Flyover Country

Something has been bothering me for the few months and I haven’t been quite able to figure out what it is. This is kind of long, but please just stay with me.

I think I first noticed it during the “Cash For Clunkers” program. The program itself ran for about 6 weeks or so. The idea was that you bring your “clunker” car as a trade-in for a more fuel efficient model car, and you get a $4500 tax-payer funded credit from the government towards the purchase of your new wheels. The trade-in cars were to be destroyed. This in and of itself is completely insane, but typical of the government which only knows how to destroy wealth and assets.

About 2 weeks into the program, something odd happened, which I think went mostly unnoticed. Many dealers had been complaining that it was difficult to file the claims to get the money they had fronted for the cars sold under the program. Applications were being sent back to the dealers for minor errors, or sent back for no apparent reason at all. In the midst of this, over a weekend, the EPA decided to change the eligibility rules for the trade-in vehicles. The Edmunds post is an early, first look “what the hell?” but several cars and models which were previously eligible suddenly were not. How does that happen?

When the giant investment arm of AIG was collapsing, the government stepped in and gave them boatloads of taxpayer cash to bail them out. AIG, perhaps stupidly, accepted the hand out. A little while later, the company honored pre-existing contracts to pay out executive bonuses. Regardless of if they should have or not, some members of Congress and the Whitehouse feigned outrage. ACORN and SEUI sent buses of protesters to stand outside the homes of AIG executives to excoriate them for “taking” the bonuses. Congress stepped in and threatened to create ex-post-facto legislation to not only seize the bonuses through special taxes, but to retroactively tax income earned by AIG employees before the bailouts happened. Most of the executives relented and just returned the money – which was legally theirs to keep. Again, regardless of what you think of if they should have gotten the money, these folks had legally binding contracts to be paid. Congress, however, decided that they were going to change the rules – retroactively.

Article I, section 9 of the United States Constitution is pretty clear on this matter. It says in part, “No bill of attainder or ex post facto Law shall be passed.” The “ex post facto” means that Congress is not permitted to pass a law that punishes someone for something done prior to the passage of the law. Ex post facto meaning “after the fact”. Yet, this is precisely what Congress and the Whitehouse were threatening to do. More than 200 years of contract law was out the window. The manufacturing czar has said that he is going to decide the salaries of employees at companies in which the government owns a stake. Setting aside that the government has zero business owning any private company, who wants to work for a company like that? Certainly not the best and the brightest who by and large believe that your compensation is relative to your output and your results, not some unelected bureaucrat.

Other examples include the bailouts of GM and Chrysler where the first-in-line lenders (secured creditors) were put in the back of the line by the government, behind for example, the unions. More than 200 years of bankruptcy law was out the window. The secured creditors had contracts with GM and Chrysler that basically said in the event of insolvency, they were the first to be repaid. That is how it works. No longer. In the midst of what should have been a Chapter 11 bankruptcy, the rules were changed. How do we expect anyone to lend money in an environment where the loan agreement, the contract you have could be wiped out by the government, with no due process?

Lest one think I’m simply “attacking” the current president, I will refer you to King Henry of Goldman Sachs, otherwise known as Treasury Secretary Hank Paulson under President Bush. An incredible piece of “emergency” legislation was signed into law giving the Secretary of the Treasury completely unprecedented amounts of power: TARP. Troubled Asset Relief Program. This was supposed to be money available to bail out banks. Some of it went for that. Some of it went to banks who didn’t want it. But instead of taking no for an answer, the government threatened the banks with all sorts of audits and regulatory red tape. It turned out that several of the banks tried to pay the money back. Then things got really weird.

At first, the government refused to accept repayment of the “loans” they gave to the banks. Then, as the government looked and realized it hadn’t spent all the money, and some banks were trying to give what they had taken back – after seeing what happened to AIG – Hank Paulson basically came back to Congress and told them he wasn’t going to return the TARP money to the taxpayers, but that he had other uses for it. Wait a minute, I thought that the TARP money was for a specific, emergency purpose. It seems like the rules were changed.

During the presidential campaign, then senator Obama said “under my cap-and-trade plan…if somebody wants to build a coal powered plant they can. Its just that if they do, you know, its going to bankrupt them because they’re going to be charged a huge sum for all that green house gas thats being emitted.” Recently, the Whitehouse has “delayed” issuing over 70 mining permits. Almost as if, they’re trying to jack up the price of coal even without cap and trade. Further, they have announced that they are revoking a permit at a major WV coal mine. Even the democrats are crying foul. “It is wrong and unfair for the EPA to change the rules for a permit that is already active” (Senator Rockefeller D-WV).

There are other examples, but a pattern of conduct is beginning to emerge. If the federal government doesn’t like something, they just change the rules. It doesn’t matter what anyone thinks, or what the law actually is, or what the Constitution says. I’m sorry to use this word, but that is tyranny. We’ve come to a point where no one wants to take any risks because no one knows what the government is going to do next. There are no longer rules to play by that we all understand and agree on. Your taxes might not just go up, but the government might come in and seize assets equal to what they think you should have been paying.

A free market economy cannot function in an environment where lenders are afraid to loan, where executives are afraid to sign contracts, where small businesses might be regulated out of existence, where the government might target your industry for scorn or worse, shredding any hope you had of a recovery in the near term. Who wants to invest or risk when the rules are completely arbitrary? I blame the previous president for starting this with his “I’m abandoning free market principles to save the free market”. Congratulations, Mr. President. You set a perfect example and free market principles – one of the core foundations of our country – are being smashed to bits daily.

Which brings me to a current debate: health care reform. or health care insurance reform. or whatever you want to call it. A few days ago, a reporter had the brass ones to actually ask the Speaker of the House, Nancy Pelosi, where in the Constitution that congress found the authority to mandate individuals to purchase health care. Her only response was “Are you serious?”

The rules limiting the power of government by our Constitution do not matter to Nancy Pelosi. At least one congressman recently found it amusing that folks were asking him to read the bills they were voting on. The laws that congress is voting into existence apparently aren’t important enough to read. Why should they be? Whatever rules they pass now, they can just change later either through direct action (ie the EPA), through threat of direct action, or through indirect action such as massive audits and creating regulatory nightmares for organizations and individuals who do not cooperate.

This is why I’m opposed to any healthcare legislation that the current government comes up with. I do not believe for a moment that what they say is what they mean. They have demonstrated a clear pattern of indifference for restraint on government interference and government intervention. When SC governor Mark Sanford wanted to use the stimulus money to pay down SC’s debt, or not take the money at all the whitehouse tried to go around him to the SC legislature, a completely unheard of move and a not-very-subtle attack on state sovereignty.

I don’t believe for a second that a public “option” will be an option. I don’t believe that anything called “opt-out” will stay that way for very long. Whether through fines or other coercion, the government will try to control the health care system, and from there every other aspect of our lives. Whatever you think they are, the rules do not matter. The rules will be changed in the middle of the night while you’re busy making ends meet. What you thought you’d agreed to yesterday will not be what you’re told today. Ask the private investors who loaned Chrysler billions of dollars of pension funds, mutual funds, money market funds, and who in the end were left begging for the scraps after connected groups like the unions got theirs.