Libertarians for Obama

There was a moment during the 2008 campaign when there was this giant push that libertarians should seriously look at supporting Obama.

At the end of 2006, in the middle of what was that nearly three-year-long primary contest, Cato published Daily Kos founder Markos Moulitsas's "The Case for the Libertarian Democrat" and accompanying Cato Daily podcasts.

In early 2008, Cato drew attention to the comments of Scott Flanders, CEO of libertarian publisher R. C. Hoiles, who "reasoned that Obama is the best candidate to work on four top libertarian reforms: 1) Iraq withdrawal, 2) restoring the separation of church and state; 3) easing off victimless crimes such as drug use; 4) curtailing the Patriot Act."

And not longer after you had stuff happening like the launch of the Libertarians for Obama blog (tagline: Put aside your skepticism and read on.)

By September, you had people like Alex Tabarrok at Marginal Revolution - a blog which I hold in high regard - making the case for Obama and having their case highlighted by The New York Times.


Fast forward to today.

I'm posting this blog post as a reminder for the next time libertarians start thinking "you know, voting for the most liberal member of the Senate is starting to make a lot of sense!"

Here we are, just shy of 8 months into his Presidency. We've seen the largest growth in government in 50-some years - and that's excluding whatever lurch awaits in his attempt to revamp healthcare via yet-more-government.

And, returning to Scott Flanders' laundry list:

1) We are still in Iraq
2) As the Washington Post reports today, Faith-based initiatives: still goin' strong. (And perhaps even stronger.)
3) And, did you really delude yourself that Obama would change drug policy? Puhleeze. Although, there is that whole Andrew Sullivan fiasco.
4) Which brings us to "Curtailing the Patriot Act." Um, not so much. I'll just quote today's AP headline: "Obama Supports Extending Patriot Act Provisions."

Mr. Flanders: You're oh-for-four. Zero. Out. Of. Four.

As Jon Henke rightly put it in July, here's the Obama response to libertarians: Thanks for the votes, now get lost.


Now, I'm something of a hybrid between a conventional conservative and a libertarian. I can appreciate the libertarian case for John McCain was pretty much nilch, and the case against McCain was tremendously strong. I, too, hate McCain-Feingold, and anyone willing to regulate our Free Speech Rights is no friend of our liberty.

However, please learn this lesson: A liberal is a liberal is a liberal as long as the day is long.

No matter how bad the conservative nominee, it can not justify voting - on a libertarian basis - for the liberal one.

And a second lesson: If you elect a liberal president, who has a liberal super-majority in the Congress, the policy they pass will not resemble what you want. Period.

The Bailout

I'll concede we are in economic trouble. But, I'm against "the bailout" that failed in the House Monday, and which apparently will be tried again in the Senate Wednesday, purely on ideological grounds that most people probably don't agree with: I believe that: a.) the bill causes the government to intrude into financial markets; b.) government intrusion into financial markets necessarily infringes upon personal liberty; and c.) as a rule, the government should not take actions which infringe upon personal liberty.

I have a number of exceptions to (c), including exchanging minimal/reasonable amounts of personal liberty for security and order (military, police), addressing externalities, and some other areas, but the scope of this bailout pretty much automatically eliminates it from this list of exclusions.

And every time I hear a journalist, pundit, or politician explain that "the government has to do something", I go a little crazy inside. Not only does the government not need to do something, to fully respect our liberty, they ideally should do nothing.

But, I've come to realize over the last week that the above position makes me notably "out of the mainstream" so I'll try to put aside that ideology and share some thoughts on the bailout that have appeal to a broader ideological spectrum.


First - just how much is $750 billion dollars?

Well, it would be about $2,500 per American. Or put another way, a stack of 232 dollar bills fits inside one inch. A stack of $750,000,000,000 would be about 50,900 miles tall. From the center of the earth, it would stack more than 1/5th of the way to the center of the moon. That's. a. lot. of. money.

Now, as a number of conservative (but certainly not uber-libertarian) folks who are favoring the bill are pointing out, the longer term cost of this bill is not that $750 billion number. I think most of the people calling their congressmen to urge them to vote against this bill misunderstand this, so it's fairly important. Unlike most government spending, the government gets an asset in return for what it "spends" on this program.

If you go and buy $100 of stock, you don't count yourself $100 "poorer." You've just transfered $100 of value from cash to stock. The stock could appreciate (or decline) in value, but down the line you will likely be able to sell the stock to get money again. It's a very similar thing going on with the mortgage backed securities Paulson wants to buy up.

Where those making the above distinction seem to veer off the path though is in the assertion they usually further make that the government would be making a "good deal" in buying these securities. These arguers seem to be utterly certain that these securities are currently under-valued by the market. If they believe this, I'd encourage them to go put their money where their mouth is, instead of the government's (and by "government's,", I mean "taxpayer's," and by "taxpayer's," I mean "mine"). The market can and does, at times, under-value things. But there is NO guarantee it is undervaluing these now.

