Voice For Liberty

Tag: Politics

  • Independence caucus: miracle or fantasy?

    By Wendy Aylworth, kansasgrandmother@cox.net.

    Would you like to be our new Congressman or Congresswoman? According to the political action group Independence Caucus (aka icaucus) you can be, even if you have no political track record. Can you defeat a six-term incumbent, even if he outspends you 6 to 1? According to icaucus you can — all you need is 1,000 grassroots volunteers in your Congressional District. You don’t need lots of money, you only need the icaucus methods.[1]

    From the Independence Caucus Big Stick Tea Party Facebook page:

    The Independence Caucus began as a group of volunteers in Utah who helped in the election of Jason Chaffetz. Despite being outspent by more than a 6 to 1 margin, through the efforts of some of the early iCaucus members, Chaffetz, with no real political track record, defeated a 6-term, incumbent who was endorsed by the local Republican machine (the dominant party in Utah), the two sitting senators, and President Bush.[2]

    Believing the above, everyday citizens nationwide, with no political experience, have launched campaigns to become members of Congress.

    Here in the 4th Congressional District of Kansas the members of icaucus seem convinced they can elect to Congress a man with no political or campaign experience. They believe Jason Chaffetz, a common, ordinary citizen with no political experience, has already defeated a 6 term incumbent Congressman and the “Republican machine” in another state, and they can therefore duplicate this success in Kansas.

    But is the above story of Jason Chaffetz’ success accurate?

    (1) Was Jason Chaffetz a common, ordinary citizen “with no real political track record?”
    (2) Did Jason Chaffetz defeat a 6 term incumbent in the general election?
    (3) Was a man with no political experience really able to defeat a powerful Democrat?
    (4) Did Jason Chaffetz defeat the local “Republican machine?”
    (5) Can the events of the 3rd Congressional District of Utah, where Chaffetz was elected, be duplicated here in Kansas’ 4th Congressional District?

    Background and Experience of Jason Chaffetz

    Raised in a wealthy, politically connected family, his father’s first wife was Kitty Dukakis, who next married Michael Dukakis, the 1988 Democrat nominee for U.S. President. His half brother is former actor, John Kerry aide, and Democrat National Political Director John Dukakis.[3]

    Prior to running for Congress, Chaffetz had “a resume bursting at the seams with political experience.”[4]

    Chaffetz had already been a campaign worker on local campaigns, and, twenty-two years ago, while playing football at BYU, was Utah co-chairman for Michael Dukakis’s 1988 campaign for U.S. President.

    Following his graduation from BYU, Jason Chaffetz took a corporate job with one of the largest employers in Utah’s 3rd Congressional District, where, in 1990, he assisted then former President Ronald Reagan in a meeting tour with top Utah dignitaries. Through participating in these high-level private meetings he became personally acquainted with the key influential people in the state. His skills and charismatic personality soon raised him to the position of Managing Director of Marketing in the Corporation.

    Eager to get back into Politics, Chaffetz was selected Campaign Manager of Jon Huntsman for Governor of Utah election campaign, serving two years before becoming the Governor’s Chief of Staff.[5] In these positions Chaffetz nurtured his ties with the state’s most important insiders, and began contemplating a run for Congress.[6] When Chaffetz left his position with the Governor’s office it was speculated that he might challenge the lone Democrat Congressman from Utah in whose district he lived.

    Chaffetz returned to the private sector and Nu Skin Corporation, having decided against challenging Democrat Congressman Matheson of Utah’s 2nd Congressional District. Chaffetz took the politically expedient path, knowing that he was not yet ready to take on an incumbent Democrat, even in the most Republican and most conservative state of the Union. Instead Chaffetz looked for a district where his chances would be stronger. He chose the 3rd Congressional District of Utah, where he did not live,[7] as the location where he would make his run for Congress. Located in this district were BYU and the Nu Skin Corporation, and, best of all, no strong Democrat — only an unpopular Republican Congressman.[8]

    In the 3rd District Chaffetz had the opportunity to defeat the incumbent Republican by working behind the scenes within the Republican Party structure. He could gather the votes of the Party decision makers long before any public election, and even end the career of the incumbent Republican Congressman without ever going to a public election.

    Yes, Chaffetz defeated a 6 term incumbent — but that incumbent was not a Democrat.

    How did Chaffetz defeat him?

