in higher education is likely to be driven by a few key factors that, in combination, pose a serious threat to the industry’s status quo. Of these, perhaps the most urgent are the increasing importance of higher education and its increasing expense. Today, most Americans realize that a college degree is essential to upward economic mobility—and yet many are simply unable to obtain one. This glut of demand, set against a shortage of suitable and affordable supply, is bound to lead to serious change.

Americans’ concerns are certainly reinforced by the data. A review of the research on economic mobility indicates that education is the largest factor in explaining the connection between parents’ earnings and the lifetime earnings of their children. Put another way, the lack of adequate education is a daunting obstacle to an individual’s future economic success.

In some ways, this situation is hardly new: Completing a certain level of education has long been crucial to securing good employment. The difference is that, just a generation ago, the attainment level needed to assure a reasonable chance at the American Dream was a high-school diploma. And with our system of public K-12 education, that key credential was within reach for almost anyone who wanted to obtain it.

Today, however, the high-school diploma has been supplanted by the college degree; making it through four years of college is now virtually a prerequisite for economic advancement.[1] Indeed, Census Bureau data show that an American with a bachelor’s degree will earn, on average, about 70% more each year than one with only a high-school diploma. The income advantage offered by a college degree is nearly double what it was just a generation ago. And it is the full bachelor’s degree that counts: Even someone with a two-year associate degree can expect just 29% more in annual income than a person who holds only a high-school diploma.[2]

Thus an American from a modest-income household who stays in school and obtains a college degree has an excellent chance of reaching the middle and even higher rungs of the economic ladder, as will his or her children. But an American from a similarly modest background who fails to obtain a college degree is likely to remain stuck at the bottom. And this alarming opportunity gap is widened by graduation rates: For the children of low-income families, college-graduation rates are much lower, and the economic consequences more significant, than they are for wealthier students. In fact, students from families in the bottom quartile of household income are now graduating from college at the lowest level in 30 years, with fewer than 10% obtaining a degree.

As for the perceived accessibility of a college degree, it is true that total enrollment is rising. Relative to other countries, however, America’s graduation rate has slipped sharply. According to a 2010 College Board report examining data from 2007, the United States—once the world’s leader in college-graduation rates among young adults—is failing to keep pace in educating rising generations of workers. Among citizens aged 55 to 65, the U.S. ranks fourth in the world, with 38.5% holding an associate degree or higher. But as these Americans retire, they will be replaced by a generation only slightly better educated: Today, among citizens between the ages of 25 and 34, only 40.4% of Americans hold an associate degree or higher. That number drops our graduation rank to 12th, putting the United States behind Canada, Korea, Russia, Japan, New Zealand, Ireland, Norway, Israel, France, Belgium, and Australia.[3]

Why do so many Americans fail to attend or complete college even though it is critical to their long-term economic well-being? According to a recent survey by the Pew Research Center, the primary reason is financial, exacerbated by the perception that a degree is not worth the cost. In the survey, 57% of adults (18 and older) said that the higher-education system fails to provide good value for money, and 75% said it is unaffordable. Two-thirds of young adults (18-34) said that they could not attend college because they need to support a family.[4]

Moreover, 2011 surveys of graduates by Adecco, the work-force recruiting company, indicate that almost one-fifth of recent graduates have been forced to turn to full-time work outside their fields of study, often in jobs for which a college degree is not required. More than half of recent graduates have not been able to find full-time jobs in their chosen professions.[5]

Higher-education suppliers thus face an enormous untapped market: those demanding an affordable path to a qualification that is essential to moving up the economic ladder. The challenge is to respond to this demand in a form and at a cost that fit the lifestyles and pocketbooks of young people and their families. Such a cost reduction will require fundamental changes in the business model and pricing of higher education—changes that do not appear to be priorities for the industry’s established providers.

The Financing Fiasco

Yet even as college leaders seem unwilling to reverse the current trends of rising tuition and growing student indebtedness, serious alternatives to the status quo are beginning to emerge. The existence of this competition, combined with widespread public frustration, has produced the conditions that may allow for a sweeping makeover of American higher education.

The chief catalyst for this transformation will be money. The financing vision of traditional higher education, which assumes steadily rising tuition and heavily indebted graduates, is increasingly at odds with the financial capacities of typical households. Just when the need for a college education is becoming more obvious, the cost obstacle is growing dramatically. Something has to give.

Over the past 25 years, the cost of a college education, adjusted for inflation, has almost trebled, while inflation-adjusted median family income has risen by only about 10%. The cost of college has thus climbed steadily as a percentage of family income, especially for four-year private colleges. According to the College Board, over the past ten years, in-state tuition and fees have been rising (in inflation-adjusted terms) at 5.6% annually for four-year public colleges and almost 3% for private non-profits. In 2011, in the midst of the Great Recession and an avalanche of home foreclosures and persistently high unemployment, tuition and fees soared 8.3% at public universities and 4.5% at private universities. The average annual published figure for in-state tuition, fees, room and board, and other expenses now exceeds $17,000 ($29,000 for out-of-state students) at four-year public colleges, and tops $38,000 at private non-profits.[6]

At these rates, it is hardly surprising that families face sticker shock. And in a sign of possible developments to come, the burgeoning expenses in higher education bear a close resemblance to the growing costs of health-care coverage. Like higher education, health insurance is a large family budget item that has long been increasing much faster than underlying inflation. When those growing insurance costs reached a tipping point in the early 1980s, a strong consumer reaction—led by employers who had to foot most of the bill for increased premiums—triggered years of turbulence and government interference in the health-care market. There is little reason to believe that the higher-education sector will avoid a similar fate.

Even so, as often happens when an industry edges toward a pricing tipping point, university leaders seem oblivious. They appear to believe that their own cost increases can be addressed by hiking tuition rather than by restructuring to drive those costs down. The problem, however, is that such tuition increases raise the prospect of a more daunting student-debt burden—the other side of the financing conundrum.

According to the College Board, by 2009, 55% of graduating bachelor’s-degree students at public colleges were in debt, with an average indebtedness of $19,800. Among private non-profit college graduates, 65% were in debt, up from 63% in 2000, with an average loan burden of $26,100 (up from $22,300 in 2000, in 2009 dollars). Among all 2009 graduates with outstanding loans, the average debt burden totaled $24,000.[7] And for those students who fail to graduate, the burden of debt can be truly devastating: Of every 100 high schoolers today, just 50 will graduate and go to college, and only 30 will actually complete college. Many of the others will rack up enormous debts without securing the credential they need to pay down those obligations.

Looking ahead, the college prospects of less affluent Americans are likely to become much bleaker if the system does not go through some significant change. Last year, total student-loan debt surpassed credit-card debt in America—a chilling milestone—and it is likely to exceed $1 trillion next year. Moreover, as that debt burden grows, it is becoming more difficult for borrowers to keep up: According to the U.S. Department of Education, swelling student debt (exacerbated by the economic downturn) has produced an increase in the student-loan default rate—from 6.5% in 2003 to 11.2% this summer.

Another reason for rising student debt is diminishing support from parents. According to surveys by Sallie Mae, the largest financial-services company specializing in education, student and parental borrowing covers an average of 22% of a student’s college costs, compared with 30% from parental income and savings. But for less affluent families, recent economic developments—such as the erosion of stock values—have left parents increasingly unable to help pay college bills through borrowing or drawing down wealth.[8] This is particularly true of minority families: A recent study by the Pew Research Center shows that, while median net worth for white households fell by 16% between 2005 and 2009, the (already much lower) net worth of black households fell by 53%. For Hispanics, it declined by an even sharper 66%.

The Pew study found that the largest factor in this decline was plummeting housing prices. Black and Hispanic Americans have a disproportionate amount of their wealth in their homes; the collapse of the housing market has therefore meant a sharp reduction in equity that can be cashed out or used as collateral.[9] Research has shown a close correlation between home equity and the decision to attend college: Michael Lovenheim of Cornell has found that, between 2000 and 2005, a 1% increase in home prices led to a 0.13% increase in total enrollment at public colleges. A $10,000 change in home equity, he found, affected the likelihood of college attendance by 0.71%. The decision to go to a two-year college was especially sensitive to fluctuations in home equity: A 1% rise in equity, Lovenheim showed, drove up two-year college enrollment by 0.23%, but increased enrollment at four-year public colleges by just 0.08%.[10] Similarly, a decline in a family’s home equity reduced the probability of a child’s attending college. The sharp reduction in housing prices and home equity since 2008, to the tune of trillions of dollars nationwide, has thus significantly reduced the capacity of families—particularly those families that are most dependent on home equity for their wealth—to financially support their children who are contemplating college.

Cost is also a significant factor in the decision to drop out of college. According to a 2010 survey of students by Public Agenda, among those students who failed to graduate, 31% said a major reason for dropping out was that they could not afford the tuition and fees, with another 21% saying that cost was a minor reason. Of all the students not completing school, 54% said a major reason was that they needed to go to work and earn some money.[11] For others, of course, the rising financial bar has prevented them from contemplating a four-year college at all, or has required them to take an alternative route—such as attending a community college, either as a final credential or as a less expensive way to get two years of education en route to a four-year degree.

The relentless rise in college costs, together with the growth of indebtedness and the erosion of household wealth, is effectively splitting high-school and college-age Americans into two groups: those who can afford to attend and complete college and those who can’t. For the first group, generally from households that are well off, college is expensive but deemed to be worthwhile. In fact, among these students, satisfaction with the higher-education system has actually been rising, with an increased number holding the view that higher education is a good value for the money and that financial aid is adequate.[12] But for the second group—young Americans generally from less affluent households—the financial obstacles to completing college are daunting, if not insurmountable, and likely to grow worse in the years ahead.

With upward mobility in America so dependent on a degree, this means that poor students’ ability to move up the economic ladder will decline relative to that of young Americans whose families have already achieved the American Dream. The result will be an effective economic-mobility caste system. And in our society—which so prizes equality of opportunity—it seems unlikely that such a divide will be allowed to stand.

A New Way of Doing Business

Adding to the pressure is the third, and likely most decisive, threat to the current structure of higher education—namely, that its traditional business model is coming under attack from new kinds of institutions. The timing is right: In U.S. News & World Report’s 2010 college rankings, editor Brian Kelly wrote that the existing structure invites aggressive new forms of competition. “If colleges were businesses, they would be ripe for hostile takeovers, complete with serious cost-cutting and painful reorganizations,” Kelly observed. “You can be sure those business analysts would ask: Is the consumer getting the product we promised? What do you actually learn here? Can you guarantee a job? Admission to graduate school?”[13]

In truth, a takeover scenario is less likely than an end run—in which new technological developments, and new educational institutions with very different business models, circumvent higher education’s established players. Today, competitors are exploring markets that are ill-served by the traditional model, such as working Americans who want to enhance their skills and lower-income potential students looking for much cheaper degrees. Meanwhile, rapid change in information technology is giving creative new entrants a growing technological edge—an essential precondition for transformative change.