I would draw a distinction that, with stocks for companies, you can make a reasonable assumption that over the long run, these will, on the whole, improve in value because businesses can create value through things like increased productivity. A mortgage backed security can't do anything like that. It is my position that the default position one should take for these later types of assets needs to be that the market is pricing them accurately.

Furthermore, the market actually does not seem to be able to price these mortgage backed securities at all - because they aren't being bought and sold, so there is no data about prices. The whole rationale behind the plan seems to be partly just to come up with a price to get them moving.

I have no faith that the government will come up with a price that will allow the government to see these increase in value over time. If the government offers such a price, what's the incentive of a firm to sell them? Even at "market price" there is no incentive to sell to the government, because the bill would attach additional regulations to companies that participate. That means the government will have to buy these at higher than market value to make up for the cost of regulation to the seller.


Another objection I have to the bill is that at least earlier versions included provisions that if the government does make money off these securities, some sizable chunk (say 20%) of those profits are going to go to (far left) politically charged groups like ACORN [1].


So, this all basically works like this: The government takes $2,500 of your money. They invest it in mortgage backed securities. Companies they sell said securities to the government have to live with new special regulations. By the nature of how they'd have to price them so firms would sell the securities to the government, the government probably won't make a profit on these securities. But, if they do, you, the tax payer, from whom the government took $2,500 for this investment, won't see a full fifth of those profits, as they get redirected to special interests. Excellent, huh?

That's why this bail out need to continue to be killed. The market will take heavy losses. That's part of the free market system. It's how the market corrects for things that were priced too highly. The market will be able to figure out a real price for these mortgage backed securities though, and eventually things will head back to normal. Give the market time, don't pass hasty big-government legislation.

Government Intervention Atheist

Mark Shields, last week on The NewsHour with Jim Lehrer

And, you know, Jeffrey Frankel of Harvard put it, I thought, perfectly well. He said, "Just as there are no foxholes -- there are no atheists in a foxhole, there are no libertarians in a financial crisis."

I mean, all of the good folks who've told us "hands off, laissez-faire, no government," I don't know where they are. They've suddenly become Marcel Marceau . They've gone mute on us. You know, everybody wants Sam in there, and you can feel the irresistible wave for regulation.

Oh, hi there. I'm a libertarian ... despite this financial crisis.

And I'm a rather concerned libertarian because Shields is right. Most fiscal conservatives have shut up and the climate is ripe for new regulatory legislation. In particular, the so called "fiscal conservatives" - the ones the left paints as being fiscally conservative, like Bush and McCain, when their record proves otherwise - seem to be especially pro-new-government-intervention.

But government intervention is not the cure all for economic woes.

In the early 80s, under the Reagan administration, taxes were lowered and regulation frozen. Although not immediate, the recession that began under Carter came to a close under Reagan.

In the early 20s, another (serious but lesser known because of the 30's depression) recession came and went without Big Government intervention.

And the economic conditions of those two recessions were dramatically worse that today.

At 6.1%, unemployment is lower today than during any year in the entire twelve year range of 1975 to 1987 with the one exception of 1979 where it was only two tenths of a percent lower than today. And 1979, 1980, and 1981 all saw double-digit inflation.

Between 1919 and 1921, unemployment climbed to 11% and the Dow Jones Industrial Average fell losing nearly half it's value.


Now, new regulations would not necessarily be a bad thing. I would welcome laws requiring more transparency assuming that said laws don't add major imediments to business (like say, Sarbanes-Oxley has done). And, if Fannie Mae and Freddie Mac are regrettably here to stay, something needs to be done to change them away from a model of private profits and socialized losses.

But, it's clear that history teaches markets can correct themselves without dramatic government involvement. And it's unlikely that giving in to the temptation to try to have government rescue us from this will be in our interest in the long run.

I join the plea: Kill the Bailout.

Of Politicians, Toilets and Salt

I've been linking to stuff written by Don Boudreaux over at Cafe Hayek like it's none of my business lately, but he has yet another gem I'd like to point out.

This time it's an opinion piece that ran this past Friday in the Pittsburgh Tribune Review entitled "Sweet Land of Liberty?".

Here's the introduction:

In this sweet land of liberty it is surprising how readily we modern Americans let others rule us. I'm not talking about Americans letting some foreign government rule us. That won't happen anytime soon. There's no risk that, say, we will quietly surrender to an invading army sent from the likes of Moscow or Beijing.

I'm talking about being ruled by homegrown politicians and petty tyrants who butt their noses into the sizes of our toilets, the amount of salt we consume and countless other provinces of our daily lives.

I highly encourage giving the full piece a read.