    Three years in advance he knew both his district and his opponent and devised a long-term strategy. Appointed by the Governor to a Trustee position with the largest public college in the district, he also served as President of BYU’s Cougar Club giving him name recognition and a resume with nearly every college graduate in this BYU-dominated area.[9] He developed personal relationships with Republican Party Committeemen and women, and with the Republican Delegates whose votes he would need. His supporters lobbied party delegates for months prior to the vote.[10] On Jan 1, 2007 Chaffetz made his announcement and quickly received campaign contributions both from in-state and out-of-state sources, PACs and the Huntsman Corporation of the Governor’s family.[11]

    Political parties in Utah use a unique method for selecting which candidate will receive party backing. In a Congressional election the nominee is not chosen via a public primary, as in Kansas. Instead, each party holds a State Convention and party delegates choose the nominee.[12] A primary election occurs only if neither of the two final candidates receives at least 60% of the vote. Chaffetz’ two years of behind-the-scenes work, his charisma, unique background, and terrific speaking ability all paid off at the convention where he succeeded in knocking out all challengers and very nearly defeating the incumbent. On the last ballot Chaffetz fell 9 votes short of the 60% total he needed to oust the incumbent, receiving 59.5%.[13]

    Chaffetz had spent only $150 per delegate, one-sixth that of incumbent Chris Cannon, and nearly defeated him without a primary.[14]

    A key advantage Chaffetz had in this particular district is the candidate winning the Republican primary is widely considered the winner of the general election.[15] This characteristic of the 3rd District is one reason Chaffetz selected it — fewer than 25% of the population are registered Democrats.[16] The lack of Democrats and the very Conservative electorate means Republicans do not need to concern themselves with choosing a nominee capable of attracting moderate or Democrat voters to defeat the Democrat. They merely choose the Republican most appealing to themselves.[17]

    This key factor, Chaffetz knew, would make it possible for him, a man who had not before run for public office, to obtain the nomination. The key problem of needing to face Democrat opposition was virtually non-existent here in this ONE district out of all of the districts in the nation. In fact in Utah County, the seat of the district, only 1% of the voters were registered Democrats.[18]

    With his army of volunteers, and top-notch campaign staff, the lobbying now turned to run a public campaign.[19]

    Chaffetz gained local and state endorsements important to the voters in this district, and his friend Republican Governor Jon Huntsman stated he would wait until after the primary to endorse a candidate, leaving the incumbent hanging.[20]

    With steady, focused work the Chaffetz campaign was free to use any and all of the inadequacies of incumbent Cannon and his voting record against him, without fear of the material creating a Democrat win in the general election (should Cannon win the primary) as there were simply not enough Democrats in the entire district to defeat even a weakened Republican candidate.[21]

    Chaffetz prevailed in the primary and was hailed nationwide as the new Congressman of the 3rd Congressional District of Utah having spent half what the incumbent did.[22] In a few months Chaffetz would easily defeat the Democrat 66 to 28 percent[23] having spent ten times more money.[24]

    Can the lessons of how to run a grassroots Congressional campaign be applied to other Congressional Districts in the U.S.? Certainly; provided they possess the demographics and political structure of Utah’s 3rd Congressional District.

    Footnotes are on the following page.

    (more…)

  • Situation in Iraq to be topic of talk

    On Friday April 16 at the Wichita Pachyderm Club, Rodger Woods of Wichita will speak to members and guests. Woods recently returned from a tour of duty in Iraq, and will be speaking on the topic “Thoughts on the changes in Iraq.”

    All are welcome to attend Pachyderm club meetings. The program costs $10, which includes a delicious buffet lunch including salad, soup, two main dishes, and ice tea and coffee. The meeting starts at noon, although it’s recommended to arrive fifteen minutes early to get your lunch before the program starts.

    The Wichita Petroleum Club is on the ninth floor of the Bank of America Building at 100 N. Broadway (north side of Douglas between Topeka and Broadway) in Wichita, Kansas (click for a map and directions). Park in the garage just across Broadway and use the sky walk to enter the Bank of America building. Bring your parking garage ticket to be stamped and your parking fee will be only $1.00. There is usually some metered and free street parking nearby.

  • Sweatshops best alternative for workers in many countries

    While sweatshops are not the place most Americans would choose to work, they are often the best alternative available to workers in some countries. Pay is low compared to U.S. standards because worker productivity is low, and the process of economic development will lead to increases in productivity and pay. But most policies promoted to help the purported plight of sweatshop workers actually lead to harm.