The most obvious technological threat to the comfortable world of higher education is online education. Online learning changes the entire relationship between student and teacher; it enables information to be transferred, and student performance to be monitored, at a fraction of conventional costs. Often called “distance learning,” online education has the potential to completely upend today’s established universities.

The concept of distance learning actually has a long history. The business model was pioneered in 1858 by Britain’s London University, which established an “External System” through which students around the world could obtain degrees through a correspondence courses. London boasts five Nobel laureates among its external graduates, and in 2008 its updated system had 41,000 students around the world. In 1969, the British government ushered in another distance-learning innovation when it chartered a television-based university—the Open University—aimed primarily at employed people who had never acquired a degree. Since then, 1.6 million people have studied at the university, with 250,000 students currently enrolled in the United Kingdom and around the world. In fact, the Open University is the largest producer of law graduates in the U.K., and is among the top three universities for student satisfaction, tied with Oxford.

These creative ventures did not lead to fundamental changes in the general higher-education landscape. But the rise of online learning—now also utilized by London and the Open University, among many other institutions—is likely to be the technological advance that triggers a broad transformation.

The main reason is that online education is growing rapidly in both scale and scope. For the past seven years, online enrollments in the United States have increased much faster than overall university enrollments. According to a survey of more than 2,500 colleges and universities by the Babson Survey Research Group, the proportion of students taking at least one online course grew from 10% in 2003 to 25% in 2008. And that figure continues to rise: In the fall semester of 2009, the share of students taking at least one online course was up 21.1% from the previous year and represented 29.3% of total enrollment—an enormous figure when compared to the increase in total post-secondary enrollment, which grew at just 1.2%.[14]

The appeal of online education, and the nature of its threat to traditional universities, are not hard to fathom. Online education allows students, such as those working while studying, to learn from their own homes at times of their choosing. It permits far greater flexibility, so that students do not have to follow the traditional semester structure and can learn at their own paces. For an increasing number of today’s students, whose K-12 educations and social lives have been built around technology, computer-based learning is more natural than the traditional “sage on a stage” model. And the quality of online education improves all the time: Babson reports that two-thirds of college and university administrators at public institutions now view online instruction as equal to or better than face-to-face instruction.

Accompanying this steady improvement have been important bursts of innovation. One example is the Khan Academy, a free, non-profit service that now provides more than 2,700 lectures online via YouTube, mainly in the sciences and primarily at the pre-college level.[15] The service started when a Bengali-American hedge-fund analyst, Salman Khan, began tutoring his cousin in mathematics and decided that YouTube was the best platform to use. Because YouTube allows anyone on the web to access Khan’s engaging lectures, they have become an international phenomenon, and are now widely used in schools. With funding from the Gates Foundation and others, the volume and breadth of the lectures have increased dramatically. Even more important, the Khan Academy now offers a sophisticated learning strategy that allows students to take graded tests and obtain feedback that steers them in a customized way toward appropriate material. Moreover, Khan can now provide a detailed education record based on a student’s use of the site, such that teachers can tailor their assistance to that student’s particular needs.

The Khan Academy is just one example of the creative use of online instruction and monitoring software that is transforming education and providing better quality at a fraction of the cost. And yet, despite the proliferation of such competitors, the major universities have been complacent in their responses to the challenge of online education. Their reaction has been simply to try to incorporate web-based learning into their traditional business model, rather than to treat it as a fundamentally different approach to learning. Most see online classes as merely a profitable not-for-credit extension of the university, designed for non-students to improve their general knowledge. Others see online education as a way of providing niche courses for credit to supplement the classes taught by full-time faculty—essentially a web-based version of the low-paid adjunct professor.

But like the early response of newspapers to internet technology, universities have generally kept charging their regular students high prices for access to online courses in order to protect the pricing of their standard on-campus classes. Harvard, for instance, operates an impressive extension school, offering a wide range of courses for either personal enrichment or degree credit. But it charges different prices according to the course viewer’s status, in order to avoid creating an incentive for students to pass over on-campus programs in favor of online instruction. And a colleague of mine who took a Yale master’s degree in nursing almost entirely online (while working at a hospital in Texas) observes wryly that the only discount she received off the regular campus-based course was that Yale waived the fee for a parking pass in New Haven.

To be sure, the established universities recognize that they face an unwelcome threat from for-profit schools that aim primarily at working students seeking professional qualifications. These include such competing institutions as the University of Phoenix, which blends online learning with instruction at local campuses across the country, and Kaplan University, owned by a subsidiary of the Washington Post. But because older working students have not been the primary market for traditional four-year universities, the established institutions have not viewed these alternatives as serious competition. Part of their confidence stems from the fact that these for-profits can be relatively expensive: Indeed, Phoenix and others have been criticized for supposedly understating their total costs and leaving many students with heavy debts. Furthermore, the traditional universities believe they have a decisive edge in quality and brand image, often sneering at the accelerated degree courses offered by the for-profits. (Of course, this dismissive reaction is eerily reminiscent of the attitude that major newspapers had during the early days of online news, when now-defunct publications believed that their journalistic quality and name brands would protect them from any serious competition.)

But while the emergence of online instruction is sure to drive change in higher education, it is not the whole story. The larger threat to the traditional university system seems more likely to come from institutions that combine online education with new, innovative business models. It is worth remembering that Apple’s Macintosh was not the first personal computer: Rather, it was Steve Jobs’s transformation of the interaction between user and machine that revolutionized the industry.

Similar potential exists in higher education, where the development of several intriguing new business models holds out the promise of radical change. For example, Harvard business expert Clayton Christensen points to Western Governors University, a non-profit created in 1996 by the governors of 19 western states.[16] WGU not only uses online education but also eschews curricula and grades. Instead, it identifies the core knowledge needed for competency in a subject area and tests for that knowledge, licensing the necessary study material. Members of WGU’s faculty function as mentors and tutors, assisting students with the material, rather than as formal instructors. WGU has won accreditation, and with its focus on undergraduates and master’s students (rather than Ph.D. students or research programs), the university now has more than 20,000 students nationwide. Perhaps most noteworthy, its annual tuition is below $6,000.

Brigham Young University-Idaho is another intriguing innovation. Created out of Ricks College in 2000, BYU-Idaho does not have a long summer recess or competitive athletics. It supplements regular professors with peer-to-peer instruction. For some students, the school allows technical certifications in core courses before moving on to electives, which means that students acquire official qualifications as they advance toward a bachelor’s degree. If, for any reason, the students do not graduate with a degree, they still have the certifications—unlike many students elsewhere, who may drop out of college with a large debt but no formal qualification of any kind. In some BYU-Idaho programs, students who can avoid room and board costs by living at home are able to complete a four-year degree for less than $8,000.[17]

The small, private Southern New Hampshire University is yet another example. Now the second-largest online-education provider in New England, SNHU’s 7,000 web-based students outnumber the on-campus student body. At the university, “course authors” with a strong understanding of online education develop classes but don’t necessarily teach them; often, the teachers are adjuncts who use the course authors’ materials. Next year, SNHU expects online education to bring in more than $100 million—a windfall that subsidizes the money-losing undergraduate campus. In a sharp break with most established universities, SNHU views online courses not as a sideshow to its traditional on-campus programs, but rather as the key to its future.

These innovative ventures have a great deal of potential, assuming they can clear a few critical hurdles. One is the perception that online or distance learning cannot provide the experiential benefits—especially the development of close personal relationships—offered by a traditional campus. As it happens, however, the traditional university’s supposed edge in providing face-to-face mentoring and instruction is already rapidly eroding. With advances in meeting software, the experience of a video tutorial is getting close to the “real thing.” Moreover, improvements in customized and sophisticated student-education data, such as those being developed by Khan Academy, make it easy to imagine the interaction quality of online tutorials surpassing the effectiveness of the traditional system. Today, it is remarkable if a professor (or, more likely, a teaching assistant) in class knows each student’s name. But in an online world, it is entirely conceivable that, during an online tutorial with a small group of students, the professor will be able to bring up a student’s performance data on-screen, much as a batter’s performance information is displayed in a ballpark as he comes up to the plate. With information about every student’s strengths and weaknesses, the professor can adapt each tutorial to make it far more useful to each individual student—providing a much more personalized educational experience than can be obtained on most campuses today.

Traditional universities are even losing their edge when it comes to forming the networks and lifelong friendships that used to be a hallmark of the campus experience. True, probably nothing will take the place of being a member of Skull and Bones, but for most young people today, electronic friendships and networks are the norm. In any case, $120,000 over four years seems a steep price to pay for making friends. Moreover, to the extent that an on-campus experience has a unique value, a blended on-campus and online experience may be sufficient for most students—especially if the total cost of such a degree is a fraction of the price of full-time attendance at a traditional university. The Open University in Britain has provided this sort of blended arrangement since its inception, with students typically attending on-campus courses for only a few weeks each year. It is even possible to imagine consortia of “virtual universities” organizing intramural and intercollegiate sports in home cities rather than on campuses.

Of course, the most obvious hurdle facing upstarts is the assurance of quality. Accreditation is not a serious problem for a new college with a different business model; unlike, say, the medical and legal professions, there is no state or national accreditation monopoly than can regulate the type and number of entrants into the higher-education field. The real challenge for new entrants, rather, is to show potential students and their parents that the programs on offer actually do rival or outperform their established competitors in terms of value for money. When it is difficult for customers to compare value between alternative suppliers, the established provider does enjoy the relative protection of a known and respected brand. Institutions like Princeton or the University of Michigan can sustain their customer bases and prices because people generally think they are high-quality providers, even if the data to justify their costs may be lacking. Places like BYU-Idaho and other innovative entrants do not have the luxury of resting on hazy laurels.

With college costs rising, however, would-be students are demanding clear demonstrations that their money will be well spent. Traditionally, value-seekers have been at a disadvantage: Compared with the value-for-money data available for many other products and services, obtaining the financial and other information needed to make a wise decision about college is confusing and difficult. But the situation is steadily improving, thanks to rankings and data like those supplied by U.S. News & World Report, Kiplinger’s, and Forbes.[18] Colleges are likely to see a significant increase in prospective students’ ability to make informed decisions, to the detriment of complacent colleges that have relied on their brand names and historical reputations to coast along. The result is sure to help newer institutions that have found better ways to provide value and to compete more effectively in the higher-education marketplace.

The Coming Revolution

To be sure, well-established leaders in any industry are used to dealing with competition from new technologies and new entrants with different business models. While they must always be on their toes, they do have advantages precisely because they are established and typically have well-developed and loyal customer bases. As Harvard’s Clayton Christensen observes, leaders generally respond to new technologies and business arrangements by incorporating them and using them to provide greater value to their customers, gaining revenue in return. He calls this process “sustaining innovation.”

For example, when Merrill Lynch encountered competitors offering online trading to investors, the financial firm improved the technology for use by its own brokers to enhance services to its existing customers. Similarly, major newspapers first responded to the internet by using it to amplify stories and nudge viewers to subscribe to their print editions, “hiding” much of their best content from web readers or charging for access to online copy. In response to the new world of online learning, universities have done much the same: As noted earlier, Harvard Extension and many other established schools have merely tweaked their business models to improve their services to existing customers (and to bring in new ones) without significantly altering their pricing or core business structures. In all three cases—the brokerage, newspaper, and higher-education industries—existing leaders have attempted to use establishment advantage and brand loyalty to absorb new ideas while retaining their dominant positions and approaches.

An industry leader does not face an existential threat from a technology or business plan that it can readily incorporate into its business model. What does present a serious danger, Christensen and his colleagues have found, is when an upstart focuses initially on a new or underserved part of the market with a breakthrough technology and business plan that are far from ready for “prime time” in the established market. During this period, the entrant focuses on customers the industry leaders have been steadily ignoring or may not particularly care about, perhaps because the leaders see little potential revenue. In many cases, the new entrant is indeed offering an inferior product or service, and because it is targeted to a “thin” area of the market, the leaders don’t perceive any real competition.

Real trouble for the existing leaders begins if and when new entrants update their creative business plans, steadily refine their new technologies and methods, increase their scales of operation, improve their lower-cost products, and start eyeing much larger possible markets. At some point, one or more of these suppliers in a minor or boutique market may—sometimes quite suddenly—decide to “invade” the long-established main market and deliver a knockout blow to the existing leaders. Christensen calls this process “disruptive innovation”—and its final stage is about to hit higher education.

The experiences of other industries indicate that the results can be dramatic. Christensen points out that when Sony introduced the first commercial battery-powered transistor radio in 1955, it did not initially aim at the high-end market, where companies like RCA provided a vacuum-tube living-room entertainment center controlled by the father of the house. Instead, it aimed at a part of the market that had not seemed profitable to firms like RCA: teenagers with limited budgets. Teenagers were not looking for a high-quality living-room listening experience; they were more interested in listening to the latest musical hits in their own rooms, and so did not mind the cheap and crackly plastic device Sony was marketing to them. Over the next decade, however, Sony improved the transistor radio to such a degree that it became a serious technical competitor to the vacuum-tube radios, offering similar quality at a much lower price. The company applied the same strategy to portable televisions, again aiming at potential buyers who were not even customers for the costly established products. Having perfected the transistor-based products for customers in these new markets, Sony then invaded the leading firms’ core markets—displacing the old technologies and the seemingly unshakable companies that employed them.[19]

Not all industries are equally vulnerable to such devastating disruptions, of course. Aside from the nature of the industry itself, another key factor is the degree to which regulations and statutes shape the industry’s market and cost structure. Rules, laws, and government-imposed standards can provide protection against competition even if they raise costs to consumers; by erecting artificial obstacles and expenses for potential new entrants, such regulations can erode or eliminate any advantages a newer, more nimble upstart might have. Established leaders will often take advantage of this red tape, lobbying government to enforce or alter rules in order to create barriers to new entrants and thus stave off competition.

One example of this dynamic is the field of telecommunications, where the technological transformation that has brought us everything from television and movies by phone line to Bluetooth was delayed in the United States for several years. The cause was the land-line monopoly provided to AT&T, as well as rules that made it difficult for other forms of communication to emerge. Before the computer revolution and the advent of the internet—developments that made the existing communication regulations seem irrelevant—it took access rule changes and a statutory break-up of AT&T to lay the groundwork for today’s regime of mobile phones and wireless networks.

Like AT&T, established players in higher education do receive some regulatory protection, as the industry is subject to certain rules and subsidies that influence its business model and shield current industry leaders. Requirements associated with subsidized student loans, for instance, tend to favor existing institutions; accreditation, while not a significant barrier, does offer some protection for established providers. Organizations representing major universities maintain strong lobbying operations in Washington and state capitals; well-connected research universities often obtain revenue from government grants; and, at least in periods of economic stability, state universities have the built-in financial advantage of state appropriations, which serve as a buffer from market pressures.

Despite these advantages, however, government programs, subsidies, and regulation will not save higher education. Among experts in the fields of education and industry transformation, there is a growing sense that higher education is approaching a tipping point—and that the industry will encounter disruptive innovation quite soon. The Innosight Institute’s Michael Horn, co-author with Clayton Christensen of several studies and publications on education, predicts: “I wouldn’t be surprised if in 10 to 15 years half of the institutions of higher education will have either merged or gone out of business.” According to Christensen, this change will not seriously threaten exclusive top-brand universities like Harvard and Yale, given the perceived high value of their brands and the connections and other extras they provide. Public universities, however, are in for a real shock.

There are two reasons why public universities are particularly vulnerable to the coming higher-ed revolution. The first is their typical market: Most state-school students are ideally suited to the online education and flexible approaches to instruction offered by low-cost upstarts. Furthermore, prospective state-school students generally come from households that are more price-sensitive than those considering elite private universities.

The second, and perhaps more urgent, reason for public schools’ vulnerability is the ongoing fiscal disaster in the states. As state budgets come under increasing pressure, tuition costs are likely to continue growing and services at state schools are likely to be slashed further by hard-pressed legislatures. California, for instance, hiked in-state tuition by 21% this year; over the next few years, the University of California system envisions annual tuition increases ranging from 8% to 16%. Other states face similarly grim prospects.

And the problem is only exacerbated by public universities’ politicized governance structures—which, when combined with the state schools’ lack of endowments to rival private universities’, makes it much more difficult for public schools to adjust and innovate in response to changing conditions and competition. Those looking for signs of the coming revolution in higher education would thus be wise to keep their eyes on America’s bloated public universities.

A Role for Government?

A fundamental restructuring of higher education—one that dramatically lowers costs and increases flexibility for millions of students—would be of enormous benefit to the country. As America faces stronger global economic competition, increasing the cost effectiveness of our approach to developing the human capital of our work force will be essential. Within our own borders, transforming higher education will also do much to increase the economic mobility of young Americans from lower-income families, and allow a broader swath of the population to grasp the American Dream.

But if reforming higher education is so important, shouldn’t we begin crafting public policies to help facilitate the change? No and yes. Because higher education is less constrained and distorted than other industries by statutes and regulation, there are far fewer impediments to the “natural” pressures of innovation; a strong case can thus be made for keeping lawmakers out of the way. Moreover, there is a danger that, once the federal government or even state governments begin to try to manage change—by, say, imposing or altering accreditation rules—they will become tools of established institutions, used to block new entrants and competitors.

That said, it might seem reasonable for the government to require some measurements of quality and effectiveness when taxpayer funds are at stake, such as in the rules for federal student aid or direct grants to universities. To that end, some proponents of radical change in higher education argue for a government quality metric such as the “Quality-Value Index” recommended by Christensen and others.[20] For each institution, the index would combine data on such measures as placement rates, salaries earned by graduates, graduate satisfaction, and loan-default rates. The idea is that Pell grants, subsidized loans, and other government funding to a university would be contingent on the institution’s maintaining a high quality score.

Other observers argue that government should also take the lead in creating a clear and standardized information system, which students and families could use to compare higher-education providers. But there is a danger here: Government-designed quality measurements are subject to manipulation by well-connected interest groups, and can lead providers to seek to increase their government scores by gaming the rating system. There is also the problem of government’s tendency to focus more on inputs rather than outputs when measuring quality. The advantage of value measurements that are developed by a range of non-government institutions, on the other hand, is that no single rating organization has a monopoly; the information industry itself can more easily evolve and improve in response to market demands.

Government policy can, however, help to improve students’ post-graduation bottom lines by shifting college costs away from debt financing and toward more financing through saving. Our current tax and subsidy structure, in particular, favors debt over savings for higher education. While there are certain education tax breaks for modest- or low-income students and their families, federally subsidized student loans encourage indebtedness while making it easier for colleges to raise tuition.

The federal government could also help reduce student indebtedness and boost savings for higher education by overhauling the way the tax code treats higher education. Today, the tax system treats fixed capital—such as investments in equipment—far more generously than investment in human capital, such as tuition for a college degree. The tax code needs to treat these different forms of investment more equally. For example, in a recent Heritage Foundation proposal for long-term fiscal reform, Saving the American Dream, Alison Acosta Fraser, William Beach, and I suggest introducing a tax deduction for up to four years of higher education.[21]

Second, ending the double taxation of savings would provide a strong incentive for Americans to save for college and for other major investments. The Heritage proposal exempts all saved income from taxation until it is spent (and in the case of higher education, savings used for tuition are not taxed even at that point). This change in federal taxation would reinforce the state tax benefits associated with state-sponsored 529 college savings funds, which have grown rapidly in recent years despite the troubled stock market (holdings now top $150 billion).

Looming on the horizon could even be a futures market in higher education. Some states already allow investors in 529 plans to lock in future tuition prices at state institutions, much as an investor might buy a futures contract for oil. With an expansion of savings for higher education, and thus a growing pool of funds linked to the financing of higher education, one could imagine commercial managers of large portfolios of college-savings funds beginning to develop a tuition futures market. Such a market might include tradable fixed-price contracts for, say, a year of tuition at the University of Virginia, and even put and call options so that parents could lock in the costs of a complete college education well before they have saved the full amount. Though the obvious advantage of such an approach would be providing parents with more predictability about future costs, a futures market might also provide added impetus for reform: Portfolio managers with billions in college savings and futures contracts would take a much keener interest in the long-term business model of colleges and universities, putting further pressure on the institutions to restructure their finances and improve the value they offer for money.