    That’s the message of Benjamin Powell, who spoke to a group of university students and citizens last night in Emporia on the topic “In Praise of Sweatshops.” Powell is a professor of economics at Suffolk University in Boston and is affiliated with The Beacon Hill Institute. His appearance was part of the Emporia State University “Lectures on Liberty” series.

    “Often when people say there’s something wrong with sweatshops, implicitly what they’re saying is ‘while this is bad, the alternative must be better.’ Often the alternatives in these countries are much, much worse.” The alternatives are often subsistence agriculture and working in farm fields, Powell said.

    A sweatshop, according to Powell, is a workplace with low wages (compared to U.S. standards), and poor, possibly unsafe, working conditions and benefits, again compared to U.S. standards. The sweatshops that Powell is defending are those where people voluntarily choose to work. Sweatshops where workers are forced to work under the threat of violence constitute slave labor, which cannot be defended. These are not better than the alternatives available to the forced workers, the evidence being that the workers are forced to work in these sweatshops.

    As evidence of non-sweatshop working conditions is some countries, Powell mentioned the case of a Cambodian girl and her working conditions, as reported by Nicholas D. Kristof in the New York Times in 2004:

    Nhep Chanda is a 17-year-old girl who is one of hundreds of Cambodians who toil all day, every day, picking through the dump for plastic bags, metal cans and bits of food. The stench clogs the nostrils, and parts of the dump are burning, producing acrid smoke that blinds the eyes.

    The scavengers are chased by swarms of flies and biting insects, their hands are caked with filth, and those who are barefoot cut their feet on glass. Some are small children.

    Nhep Chanda averages 75 cents a day for her efforts. For her, the idea of being exploited in a garment factory — working only six days a week, inside instead of in the broiling sun, for up to $2 a day — is a dream.

    Generally, sweatshop workers are paid much more than most other workers in the country, and their working conditions are much better. Powell mentioned that working inside — rather than outside — is very desirable in most countries. The fact that sweatshops pay higher wages and have better working conditions than the workers’ alternatives is important to remember.

    Powell explained the factors that determine how much workers are paid. The upper bound that employers are willing to pay workers is based on the amount of value that a worker can create. In economic terms, this is called the marginal productivity of labor.

    The lower bound, the minimum employers can pay, is the value of workers’ next best alternative.

    If we want to increase the earnings of sweatshop workers, we have to create policies that raise both the upper and lower bounds, Powell said, adding that about three-fourths of the variation in earnings across countries is explained by the upper bound. This points to the importance of increasing worker productivity.

    In one debate, Powell said his opponent wanted to take the question of sweatshop wages off the table, admitting that pay is higher in sweatshops. Instead, she wanted to focus on worker health and safety. But it’s important to remember, Powell told the audience, that working conditions, even those related to health and safety, are part of a total compensation package. Wages and working conditions are interconnected and can’t be separated.

    Sometimes people ask why apparel companies — the largest users of sweatshops — can’t simply pay the workers more, pointing to large profits and highly paid executives at these companies. But Powell said that apparel companies usually aren’t excessively profitable.

    Additionally, businesses are not charities. Forcing them to pay workers more means that companies will begin to look at ways to reduce the amount of labor they use. They may replace workers with machines, or use more productive workers in other countries. The result is sweatshop workers will lose their jobs.

    Powell reminded the audience that it’s important to remember that in most countries where sweatshops are used, these jobs are much better — both in terms of pay and working conditions — than what the workers face as alternatives. Anything that causes companies to shut down sweatshops or employ fewer workers, then, means that workers lose these better jobs and return to harder work at lower wages, or perhaps no work at all.

    In discussing the anti-sweatshop movement, Powell said that some groups sincerely want to help sweatshop workers, but don’t understand the economic realities in sweatshop-using countries. But labor unions such as UNITE do understand economics. The policies they advocate to help sweatshop workers — international labor standards and minimum or “living” wages, for example — increase the cost of sweatshop labor, causing companies to use less of it. It also makes unionized garment workers more attractive, and may lead to more employment in developed countries like the United States.

    “So unions advocate this not out of love for third world workers. They do it quite maliciously, actually, to unemploy third world workers for the benefit of already relatively wealthy union members in the United States and Western Europe countries.”