The Impossible Dream No More

For a growing number of Americans, a college degree is something obtained only through enormous sacrifice and indebtedness on their part or their parents’, or a dream that is entirely out of reach. Meanwhile, most college leaders live in a bubble in which the costs of ever more elaborate facilities, expanding administrative bureaucracies, and high-profile professors with light teaching loads can simply be passed on to customers in the form of higher tuition.

But those days are about to end. Underneath the surface, upstart institutions are perfecting radically new education technologies and business plans at the same time that young people and their parents are becoming more frustrated with the traditional higher-ed model, and more open-minded about alternatives. There is every reason to suspect that, quite soon, these new institutions will do to higher education what Sony did to radios and Apple did to computing. Afterward, our colleges and universities will never be the same. Few Americans, one suspects, will look back in regret.


The Six Dirty Secrets of Presidential Politics in 2012

The vast majority of the decisions made in the conservative media and by activists are decided by business considerations rather than by what is best for the cause,” not what is best the country. CftC

It is amazing to me how many political opinions/predictions from seemingly intelligent people are so clearly wrong and how little it seems to matter to them or anyone else in the punditsphere when this is inevitably proven to be true.

The reasons why this is the case are many, but at the core of this phenomenon is the fact that there are several basic realities of presidential politics that appear to have somehow failed to pierce the bubble/echo chamber of the media elites. These are, if you will, the “dirty little secrets” of presidential elections in general and 2012 in particular.

You simply can’t properly evaluate what will happen this November without first understanding that:

Ignorant votes rule

No matter how politically incorrect it may to say out loud, there is absolutely no doubt that the voters who determine who wins our presidential elections are frighteningly lacking in even basic knowledge of the issues or the candidates.

While this has probably always been the case, the evidence is overwhelming that, for a variety of reasons (most notably the fragmentation and “fluff-ification” of our celebrity-driven media), this problem is getting worse every cycle. In 2008, I commissioned two scientific polls as part of my documentary of the media coverage of the election which proved just how incredibly ignorant of fundamental facts the voters of each candidate were.

It is quite clear that the country is basically split politically into thirds. One third is known in overly polite circles as “independent” or “casual” voters. In truth, these are people who don’t pay attention and don’t really care about current events. Unfortunately, because the other two thirds of “partisans” tend to balance each other out, it is these voters (yes, regrettably, they do indeed vote) who usually decide the winner in presidential elections.

Because the media has by far the greatest influence over this group (because they get their political “news” almost entirely from headlines, comedians, and friends), they went for Obama in a huge way in 2008 and, to a lesser extent, probably will again this time.

Issues/Ideology Mean Very Little

Thanks to “dirty little secret” number one, I find it almost hilarious that so many political commentators still desperately hang on to the delusion that voters (at least the ones who matter) make their decisions the same way that said commentators do. This reminds of me of the identical fallacy which occurs when a woman interprets the actions of a man based on the erroneous belief that his brain works like hers does.

These ignorant voters don’t delve deeply into the candidates’ record/positions to decide which one is closest to their views. They have no real ideology. Instead, they make their choices based mostly on feeling, and often that doesn’t even mean a sense about each of the candidates.

Instead, these people tend to vote based on which decision will make them feel better about themselves. Ironically, that usually means which side will make these “stupid” people feel as if the have made the “smart” selection.

A glance at recent history proves this point. In 2008, there was no doubt that the media had convinced the “middle third” that Obama was the “wise” choice. In 2004, despite the media’s best efforts, the middle third felt like Bush 43 would keep us safer in a post-9/11 world. In 2000, there was no real sense as to which candidate was the “wise” option, and it basically ended in a tie. In 1996, thanks to the economy being good, they deemed Bill Clinton worthy of a second term. In 1992, thanks to a misperception of the economy, they simply felt like three straight Republican terms was enough.

Now, if one candidate is perceived as being ideologically outside the mainstream (which, thanks to a media-created matrix, can really happen only to Republicans), then that perception will very likely impact the way that the “middle third” decides which candidate is the “wise” pick. But this usually won’t be because of the candidate’s actual views, but instead because of the narrative that his or her ideology creates (for instance, Rick Santorum would get crushed not because most people disagree with him about gay rights, but rather because his misunderstood views on the issue would create the impression that he was outside the mainstream and therefore not the “wise” alternative).

The bottom line as this relates to 2012 is that the notion that Mitt Romney would be at a disadvantage against President Obama because he is supposedly a “right-leaning moderate” going up against a “left-leaning moderate” is just silly. As long as there is no conservative third-party candidate, Obama himself will single-handily produce a near-100% conservative voter turnout for Romney, regardless of how his ideology is perceived.

This is also why Newt Gingrich is so unelectable, especially against Obama. All these voters would ever really know about him is that he is a fat, old, angry white male, with two ex-wives, who resigned as speaker of the House because he got Clinton impeached while he himself was having an affair. Game, set, match.

The 2010 Midterms Are Largely Irrelevant

The biggest political misunderstanding that most hardcore conservative voters have is that presidential elections are pretty much the same as the midterm variety. This is like comparing the NFL’s Super Bowl with the Pro Bowl. Even though they are both football games, it would be difficult for them to be more unlike each other.

Midterms are local and state elections with almost no national media narrative/impact or principal individuals and where the turnout is usually pretty light. Presidential elections are 50 separate state elections with a distinct national narrative set by the media where there are two much-focused-on individuals and where turnout out is much higher than normal.

In short, midterms are based largely on ideology/party affiliation, while presidential matchups are about mostly about the feelings of people who don’t follow politics.

This misconception has caused a huge problem for conservatives in this cycle because the Tea Party people seem to think that, based on the relative success of the 2010 campaign, beating Obama should be rather easy. This, in turn, has caused them to consider a number of candidates who have no shot at winning and who would ordinarily never even be considered for the task of trying to bring down the Obama monster.

In the end, it is likely to create enormous disappointment when Romney wins the nomination based mostly on the idea that he is the most (only) electable alternative. I also fear that, should Romney lose, the incredibly false lesson that will be “learned” (much like with John McCain in 2008) will be that we lost because we nominated a “moderate.”

The Liberal Media’s Influence Is Increasing

The popular perception among most commentators is that the media’s general influence is on the decline and that, therefore, liberals are slowly losing one of their most powerful political weapons. I have devoted most of the last four years of my life to proving that this premise is patently false.

The counterargument to mine goes something like this: because of fragmentation, the audience sizes of the traditional liberal news outlets is shrinking, and thanks to Fox News, talk radio, and the internet, we are able to get our message out around the old gatekeepers.

This might very well be the most dangerous fallacy in the conservative movement today.

There is no doubt that fragmentation has dramatically altered the entire media landscape for the worse (except for the Golf and History Channels) and that audiences for individual outlets are indeed getting smaller. The problem is that numerous factors (including having largely gotten away with singlehandedly electing Obama in 2008) have freed up these same liberal outlets to allow their true selves to really come pouring out without a hint of self-restraint.

After what they so overtly did for Obama and against Sarah Palin in 2008, why would they ever go back to just the relatively tame “bias” of the Nixon and Reagan years? The referees have gone from putting a finger on the scales of justice to flat out sitting on them, and yet there have been almost no repercussions. Even though they don’t have nearly the same weight/power that they used to, they are happy to simply use a much greater percentage of what they still possess in order to get the job done.

Conversely, it is a myth that Fox News, talk radio, and the internet allow conservatives to get our truth out. In reality, at best, these outlets allow the previously converted to feel better about what they already believe. At worst, they provoke the other side into justifying a more overt bias in order to “balance” things out.

The ultimate example of this comes in the way the cable news networks have positioned themselves. MSNBC is far more left than FNC is to the right, and now, significantly left CNN is somehow allowed to be perceived to be in the “middle.”

It is important to note here that the definition of “media outlets” which influence presidential elections now goes far beyond the “news” variety. You can actually argue that entertainment media has even more control these days than news divisions do (assuming you can even tell the difference between them anymore).

Jon Stewart, Stephen Colbert, Jay Leno, David Letterman, Bill Maher, Saturday Night Live, and other “entertainment” outlets all have incredible power to create the narrative of a presidential election (just ask Palin), and they are highly unlikely to do so in a way that would ever harm Obama.

One of the many reasons why Romney is the only Republican candidate with a chance is because he is the only one who would be the target of mostly harmless jokes (teasing about how rich, straight-laced, and boring he is won’t be nearly as devastating what they would easily come up with for Gingrich, Santorum, Paul, or Perry). Interestingly, this past week’s attempt by SNL to parody Romney in exactly that way bombed dramatically.

The 2000 election provided an important lesson in this area. Interviews since then indicate that SNL staff thought that they were destroying Bush 43 by making him seem stupid. Instead, they actually helped his candidacy by making him seem way cooler and more likable than Al Gore, whom they portrayed as incredibly annoying.

The media testified on behalf of Obama in 2008. They are simply not going to let him be a one-term disaster if they can possibly help it.

Which leads directly to the next “secret”…

Obama Will Be Much Tougher to Beat Than Perceived

Even if the economy doesn’t improve (or at least provide enough data for the media to manipulate into making it seem as if it is), Obama has at least a 50% chance at reelection. This assessment may be shocking to many conservatives, but it is based on sound analysis.

Incredibly, even now, both Obama and Romney are almost exactly even when it comes to net approval ratings, with the only difference being that a few more people have made up their minds about Obama than have with Romney. The head-to-head polling data also indicates that they are approximately tied.

Taking out an incumbent is always difficult (even Bush 43 improved on his 2000 vote with an unpopular war and a partisan press working against him), but especially given two elements that seem to have been forgotten by overly optimistic conservatives.

The first is that the number-one argument (at least as approved by the cowardly McCain campaign) against Obama in 2008 was that he lacked any executive experience. Well, he now has essentially served four years in the most difficult executive position in the world. To the “middle third” voters, this weakness has now become a strength (as has, by the way, his lack of a foreign policy resume, which now boasts the killing of Osama bin Laden on it).

Second, “middle third” voters hate one party controlling all the levers of power, especially now, when trust in politicians and Congress is at all-time lows.

Republicans currently control the House and seem very likely to take over the Senate. This is a reality, I am quite certain, of which (unlike 2008, when my polls indicated that most Obama voters wrongly thought that Republicans were in control) the media will make very sure every “casual” voter is made painfully aware. The fact that they would be able to claim that a Romney victory would allow the “crazy” (and increasingly unpopular) Tea Party coalition to “take over” will only exacerbate the negative impact this will have on undecided voters.

The only reason why Romney has any real chance at all is because he is uniquely positioned to win in New Hampshire, Nevada, and Michigan, all of which are critical to Obama’s various paths to 270 Electoral College votes.

But this all assumes that the economy stays basically where it is between now and November. If it is perceived as really getting better, then Romney will almost certainly lose barring some sort of significant scandal, which, given the incredibly high standards the media would use to judge any possible indiscretions, would seem to be highly unlikely.

The reason why Romney is indeed the most electable Republican left is because he makes the race more of a pure referendum on Obama than any of the others (though not as much as a Tim Pawlenty would have). This means that, to a large degree, his destiny is not in his own hands, and his candidacy is at the mercy of largely ignorant voters’ feelings about the economy.

The only other plausible scenario here is that Iran, Iraq, and Syria explode to the point where foreign policy becomes a much bigger issue than anyone currently expects. This, of course, does not play into Romney’s strengths, and unless he took the bold/risky step of picking Condoleezza Rice as his VP (and she surprisingly accepted), it would be hard to see how he could fully take advantage of this shift in the campaign’s narrative.

The Conservative Media Has an Incentive for Obama to Win

The “dirtiest” little secret on my list is one that, because it is so obvious, I am astonished has not been mentioned in any significant way.

In my experience, the most universal misconception that conservatives have about politics is that most of those in the “conservative media” or those who are “activists” are motivated primarily because they believe in the cause. Unfortunately, for many reasons too numerous to get into in this space, this is simply not the case. The vast majority of the decisions made in the conservative media and by activists are decided by business considerations rather than by what is best for the cause not what is best the country ( added by the CftC ).

In other words, it is ratings, traffic, and, ultimately, revenue/job security which dictate a huge portion (not all) of the content produced by Fox News, the Drudge Report, and talk radio, and it is donations which determine how most activists react. This is why Sarah Palin’s irrelevant presidential tease and Herman Cain’s always-doomed campaign were given so much more attention than they deserved. It is also a significant part of why the “Tea Party movement” evolved as it did.

It is also why there is a very good chance that many people in both groups will effectively lay down their arms in the battle to unseat Obama.

The reasoning behind this controversial declaration is quite simple. Those entities have absolutely no financial incentive for Obama to lose and, if fact, have a profound disincentive against facilitating his defeat.

The Obama presidency has been a financial windfall for all of them. Fox’s ratings have never been higher, Drudge’s traffic has never been better (which is rather “ironic,” given how blatantly he protected Obama during the 2008 primaries), talk radio has been at least temporarily saved, and dozens of “Tea Party” groups have raised millions of dollars with which to line the pockets of their organizers and consultant friends. If Obama loses, not only does all of that stop, but the prospect of possibly eight long years of being “obligated” to support a rather boring Mitt Romney with no “boogieman” to attack must scare the daylights out of them.

To be clear, there will be no overt conspiracy. There is no need for there to be one. These are all people who live their daily lives based on pursuing their own interests, and many of them will have no problem coming to the conclusion that an Obama loss would be a terrible thing for their personal “cause” all on their own.

For those skeptical of my rather cynical hypothesis, I offer two quick examples.

If those I speak of really were primarily devoted to the cause of beating Obama, every conservative in the country would have been activated to support Pennsylvania’s proposal to alter the way that it allocates its Electoral College votes because it would have made Obama’s reelection almost impossible. Instead, the proposal got almost no attention, and the idea was unceremoniously dropped.

Similarly, some have compared the attacks on Romney’s Bain record to what happened regarding Obama’s “Rev. Wright” issue during his successful primary run. The big difference (other than the Wright issue being far more legitimate), of course, is that Hillary Clinton did not take up the attacks on the Wright connection, while Newt Gingrich has led the charge on the Bain issue.

While Gingrich has been criticized by many conservatives for his actions here, there has not been nearly the universality of ferocity of condemnation on the right as there would have been on the left had Hillary done the same to Obama (which is probably why she never dared to go there).

The primary reason for this is that the conservative elite are simply not as willing to go to the mat for Romney as their counterparts on the left were (and still will be) for Obama.

In a bizarre way, I am coming to see the coming Romney candidacy much as I view the Iraq War. It was a good idea; was based on seemingly sound, though ultimately flawed, assumptions; and was executed well under very difficult circumstances, but it ended up being doomed in public perception largely because too many weak-kneed conservatives weren’t willing to pay the price to achieve ultimate victory.

In other words, if every conservative power broker sincerely wanted to defeat Obama as they claim they do and acted based on that as their primary priority, then, with any luck, Romney would win. Unfortunately, based on my extensive knowledge of these people, I have zero faith that most of them will be there for the cause when it really counts.

Therefore, the most likely scenario is that Obama gets re-elected, the country is harmed, and many so-called “conservatives” will smile.

Time for a Stupidity Tax

Time for a Stupidity Tax

– Drew McKissick (1/25/12)
As many of us spend time each day becoming more frustrated with the political news and our country’s direction, it is worth noting that our country is (for now) a self-governing democratic-republic, which means that the people who are ultimately responsible for our situation are those who participate in our wonderful little experiment.

Let’s face it, self-government, whether in the personal or political sense of the term, requires some common sense. And our country suffers from an overabundance of stupid people – and too many of them have voter registration cards. There, I said it.

Just how stupid are we? Several years ago a Gallup survey found that: 43% don’t know that the “judicial” is one of the three branches of government; 41% don’t know that their state (and every other state) is represented by two US Senators; 53% don’t know what the “Bill of Rights” is; and 66% can’t identify the document containing the words “We hold these truths to be self-evident, that all men are created equal”.

In 2006 and 2007, a multiple choice civics exam was administered to over 28,000 college freshmen and seniors by the National Civic Literacy Board. The freshmen (AKA, high school graduates) failed each year, and the seniors, after four years of higher education, failed each year as well. In 2008, the same group tested over 2,500 adults of all backgrounds and 71% of them also failed.

In addition to general civic ignorance, the study found that “college made graduates more liberal, while greater civic knowledge led adults to be more supportive of America’s constitutional traditions”, (which might explain why so many schools give civics short shrift, especially since so much of liberalism’s gains come at the expense of the Constitution).

The study also demonstrated that greater civic knowledge was the leading factor in encouraging a higher level of civic involvement beyond just voting, such as attending political meetings, contributing or volunteering for a campaign, lobbying an elected official, or just writing a letter to the editor. (Again, not the type of thing the average liberal politician wants to encourage).

A study in the 2001 Annual Review of Political Science found that “Despite huge increases in the formal educational attainment of the US population during the past 50 years, levels of political knowledge have barely budged. Today’s college graduates know no more about politics than did high school graduates in 1950”. (This testifies to the fact that we have a “quality” problem, not quantity.)

Their shocking conclusion? That “the successful study of America’s history and institutions is the key to informed and responsible citizenship”.

All the while that we are teaching less civics, (half of the states don’t require it in high school), we are constantly encouraging the less civically inclined to engage in two of the most fundamental aspects of citizenship: voting and jury duty.

Of course it is politically incorrect to suggest (and no less true), but those who are unfamiliar with the basics of how our government should function are more easily “bribed” with their own money to vote for certain politicians, and are more malleable by trial lawyers in the hunt for big verdicts.

It’s bad enough that the stupid among us do participate, to the degree that they do; but why on Earth would we continually make it easier? We almost force them to register to vote automatically when they apply for a driver’s license. At least when it comes to driving a car you have to study, take a test and demonstrate that you can do so. But not when it comes to driving the world’s oldest experiment in self-government.

Perhaps we need to do away with voter registration and current jury pool rules and institute a “citizenship volunteer registration” whereby the bearer volunteers to vote when called upon and serve on a jury when called upon. (Failure to do so could revoke said privileges for one year.)

Meanwhile, we are awash in tens of billions of dollars, spent on sports, Hollywood entertainment and video games. So, how about imposing a “stupidity tax” on such pass-times, much like the “sin taxes” we impose on alcohol and tobacco that supposedly fund healthcare and public awareness campaigns. Take money from the stupidity tax and fund civic education programs. Isn’t understanding our freedoms and the government instituted to secure them at least as important as funding the latest preachy anti-smoking ad?

Or maybe we could just demand that our schools actually start focus on teaching the basic civics that prepare future citizens for self-government.

The father of our Constitution, James Madison, once said, “A well-instructed people alone can be permanently a free people”. We seem determined to test that notion.

Drew McKissick is a political strategist and former member of the Republican National Committee with over twenty years of experience in grassroots politics. He writes a regular column providing analysis and commentary on current events. He is also the Founder & Publisher of Conservative Outpost, an online community for conservative activism. His personal website is available at DrewMcKissick.com.

The High Cost of Cheap Labor: Illegal Immigration and the Federal Budget

The High Cost of Cheap Labor: Illegal Immigration and the Federal Budget

August 2004


This study is one of the first to estimate the total impact of illegal immigration on the federal budget. Most previous studies have focused on the state and local level and have examined only costs or tax payments, but not both. Based on Census Bureau data, this study finds that, when all taxes paid (direct and indirect) and all costs are considered, illegal households created a net fiscal deficit at the federal level of more than $10 billion in 2002. We also estimate that, if there was an amnesty for illegal aliens, the net fiscal deficit would grow to nearly $29 billion.

Among the findings:

  • Households headed by illegal aliens imposed more than $26.3 billion in costs on the federal government in 2002 and paid only $16 billion in taxes, creating a net fiscal deficit of almost $10.4 billion, or $2,700 per illegal household.
  • Among the largest costs are Medicaid ($2.5 billion); treatment for the uninsured ($2.2 billion); food assistance programs such as food stamps, WIC, and free school lunches ($1.9 billion); the federal prison and court systems ($1.6 billion); and federal aid to schools ($1.4 billion).
  • With nearly two-thirds of illegal aliens lacking a high school degree, the primary reason they create a fiscal deficit is their low education levels and resulting low incomes and tax payments, not their legal status or heavy use of most social services.
  • On average, the costs that illegal households impose on federal coffers are less than half that of other households, but their tax payments are only one-fourth that of other households.
  • Many of the costs associated with illegals are due to their American-born children, who are awarded U.S. citizenship at birth. Thus, greater efforts at barring illegals from federal programs will not reduce costs because their citizen children can continue to access them.
  • If illegal aliens were given amnesty and began to pay taxes and use services like households headed by legal immigrants with the same education levels, the estimated annual net fiscal deficit would increase from $2,700 per household to nearly $7,700, for a total net cost of $29 billion.
  • Costs increase dramatically because unskilled immigrants with legal status — what most illegal aliens would become — can access government programs, but still tend to make very modest tax payments.
  • Although legalization would increase average tax payments by 77 percent, average costs would rise by 118 percent.
  • The fact that legal immigrants with few years of schooling are a large fiscal drain does not mean that legal immigrants overall are a net drain — many legal immigrants are highly skilled.
  • The vast majority of illegals hold jobs. Thus the fiscal deficit they create for the federal government is not the result of an unwillingness to work.