    The worst thing that advocates for sweatshop workers can do is to call for boycotts of products produced in sweatshops. If a boycott decreases demand for a product, the company must reduce its price, and the upper bound of what sweatshop workers can earn goes down. Then workers either have their wages reduced, or they lose their jobs.

    Powell presented the results of his research examining sweatshop wages. In many countries that use sweatshops, wages are very low, compared to U.S. wages. But that isn’t the appropriate comparison. Instead, when comparing the wages of sweatshop workers to the average income in the workers’ own country, we find that sweatshop workers do very well, often earning from two to seven times as much as the average worker in each country.

    Powell said that “ethical branding” is an idea that might help sweatshop workers. This is a marketing strategy where a company uses the fact that products are produced in sweatshops as a way to increase demand and prices. This, in turn, would increase the demand for sweatshop workers and increase their wages. But this has to be a voluntary strategy, Powell said. Companies must see this as a business success. If it is not successful in increasing demand but companies are forced to implement this strategy, it will lead to less sweatshop employment.

    Also, demand — in terms of the number of units sold — must not fall. This is a problem with “fair trade” coffee, where people purchase less of the more expensive fair trade coffee.

    The real solution for improving sweatshop wages and working conditions, Powell said, is the process of economic development. Sweatshops existed in Great Britain and the United States at one time. As capital is accumulated, better technologies are developed, and workers become more educated, workers become more productive and earn more, both in income and better working conditions.

    This process took over a century in the U.S., but countries like Hong Kong, Singapore, and South Korea, which were sweatshop countries in the 1950s and 1960s, made very rapid improvements in wages and working conditions. Capital and technology is available from abroad, Powell said, and this process can be repeated. But anti-sweatshop policies risk stalling this development, resulting in a permanent sweatshop country with low incomes.

    The real question, Powell said, is not why some countries are poor, but why some countries are rich. Rule of law, respect for property rights, and respect for individual liberty and economic freedom are policies that promote rapid economic growth. Countries that do not have these stagnate and do not increase their standard of living.

    In conclusion, Powell said that sweatshop wages and working conditions are better than what many workers face as alternatives, and that’s why people voluntarily choose to work in them. While wages are low compared to developed countries, this is because productivity is low. The process of economic development is the way to raise productivity and wages. Much of the work of anti-sweatshop groups risks undermining the economic development processes that will raise living standards.

    A question from the audience asked about the proliferation of sweatshops abroad leading to the loss of American jobs. Powell replied that sweatshops lead to the decline of the American apparel industry. But it is in the interest of America, he said, to get garments at lower cost overseas, freeing up high-skilled U.S. labor and capital to do what we’re relatively better at. This increases the wealth of America.

    Another question referred to the human costs of sweatshop labor, contrasting those workers to Nike executives who earn millions. What is the cost in terms of damage to human dignity? Powell replied that businesses are not charities, and they don’t pay executives high salaries simply because they want to. The extremely high pay of the top executive serves as an incentive for underlings to work harder in jobs that are hard to observe quality of effort. Most people do not understand this, Powell said.

    He also said that if we’re concerned about the dignity of sweatshop workers in third world countries, we should be even more concerned about those who don’t have sweatshop jobs. These people either have no jobs, or jobs with much lower pay and worse working conditions than sweatshop workers.

    Another question asked if it would help the economies of third world countries if we simply raised the wages of sweatshop workers, referring to companies that are making millions in profits. Powell said that laws mandating higher wages will change the behavior of sweatshop companies, resulting in a loss of sweatshop jobs. But voluntary programs like ethical branding could work.

    Related material on this topic by Powell includes a Christian Science Monitor op-ed Don’t get into a lather over sweatshops, a working paper titled Sweatshops and Third World Living Standards: Are the Jobs Worth the Sweat?, and an article In Defense of “Sweatshops.”

    The ESU Lectures on Liberty was conceived by Greg Schneider, professor of History at Emporia State University, to bring in important academics who support the idea of research and scholarship on critical issues regarding liberty in American history. The lecture series is underwritten by the Fred C. and Mary R. Koch Foundation in Wichita.

  • Kansas senate leader to speak to Pachyderms

    On Friday April 9, Kansas Senator Derek Schmidt will address members and guests of the Wichita Pachyderm Club. Schmidt, of Independence, is the Majority Leader of the Kansas Senate and candidate for the Republican nomination for Kansas Attorney General.