The results of this study are consistent with a 1997 study by the National Research Council, which also found that immigrants’ education level is a key determinant of their fiscal impact.A Complex Fiscal Picture

Welfare use.Our findings show that many of the preconceived notions about the fiscal impact of illegal households turn out to be inaccurate. In terms of welfare use, receipt of cash assistance programs tends to be very low, while Medicaid use, though significant, is still less than for other households. Only use of food assistance programs is significantly higher than that of the rest of the population. Also, contrary to the perceptions that illegal aliens don’t pay payroll taxes, we estimate that more than half of illegals work “on the books.” On average, illegal households pay more than $4,200 a year in all forms of federal taxes. Unfortunately, they impose costs of $6,950 per household.

Social Security and Medicare. Although we find that the net effect of illegal households is negative at the federal level, the same is not true for Social Security and Medicare. We estimate that illegal households create a combined net benefit for these two programs in excess of $7 billion a year, accounting for about 4 percent of the total annual surplus in these two programs. However, they create a net deficit of $17.4 billion in the rest of the budget, for a total net loss of $10.4 billion. Nonetheless, their impact on Social Security and Medicare is unambiguously positive. Of course, if the Social Security totalization agreement with Mexico signed in June goes into effect, allowing illegals to collect Social Security, these calculations would change.

The Impact of Amnesty. Finally, our estimates show that amnesty would significantly increase tax revenue. Because both their income and tax compliance would rise, we estimate that under the most likely scenario the average illegal alien household would pay 77 percent ($3,200) more a year in federal taxes once legalized. While not enough to offset the 118 percent ($8,200) per household increase in costs that would come with legalization, amnesty would significantly increase both the average income and tax payments of illegal aliens.

What’s Different About Today’s Immigration. Many native-born Americans observe that their ancestors came to America and did not place great demands on government services. Perhaps this is true, but the size and scope of government were dramatically smaller during the last great wave of immigration. Not just means-tested programs, but expenditures on everything from public schools to roads were only a fraction of what they are today. Thus, the arrival of unskilled immigrants in the past did not have the negative fiscal implications that it does today. Moreover, the American economy has changed profoundly since the last great wave of immigration, with education now the key determinant of economic success. The costs that unskilled immigrants impose simply reflect the nature of the modern American economy and welfare state. It is doubtful that the fiscal costs can be avoided if our immigration policies remain unchanged.

Policy Implications
The negative impact on the federal budget need not be the only or even the primary consideration when deciding what to do about illegal immigration. But assuming that the fiscal status quo is unacceptable, there are three main changes in policy that might reduce or eliminate the fiscal costs of illegal immigration. One set of options is to allow illegal aliens to remain in the country, but attempt to reduce the costs they impose. A second set of options would be to grant them legal status as a way of increasing the taxes they pay. A third option would be to enforce the law and reduce the size of the illegal population and with it the costs of illegal immigration.

Reducing the Cost Side of the Equation. Reducing the costs illegals impose would probably be the most difficult of the three options because illegal households already impose only about 46 percent as much in costs on the federal government as other households. Thus, the amount of money that can be saved by curtailing their use of public services even further is probably quite limited. Moreover, the fact that benefits are often received on behalf of their U.S.-citizen children means that it is very difficult to prevent illegal households from accessing the programs they do. And many of the programs illegals use most extensively are likely to be politically very difficult to cut, such as the Women Infants and Children (WIC) nutrition program. Other costs, such as incarcerating illegals who have been convicted of crimes are unavoidable. It seems almost certain that if illegals are allowed to remain in the country, the fiscal deficit will persist.

Increasing Tax Revenue by Granting Amnesty. As discussed above, our research shows that granting illegal aliens amnesty would dramatically increase tax revenue. Unfortunately, we find that costs would increase even more. Costs would rise dramatically because illegals would be able to access many programs that are currently off limits to them. Moreover, even if legalized illegal aliens continued to be barred from using some means-tested programs, they would still be much more likely to sign their U.S.-citizen children up for them because they would lose whatever fear they had of the government. We know this because immigrants with legal status, who have the same education levels and resulting low incomes as illegal aliens, sign their U.S.-citizen children up for programs like Medicaid at higher rates than illegal aliens with U.S.-citizen children. In addition, direct costs for programs like the Earned Income Tax Credit would also grow dramatically with legalization. Right now, illegals need a Social Security number and have to file a tax return to get the credit. As a result, relatively few actually get it. We estimate that once legalized, payments to illegals under this program would grow more than ten-fold.

From a purely fiscal point of view, the main problem with legalization is that illegals would, for the most part, become unskilled legal immigrants. And unskilled legal immigrants create much larger fiscal costs than unskilled illegal aliens. Legalization will not change the low education levels of illegal aliens or the fact that the American labor market offers very limited opportunities to such workers, whatever their legal status. Nor will it change the basic fact that the United States, like all industrialized democracies, has a well-developed welfare state that provides assistance to low-income workers. Large fiscal costs are simply an unavoidable outcome of unskilled immigration given the economic and fiscal realities of America today.

Enforcing Immigration Laws. If we are serious about avoiding the fiscal costs of illegal immigration, the only real option is to enforce the law and reduce the number of illegal aliens in the country. First, this would entail much greater efforts to police the nation’s land and sea borders. At present, less than 2,000 agents are on duty at any one time on the Mexican and Canadian borders. Second, much greater effort must be made to ensure that those allowed into the country on a temporary basis, such as tourists and guest workers, are not likely to stay in the country permanently. Third, the centerpiece of any enforcement effort would be to enforce the ban on hiring illegal aliens. At present, the law is completely unenforced. Enforcement would require using existing databases to ensure that all new hires are authorized to work in the United States and levying heavy fines on businesses that knowingly employ illegal aliens. Finally, a clear message from policymakers, especially senior members of the administration, that enforcement of the law is valued and vitally important to the nation, would dramatically increase the extremely low morale of those who enforce immigration laws.

Policing the border, enforcing the ban on hiring illegal aliens, denying temporary visas to those likely to remain permanently, and all the other things necessary to reduce illegal immigration will take time and cost money. However, since the cost of illegal immigration to the federal government alone is estimated at over $10 billion a year, significant resources could be devoted to enforcement efforts and still leave taxpayers with significant net savings. Enforcement not only has the advantage of reducing the costs of illegal immigration, it also is very popular with the general public. Nonetheless, policymakers can expect strong opposition from special interest groups, especially ethnic advocacy groups and those elements of the business community that do not want to invest in labor-saving devices and techniques or pay better salaries, but instead want access to large numbers of cheap, unskilled workers. If we choose to continue to not enforce the law or to grant illegals amnesty, both the public and policymakers have to understand that there will be significant long-term costs for taxpayers.


Environmentalism and the Leisure Class

Environmentalism and the Leisure Class
This week President Obama handed down what may prove to be one of the most fateful decisions of his entire administration when he rejected the plan to build the Keystone XL Pipeline carrying oil from the tar sands of Canada to the refineries of Houston. The decision did not win him one new vote but was crucial in protecting his environmental flank. The movie stars and Sierra Club contributors were getting restless and had drawn the line in the sand.
In turning down Keystone, however, the President has uncovered an ugly little secret that has always lurked beneath the surface of environmentalism. Its basic appeal is to the affluent. Despite all the professions of being “liberal” and “against big business,” environmentalism’s main appeal is that it promises to slow the progress of industrial progress. People who are already comfortable with the present state of affairs — who are established in the environment, so to speak — are happy to go along with this. It is not that they have any greater insight into the mysteries and workings of nature. They are happier with the way things are. In fact, environmentalism works to their advantage. The main danger to the affluent is not that they will be denied from improving their estate but that too many other people will achieve what they already have. As the Forest Service used to say, the person who built his mountain cabin last year is an environmentalist. The person who wants to build one this year is a developer. …
It is not that the average person is not concerned about the environment. Everyone weighs the balance of economic gain against a respect for nature. It is only the truly affluent, however, who can be concerned about the environment to the exclusion of everything else. Most people see the benefits of pipelines and power plants and admit they have to be built somewhere. Only in the highest echelons do we hear people say, “We don’t need to build any pipelines. We’ve already got enough energy. We can all sit around awaiting the day we live off wind and sunshine.”
Environmentalists have spent decades trying to disguise these aristocratic roots, even from themselves. They work desperately to form alliances with labor unions and cast themselves as purveyors of “green jobs.” But the Keystone Pipeline has brought all this into focus.

What really brings it into focus is the open rift that has now developed between the laborers’ union and the environmentalist movement.The Laborers’ International Union of North America (LIUNA) left the BlueGreen Alliance on Friday, citing a disagreement with the group’s members over the Keystone XL pipeline. LIUNA, a vocal Keystone supporter, took aim at other unions for opposing the project. “We’re repulsed by some of our supposed brothers and sisters lining up with job killers like the Sierra Club and the Natural Resources Defense Council to destroy the lives of working men and women,” LIUNA General President Terry O’Sullivan said in a statement.

It is hard to understand how any union can explain to its members why it supports Obama’s job-destroying energy and economic policies, but it is has been a long time since many union leaders have taken their members’ interests seriously.

The comments above by John Hinderaker relate to an essay in the American Spectator by William Tucker with paragraphs included above. Tucker’s reflections recall remarks by Thorstein Veblen and were prompted by Obama’s decision to kill the Keystone pipeline. Tucker is the author of Terrestrial Energy: How Nuclear Power Will Lead the Green Revolution and End America’s Energy Odyssey.

Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts

Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts

The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out. Ben Bernanke(pictured to the right), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets. Nevertheless, the results of the first audit in the Federal Reserve’s nearly 100 year history were posted on Senator Sander’s webpage earlier this morning.

What was revealed in the audit was startling:

$16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world’s banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious – the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.

To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. Take all of the outrage and debate over the $1.5 trillion deficit into consideration, and swallow this Red pill: There was no debate about whether $16,000,000,000,000 would be given to failing banks and failing corporations around the world.

In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies. That was a blatant lie considering the fact that Goldman Sachs alone received 814 billion dollars. As is turns out, the Federal Reserve donated $2.5 trillion to Citigroup, while Morgan Stanley received $2.04 trillion. The Royal Bank of Scotland and Deutsche Bank, a German bank, split about a trillion and numerous other banks received hefty chunks of the $16 trillion.

“This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.” – Bernie Sanders (I-VT)

When you have conservative Republican stalwarts like Jim DeMint(R-SC) and Ron Paul(R-TX) as well as self identified Democratic socialists like Bernie Sanders all fighting against the Federal Reserve, you know that it is no longer an issue of Right versus Left. When you have every single member of the Republican Party in Congress and progressive Congressmen like Dennis Kucinich sponsoring a bill to audit the Federal Reserve, you realize that the Federal Reserve is an entity onto itself, which has no oversight and no accountability.

Americans should be swelled with anger and outrage at the abysmal state of affairs when an unelected group of bankers can create money out of thin air and give it out to megabanks and supercorporations like Halloween candy. If the Federal Reserve and the bankers who control it believe that they can continue to devalue the savings of Americans and continue to destroy the US economy, they will have to face the realization that their trillion dollar printing presses will eventually plunder the world economy.

The list of institutions that received the most money from the Federal Reserve can be found on page 131 of the GAO Audit and are as follows..

Citigroup: $2.5 trillion ($2,500,000,000,000)
Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
Bank of America: $1.344 trillion ($1,344,000,000,000)
Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
Bear Sterns: $853 billion ($853,000,000,000)
Goldman Sachs: $814 billion ($814,000,000,000)
Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
JP Morgan Chase: $391 billion ($391,000,000,000)
Deutsche Bank (Germany): $354 billion ($354,000,000,000)
UBS (Switzerland): $287 billion ($287,000,000,000)
Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
Lehman Brothers: $183 billion ($183,000,000,000)
Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
BNP Paribas (France): $175 billion ($175,000,000,000)
many many more including banks in Belgium of all places

View the 266-page GAO audit of the Federal Reserve(July 21st, 2011): http://www.scribd.com/doc/60553686/GAO-Fed-Investigation

Source: http://www.gao.gov/products/GAO-11-696
FULL PDF on GAO server: http://www.gao.gov/new.items/d11696.pdf
Senator Sander’s Article:


A Final Update from Afghanistan – Pete Hegseth

A Final Update from Afghanistan

By Pete Hegseth January 19, 2012

The Endgame in Afghanistan

My first email from Kabul was entitled “First Impressions” and the caveats I used in that email remain unchanged. Afghanistan is such a dynamic place—layered with umpteen complexities, contradictions, mysteries, and unknowns—that a holistic understanding of the country, let alone the conflict (overt and covert), is nearly impossible. That said, over the past eight months I’ve had the opportunity to challenge my first impressions, test hypotheses, and attempt to understand the true nature of the conflict. This section represents my modest—if declarative—initial attempt at distilling what I’ve learned and making some observation about America’s eventual endgame in Afghanistan.

Rather than break down my assessment categorically as I did in previous emails, I will instead look at the war through a lens provided by an insurgency expert who visited us this past summer. His name is Gérard Chaliand and the day we spent with him was fascinating. In addition to authoring over 40 books on guerilla warfare, he has also been a participant/observer of over a dozen insurgencies around the world—including Afghanistan in the 1980s, and again during the current conflict. Listening to him was like sitting in a semi-circle around Yoda himself, absorbing the insight and knowledge of a rare specimen.

Mr. Chaliand visits Afghanistan yearly, but said his 2011 trip was his last. When asked why, he said, “Because I know how it will end. The Taliban control the countryside and are growing in support throughout the country by providing an effective underground government structure. The seeds of their return were planted long ago—much before Gen. McChrystal’s 2009 counterinsurgency strategy—and their ascension is now inevitable. International forces started doing the right things at ‘half past eleven’ and now it’s too late.”

While I certainly didn’t share his pessimism then, I’ve come to begrudgingly agree with his assessment today. The Taliban—by mitigating their negatives (brutality, ethnic exclusion, and overt association with Al Qaeda) and accentuating their perceived positives (swift justice, longevity, and ideological cohesion)—have gained and maintained a psychological grip on the Afghan population. While most Afghans, especially non-Pashtuns, do not want the Taliban to return (“hearts”) they are grappling with—and calculating accordingly—the looming reality that the Taliban will outlast U.S. forces (“minds”) and eventually challenge a weak, corrupt, and fractured Afghan government for control of the country.

This isn’t to say that we couldn’t affect a more advantageous outcome for the United States; of course if we got rid of the 2014 withdrawal deadline completely, were willing to truly remove Taliban and Haqqani safe-havens in Pakistan (we know where they are!), and purged the Afghan government of its most corrupt nodes we could “change the game” of this conflict. But for various reasons—be they domestic politics, a nuclear-armed Pakistan (a lesson for Iran, I would suggest), and a trepidation with undermining corrosive “Afghan sovereignty”—it is highly unlikely we will make the hard choices necessary to level the playing field. A bad outcome in Afghanistan isn’t inevitable, but in light of current realities, it is likely.

However, the policies we pursue in the coming years will impact the degree to which the outcome here is bad, or less-bad. Our commitment to training and mentoring Afghan security forces will be central to determining the future of this country. If we do it right—truly creating a multi-ethnic force that will defend the interests of most Afghans—it could be a vanguard against total Taliban control and a buffer against outright civil war. If we do it wrong or hurriedly, we’re merely indiscriminately (and heavily!) arming different elements of an Afghan Army that will eventually turn its guns on each other. In my opinion the later outcome is most likely, but not inevitable.

If you know me, I’m not one for pessimism, and certainly not interested in undermining the efforts of our troops in harm’s way. Afghanistan is nowhere near a John Kerry-esque “who will be the last American to die for a mistake?” situation. Our effort is noble, our cause just, and our military sharp. But at the same time, my sentiments are in keeping with most Coalition members over here—even if they’re unwilling to say it. We soldier on. We will fight until the end. But with our ear to the ground and our boots in the snow, we can feel the undercurrent in Afghanistan. As the clock ticks to 2014, we become more irrelevant as Afghans make decisions (hoarding, segregating, and hedging) regarding a post-American future in their country.

While I don’t like acquiescing to a “non-victory” in Afghanistan, we will have nonetheless achieved an outcome in Afghanistan that is an exception to the rule in the so-called “graveyard of empires.” From a historical perspective, whenever we “leave” we will be the first “invader” that left on our own terms—a not insignificant accomplishment. Thankfully, and necessarily, I’m fairly certain our commitment to Afghanistan will continue on a smaller and enduring scale—and in doing so we will have done everything we can to create the conditions for a friendly and capable (at least on paper) Afghanistan government to determine their own future. It may not end well, but it won’t be for a lack of U.S. effort, courage, and ingenuity.

As supporting evidence for these heavy-hearted assertions, I would first submit my previous two emails (here and here). My feelings on the fundamentally corrupt Afghan government, Pakistan safe-haven, the 2014 deadline, Taliban capabilities and more are clearly stated in those emails—along with facts and financial figures. However, I’d like to take one more, broad look at our mission in Afghanistan, as it currently stands in January of 2012. In doing so, I’ll use Mr. Chaliand’s closing statement to us as a framework for examination. He said, when looking at a counterinsurgency conflict, we must “Never believe your propaganda, always re-asses the facts, challenge assumptions, and don’t rely on wishful thinking.” Wise words, and a useful filter for analyzing our mission in Afghanistan.

“Never believe your propaganda”

The Coalition narrative (I don’t consider it “propaganda”, because we’re beholden to the truth—unlike our enemies) in Afghanistan is as follows: the “surge” summer of 2011 has inflicted serious damage on the Taliban, especially in the south. At the same time, we are aggressively pushing Taliban re-integration programs, training increasingly capable Afghan security forces, and working to improve local governance. But, as I’ve said before, only half of this is grounded in reality. Yes the “surge” has allowed U.S. troops to push the Taliban out of traditional strongholds in the south, significantly disrupting their operations. However, there is also evidence that, despite heavy casualties, the Taliban have been able to regenerate themselves quickly, maintain their military and shadow-governance networks, and are waiting us out.

More troubling is the fact that we have not seen the ripple effects we needed the surge to induce (as it did in Iraq). While re-integration numbers (fighters giving up the fight) are increasing, they still include very few Pashtuns, especially Pashtuns from the south. Most of the re-integrated fighters are from the north and west, places not known for Taliban support. Second—and more importantly—Afghan governance at the local and national level has not decisively taken advantage of the surge environment to improve capability and legitimacy. While there are great programs (like Village Stability Operations and the Afghan Local Police) working to create the conditions for local governance, there hasn’t been—nor will there be—an Anbar-style tribal awakening like we saw in Iraq, largely because of the segmented and fractured nature of Pashtun society in modern Afghanistan. And without a legitimate government in Kabul and in the provinces, the chances for a stable outcome are minimal.

Another aspect of our narrative is that the 2012 “fighting season” (April to October) will be a decisive moment for our forces. We will increase our gains in the south, and degrade the Taliban enough to create the space for increasingly capable Afghan forces and a burgeoning government. There are three big problems with this. First, the idea of a “fighting season” is misleading. While violence is higher in the summer months, the non-violent aspect of this conflict doesn’t stop. When we’re not fighting (and sitting snug on our FOBs for the holidays), the Taliban continues to spread their influence through local dispute resolution, mobile Sharia courts (seen as increasingly legitimate by the people), and propaganda. Second, while we have achieved a critical mass of soldiers in the Afghan National Army, their ability and motivation to continue the fight when we’re not in the lead is still suspect (more on this below). Finally, it’s hard to overstate how damaging the 2014 deadline is in creating these outcomes. As the perception of 2014 gets closer, our influence—by point of fact—will diminish. The Taliban can stand back and wait us out because we told them how long to wait.

“Always re-asses the facts”

The fact is: facts are sticky in Afghanistan. And, depending on whom you’re talking to—especially amongst Afghans—they are always different, and oftentimes contradictory. So, rather than only talk “facts” now, I’d like to do a quick comparison between old facts and new realities.

Fact: In 2004, President Hamid Karzai was elected the President of Afghanistan, and seen as legitimate by wide swaths of Afghans as well as around the world. Reality today: Not only is the Karzai government corrupt and dysfunctional, it is already seen as illegitimate by most groups inside Afghanistan and as a complete money-pit to international donors. In fact, by any fair assessment, it can barely be called a “government” by traditional standards; it’s more like a ruling mafia. Bribery, nepotism, and blatant disregard for the rule of law and their own constitution are off the charts. The ruling elite are getting rich off international aid while regular Afghans scarcely see their lives improve. All the while, the Taliban exploit this fact through piercing propaganda. The end result is that we continue to prop up an Afghan government that is seen as increasingly illegitimate by the people; all the while hoping “peace talks” with the Taliban will provide an exit ramp for the war. The Taliban doesn’t want to work with the Afghan government, they want to replace it.