    All are welcome to attend Pachyderm club meetings. The program costs $10, which includes a delicious buffet lunch including salad, soup, two main dishes, and ice tea and coffee. The meeting starts at noon, although it’s recommended to arrive fifteen minutes early to get your lunch before the program starts.

    The Wichita Petroleum Club is on the ninth floor of the Bank of America Building at 100 N. Broadway (north side of Douglas between Topeka and Broadway) in Wichita, Kansas (click for a map and directions). Park in the garage just across Broadway and use the sky walk to enter the Bank of America building. Bring your parking garage ticket to be stamped and your parking fee will be only $1.00. There is usually some metered and free street parking nearby.

  • Tax day tea parties in Kansas announced

    Several tea party events have been announced for tax day, April 15, in Kansas. Cities include Wichita, Hutchinson, Salina, Wamego, Manhattan, Olathe, Burlington, Lakin, Fort Scott, and Kansas City.

    Wichita

    In Wichita, the event is titled “From Wichita to Washington DC.” Organizers announce that they are closing Central west of Main between the Wichita City Building and the Sedgwick County Courthouse.

    The date is Thursday, April 15 from 5:00 pm to 6:30 pm. A Wichita Eagle news story previewing the event, complete with a list of speakers, is Radio host to attend tea party event in Wichita.

    For more information on this TEA Party contact Lynda Tyler at 316-722-8031 or email at Info@KansansForLiberty.com. Also, see Kansans for Liberty. Please Send Donations to Kansans For Liberty 11509 Valley Hi Drive Wichita, KS 67209.

    Hutchinson

    In Hutchinson, the event is hosted by the Reno County Patriot Freedom Alliance. The event is April 15, starting at 6:00 pm at the Hutchinson Sports Arena.

    Organizers say they will have speakers, booths, candidates and vendors. For more information contact: Jinny Walz at 620-664-6785 (landline) or 620-202-1212 (cell), or by email at Jinny.Walz@sbcglobal.net.

    Kansas City

    In Kansas City, the KC Metro Tax Day TEA Party is being hosted by PoliticalChips.org. It’s on April 15 at the Community American Ballpark (home of the KC T-Bones).

    Organizers say: “Admission is free (although contributions at the gate would be greatly appreciated). If you are a Vendor or a Exhibitor, you may reserve a 6 foot table for the April 15th Tea Party by visiting the event website PoliticalChips.org.

    We have plenty of great personalities, including you, live music, and a heavy dose of military tributes lined up for the show. Stay tuned for more information as it becomes available.”

    For more information, contact Alex Poulter 913-708-0292, Leslie Schmidt 913-220-7672, or Christina Blair 913-634-4155

    Salina

    There is also a TEA Party in Salina sponsored by the Salina TEA Party. The party is titled “State of the People Address.” We have invited national, state and local officials to come and listen to what the people have to say about the state of affairs in our city, state and national governments. For more information, go to salinateaparty.com.

    Wamego

    A Tax Day Tea Party is scheduled for April 15 in Wamego at the city park at 9:00 am. Contact Jud Jones at 785-776-2221.

    Manhattan

    April 15 on the courthouse steps at 6:00pm. Contact Chuck Henderson.

    Olathe

    11:00am on April 15 at the Olathe Courthouse. See teapartypatriots.org.

    Burlington

    11am-1pm on April 10 at Free Residence. Contact Wes Weller at 620-256-6775.

    Lakin

    5:00 pm to 8:00 pm on April 15 at Hwy 25 and 50. Contact Debbie Jordan at 620-275-4023.

    Fort Scott

    Noon to 1:00 pm on April 15 at Memorial Hall. Contact Gayle Sackett at 620-223-4211.

    Lyndon

    9:00 am on April 15 at the Courthouse. For more information, contact: Jane Falley, tarzans1girl@yahoo.com.

    Emporia

    April 15 from 2:00 pm to 4:00 pm at Memorial Park, 6th & Merchant. For more information, contact Barb Nichols, 620-343-3289.

    Mound City

    April 14 from 6:00 pm to 7:30 pm at the Linn County Courthouse. For more information, contact: slinkard@embarqmail.com.

  • Kansas House candidate to address Pachyderms

    On Friday April 2 at the Wichita Pachyderm Club, Eric Payne will address members and guests. Payne is a candidate for the Republican Party nomination for the Kansas House of Representatives for the 87th district. This district in east and southeast Wichita is currently represented by Raj Goyle. Joseph Scapa, another candidate for this position, will speak to the same group on April 30.