Fact: Since 2001 the United States has spent $456,000 an hour, every hour, on non-military developmental aid alone, and has spent even more on the military. Reality today: Afghanistan is an international donor state, almost completely reliant on international aid money to function. They have almost no tax base (save import taxation and . . . untaxed opium) and 97 percent of Afghanistan’s Gross Domestic Product is linked to foreign aid. We pay for their government and military, and have created financial realities that are completely unsustainable. Take, for example, the Afghan Army. This year we will spend $13 billion on training and equipping the Afghan Army, while the Afghan government will take in less than $2 billion in revenue. Some tough financial realities loom: either we cut spending and reduce the size of their Army or we continue to pay for it. The former would mean—for certain—the Afghan Army would eventually capitulate to the Taliban; the latter would mean we continue to pump billions into Afghanistan’s Army while we downsize our own (a bad idea, by the way). Not only is Afghanistan’s current situation unsustainable, but spending in the country for the past decade has distorted their economy and government more negatively than positively.

Final fact: In 2001, the United States was attacked by Al Qaeda from Afghanistan, where the Taliban granted them safe-haven. Reality today: Bin Laden is dead, Al Qaeda is on the ropes, and the Taliban are wary of their association with Al Qaeda. Yes the groups still coordinate, but it’s not the rock solid alliance it was ten years ago. Vice President Biden recently said that “the Taliban is not our enemy.” I respectfully and adamantly disagree (as would, I suspect, the families of those U.S. troops killed by the Taliban). Any group openly fighting and killing our soldiers is our enemy. But the more important question is: Does the Taliban pose an existential threat to America and our interests? They might tell us during negotiations that they will swear off association with Al Qaeda, but just like the Iranian denial of nuclear weapons, we should not believe them. There isn’t a scenario where a radical and violent Islamic group taking control of Afghanistan is a good outcome. However, we can still salvage conditions where the Taliban are not able to utilize, or provide, substantial haven for radical Islamists with global ambitions.

“Challenge assumptions”

The largest and most dangerous assumption we make is that there is a nation called “Afghanistan” and a collection of people called “Afghans.” Neither is correct, but that assumption continues to fuel our push for a multi-ethnic military and government that holds sway inside the arbitrary boundaries of Afghanistan. Having spent time with Afghans from multiple backgrounds—Pashtuns, Tajiks, Uzbeks, and Hazaras—it’s painfully clear that beneath the surface of the “we are Afghans” talk are true feelings of ethnic and tribal affiliations that supersede an “Afghan” identity. History, language, violence, custom, mistrust, and animosity separate these groups—and a flag, a national anthem (only in Pashto, which angers Dari speakers) a “government,” and a western-style Army are not enough to create a nation where none exists. I could tell story after story about this, but suffice it to say, this country is fragmented, and won’t unite in time to fight an ideologically cohesive, Pashtun-based Taliban movement.

In regards to the western-style Army I mentioned above, the assumptions we make with this force will have lasting, and potentially positive or negative impacts. Not only have we attempted to create a multi-ethnic institution that will represent all Afghans, but we’ve also built an Army in our image—with strong conventional capabilities and a Non-Commissioned Officer Corps, where none has existed before. We are producing new units at a rapid rate, recruiting from all backgrounds and then sending them to the Consolidated Fielding Center (CFC) in Kabul where multi-ethnic units are established and trained, before being sent to the field. There’s nothing wrong with that; but the problem is what happens after that on three fronts:

First, each new unit is given millions of dollars of brand new weaponry and equipment with minimal actual accountability. The kandak (battalion) commander is responsible for the equipment, some/much of which eventually ends up missing (and sometimes on sale in Pakistan). For example, a heavy weapons kandak leaves the CFC with approximately eighteen brand new 50-caliber machine guns and dozens of smaller-caliber heavy weapons and RPGs. I challenge you to walk into any National Guard armory in the States and ask how many functioning 50-caliber machine guns they have. They’ll probably pull out four beat-up 50-cals with rusting barrels, likely dated back to Vietnam. If things don’t end well, someone will use these weapons—and it might not be our friends.

Second, while units are formed as multi-ethnic entities, once they get to the field a slow, but deliberate self-segregation is starting to occur. Soldiers from the north try to get back to the north, and likewise for soldiers in the south. A Tajik ultimately wants to fight alongside Tajiks from his area, and likewise for Pashtuns and other groups. What you could end up having is a series of regional Armies with more commitment to their area then to “Afghanistan.” If things don’t end well, they will end up fighting each other—with weapons we have supplied them. On the flip side, if things move forward as we plan, these units will be a bulwark for the state. There are certainly many multi-ethnic units in the field fighting bravely together and doing great things. The question is, will this be the rule, or become the exception?

Third, even once the units are fielded—and assuming they are fighting for “Afghanistan”—we are currently making big assumptions about their capability to eventually independently operate and sustain their activities. With U.S. support—which includes things like logistical resupply, air support, and medical evacuation—many units currently do well in the fight. But if we take that away in 2013, ‘14, or ‘15—will they sustain the fight? And will they push into enemy territory? Many Afghan units have become accustomed to U.S. support, and may not be willing to fight an emboldened Taliban without the robust U.S. support they receive. They’re also accustomed to being paid well, while their Taliban counterparts fight for nothing. Our brave soldiers will mentor and train them to make them as capable as possible, but if they don’t develop their own systems soon, the Afghan Army house of cards could come falling down more quickly than anyone would like to admit.

Finally, I came to Afghanistan with the assumption that this battlefield is central to defending the United States. In the realm of perception and international opinion it is still very important; how we “finish” in Afghanistan will send strong signals to the rest of the world about whether we finish what we start. Recent events in Iraq make this plainly clear. However, the question is whether the cost in Afghanistan is worth the outcome? As my British colleague says, “Is the juice worth the squeeze?” I think seeing this through, while gradually drawing down, is worth doing. That said, larger and more strategically significant issues staring us in the face need to take a higher priority. We need to muster our political courage and confront our crippling domestic debt. (Did you know that, by 2015, just the interest payments on our debt to China will pay for its entire military?). We need to ensure our force posture and military might is capable of deterring a rising China. And we need to do what is necessary—including military action—to prevent a nuclear Iran (the fact that we can’t do anything in a nuclear-armed Pakistan should demonstrate that). There are obviously plenty of other challenges as well, especially at home, and spending money the way we are today in Afghanistan prevents us from confronting these challenges.

“And don’t rely on wishful thinking”

If you’ve read the previous two sections (and my previous emails), then I hope most of your “wishful thinking” has been stripped. That’s the point—we can’t wish our way to victory. Or as we say, “hope is not a strategy.” But we can look at the world the way it is and craft strategies to effect a more-desirable outcome. From where I’ve been sitting in Afghanistan, thankfully it’s clear that General Allen understands this; and as a result we’ve already seen (and will continue to see) a shift in our strategy from counterinsurgency to security force assistance. It’s a subtle, but important change. Instead of U.S. units taking the military lead in the field and trying to “partner” with Afghan units in the process, the lead responsibility will now fall to Afghans. Our soldiers will serve as embedded advisors, with 12-16 man teams embedded inside every Afghan unit, pushing the Afghan Army (and police) to the point where they can defeat the enemy on their own. U.S advisors will start with infantry units trained to clear and hold areas of insurgents and gradually shift toward support units, including helicopter units, logisticians, and other support personnel. This change makes complete sense and is the best strategy to securing a less-bad outcome for us.

At the same time, General Allen continues to talk about a post-2014 presence for NATO and the United States. This is extremely important as well. Both the Afghan Army and Taliban need to be convinced that we won’t just leave in 2014—but will instead maintain an enduring, and strategically significant, presence. The perception (as opposed to the reality) of 2014 is what is most damaging to our effort, and from General Allen and all elements of command, there is a clear effort to erode this perception. It won’t change overnight, but we must aggressively pursue a counter-narrative.

Finally, I would be remiss if I did not mention the ongoing “peace talks” with the Taliban (aptly placed in the “wishful thinking” section). It appears that both the U.S. and Afghan governments have approved a Taliban “office” in the country of Qatar, from which they can hold peace talks. Right now the Taliban is only talking to the United States, which angers President Karzai. In fact, the Taliban’s most recent pronouncement on negotiations rejected Karzai, his government and the Afghan constitution, which is not a promising starting point. From our side, there are talks of a prisoner exchange from Guantanamo as well as ceasefires, etc. The United States insists that the Taliban would have to forswear violence, stop harboring international jihadists, and recognize the Afghan government and constitution. It is highly unlikely they will agree to all three; therefore, which one would we be willing to cave on? If they keep their weapons, they’ll keep fighting; if they continue to harbor terrorists, then our entire effort is for naught; and if they won’t recognize the Afghan government, then they’re never join it.

I honestly don’t have the slightest idea how these talks will unfold, but we’re being shortsighted and “wishful” if we think they will provide a silver bullet for this conflict. I’m fearful the beltway intelligentsia, out of options and desperate for a rapid solution, will seize on this idea regardless of underlying realities. The Taliban will not be content to share power in good faith, and since they think they’re “winning,” they’re not likely to capitulate to our demands. Their negotiation strategy is based (again) on waiting until 2014 when the United States could be forced to compromise on the most important aspects of the post-2001 order in Afghanistan.

In the end, we clearly cannot abandon Afghanistan—pulling our troops out now would be a disaster. On the other hand, maintaining our effort at the current scope and cost is not commensurate with the benefits. The surge, led by the finest generals the American military has to offer, was the right approach; however, it was undercut from the outset when we told the enemy when we were going to leave. Having tried “more troops” (albeit, half-heartedly) and in light of political realities, the best course of action now is to continue drawing down our troops, bolster our advising mission, and emphasize our continued—if much scaled down—commitment to the outcome in Afghanistan. Despite our mistakes, we cannot abandon this mission lest we invite larger problems in the future. Going forward, a robust advising mission, along with continued targeted special forces raids, could be sustained in perpetuity with minimal cost and most of the benefit of our current presence.


Army Captain Pete Hegseth wrote the update above while in Kabul, Afghanistan and then Manas, Kyrgyzstan.