    All are welcome to attend Pachyderm club meetings. The program costs $10, which includes a delicious buffet lunch including salad, soup, two main dishes, and ice tea and coffee. The meeting starts at noon, although it’s recommended to arrive fifteen minutes early to get your lunch before the program starts.

    The Wichita Petroleum Club is on the ninth floor of the Bank of America Building at 100 N. Broadway (north side of Douglas between Topeka and Broadway) in Wichita, Kansas (click for a map and directions). Park in the garage just across Broadway and use the sky walk to enter the Bank of America building. Bring your parking garage ticket to be stamped and your parking fee will be only $1.00. There is usually some metered and free street parking nearby.

  • Bigger danger of healthcare bill: the arrogance of Congress

    By Eric O’Keefe.

    We may never fully know the damage that will be done by the massive health care bill Congress passed on Sunday, but one thing is certain: It will lead to lower-quality care at higher costs.

    Dozens of new health boards will come on line in the next few years, as bureaucrats gradually take control of our health care system. Who knows how many bright college students will decide to avoid medical careers because they don’t want to follow orders from these bureaucrats?

    As alarming as some of the bill’s provisions are, what’s more dangerous is the arrogance this Congress demonstrated.

    The House of Representatives used to represent; now it rules.

    This health care reform was widely debated for a year, and it became less popular by the month. A weekend poll by Rasmussen Reports showed the depth of that unpopularity, with only 26 percent strongly supporting the reform and 45 percent strongly opposing it.

    How can elected representatives defy the considered will of the people?

    Because defiance becomes an easy habit when you know that there is almost no chance you will lose your next election. The loss of accountability enables public servants to indulge their own lust for power. As Lord Acton wrote, “Power tends to corrupt, and absolute power corrupts absolutely.”

    If we do not address the problem of a permanent class of rulers in Congress, we will watch Congress bankrupt the country and destroy the republic.

    Most members of the House represent specially drawn districts where one party dominates. As a result, these members face no primary election challengers and only nominal competition in the general election.

    Congressional entrenchment is not a product of popularity; Congress has routinely been unpopular the past 30 years. A February survey by Rasmussen Reports showed approval of Congress at a historic low, with only 10 percent rating their performance as good or excellent. Rasmussen also found 63 percent favor replacing the entire Congress.

    Unfortunately, that will not happen. Even during this year’s extreme political turmoil, you can be confident that over 80 percent of House incumbents will win yet again in November. In most modern US elections, more than 95 percent of House incumbents are reelected.

    The reason is a century of entrenchment by incumbents looking out for themselves. They have large staffs and budgets to run a permanent campaign; they have pork and patronage to distribute at taxpayer expense; and they enacted campaign restrictions to hobble challengers.

    With mostly one-party districts, incumbents own their seats unless they face serious primary challenges. But party organizations controlled by incumbents work to discourage primary challenges, regardless of the performance of the incumbent. In fact, only eight incumbents have lost their primary races in the past three elections combined – that’s a renomination rate of over 99 percent.

    To regain congressional accountability, we must work outside the political parties to set the standard of acceptable behavior, and to enforce it in primary elections.

    In 2006 and 2008, Democrats won the close House races and took control of Congress because voters were tired of big-spending Republicans. In 2010 voters will defeat Democrats in close elections, and the House is likely to return to Republican control. But what will those Republicans do? Should we trust them to behave this time?

    I would say no. Congress will not behave on its own because the political parties now exist to serve the politicians, not the taxpayers.

    That’s why the development of the tea party movement has been so forceful and swift. Tea party leaders stepped up because both parties had failed us. Yet they understand that you don’t solve the problem of two unaccountable parties by creating a third. What we really need is a way to hold politicians of any party accountable, and that begins with independent organizations demanding accountability, and backing primary challengers to representatives of both political parties who fail to live up to their job title: Representative.

    In 2010, tossing out some big-spending Democrats may be all that voters can accomplish. But if we don’t solve the bigger problem of creating the organizations to systematically hold politicians accountable, we will only get another round of broken promises on the road to ruin. The fate of the republic depends on building an independent system to hold Congress accountable to the taxpayers.

    Eric O’Keefe is chairman of Sam Adams Alliance, a Chicago-based nonprofit focused on communicating free-market principles.

  • Financial services reform consequences may not be unintended

    A financial services regulation bill could place many types of businesses under new regulations, even though they are nothing like banks or other companies typically considered to be in the financial services business.

    I had thought that this possibility might simply be an example of the unintended consequences of regulation. But after reading a Wall Street Journal article (Will Walmart Pay for the Next Bailout?), I’ve come to believe that these consequences — the spread of regulation to vast new sectors of industry — is, in fact, intended.

    Gregory Zerzan, the author, explains: “The current proposals for ‘financial’ reform are stalking horses allowing government intervention into virtually every facet of the U.S. Economy.” He explains that the Federal Reserve — if it believes a company poses a threat to the economy — could order the company to separate its businesses so that its financial dealings could be regulated as a bank holding company.

    Which companies could be subjected to this new regulation by the Federal Reserve? Zerzan explains:

    Despite non-binding staff explanations to the contrary, there is no mystery as to who is being targeted. Under the bill the Fed gets regulatory authority over bank holding companies with greater than $50 billion in assets, and “nonbank financial companies”. As the Fed already regulates bank holding companies the new twist is that non-banks become subject to Federal Reserve regulation for the first time. The language is unusually clear: if the new systemic risk regulator so chooses, any company engaged in routine business transactions can suddenly be deemed “financial” and subject to bank-like regulation. (emphasis added)

    In Wichita, several large companies could be impacted. The author mentions an “airplane manufacturer that holds customer down payments for future delivery” as an example of a company that could now be regulated by the Federal Reserve.

    Why is the legislation being considered? Zerzan explains that it’s partly based on the belief by some that the government can manage the economy, but there’s also an opportunity to generate new tax revenue:

    Why would the systemic risk regulator seek to make regular American businesses subject to bank-like regulation? No doubt in part it is the belief in some quarters that the government can stop financial crises from happening if only it has enough power and influence over the economy. Even among true believers the near-collapse of the highly regulated banking sector should call that article of faith into question. But there is a more practical reason to seek to turn Walmart, IBM, Boeing and other Fortune 500 companies into “financial” businesses. Under both the House bill and the Dodd legislation it is these companies that are to be taxed to pay for winding up a “too big to fail” firm. If a company gets deemed systemically risky it is on the hook for bailing out financial firms that took on too much risk. Such a regime is neither fair nor sensible from an economic perspective, but existing taxpayers’ money is already over-allocated; the Treasury needs the contents of new wallets to pay for the next crisis.

  • Financial services regulation could spread to non-financial industries

    Chairman of the Senate Banking Committee Christopher Dodd has introduced sweeping legislation to regulate the financial services industry. The bill, at 1,336 pages, would dramatically change the regulatory landscape for one of our most important industries and spread to other non-financial industries.

    The bill would create vast new regulatory powers for the Treasury Department. According to an interview with the Wall Street Journal, Senator Bob Corker says that “there’s no question that Treasury is pushing left,” indicating the Treasury’s Department’s desire for more regulatory power.

    In fact, Treasury Secretary Timothy Geithner is expected to deliver a speech today that calls for Congress to pass a bill with “real reforms.”

    Indication of interest in these regulations may be gauged by the fact that some 400 amendments to the bill have been offered.

    As with any regulation, especially a law designed to regulate a large and multi-faceted industry, unintended consequences are certain to arise. The Main Street Alliance, a coalition of leading U.S. manufacturers and business groups warned that many businesses that would not usually be considered financial institutions could fall under this regulation.

    The Dodd bill extends systemic risk regulation to “nonbank financial companies,” defined as any business substantially engaged in “financial activities.” Because the term “financial activities” is so broad and includes things like lending money and investing a company’s own assets, the bill could authorize the new systemic risk regulator to regulate manufacturers, retailers and other non-financial services businesses.

    Also: “We are concerned the new draft bill is so broad that larger manufacturers could be subjected to regulation by the Federal Reserve,” says Dorothy Coleman of the National Association of Manufacturers, a member of the Alliance.

    Dodd’s proposed regulation is a response to the financial crisis of 2008. Whether new regulation is needed in response to that crisis is one question. But as the Main Street Alliance wrote in a letter to the Senate Banking Committee: “We do not believe that it is the intent of Congress to impose a new regulatory regime on companies that had nothing to do with the financial crisis of 2008.”

    It should be noted that Dodd is not running for re-election this year. He faced declining poll numbers in his home state of Connecticut.