Destructive Qualities of Stupidity in Government

Click here for part one of this topic.

Yesterday we wrote that we feel horrifyingly bad mis-investment has become the norm on the part of the U.S. Federal Government. As awful as that mis-investment is, at the same time, it only seems reasonable to assume that such activities can only go on for just so long before they cannot continue. When that end comes is anyone's guess, but we feel certain that the end will come.

At that time, American Citizens will collectively realise they live in a blasted country, and they will probably decide that changes are in order. The nation will have to learn humility and discipline. However, we feel the United States will likely have no domestic vision left to rebuild upon more-realistic and sustainable lines. The only choice will be to turn to the greatest economic and social friend the U.S. presently has: Canada.

As the largest trading partner of the U.S., as well as a cultural ally, Canada has been in a very good position to study the American mindset; it isn't a stretch to say that Canada understands the U.S. better than it does itself. In the future, it will likely be Canada, as the impartial observer, which will both understand the problems in the U.S., and have the best solutions.

That is, of course, unless the United States distances itself sufficiently from its northern neighbour. Although we understand the high-level visit by President Barack Obama to Canada was a warm success, we've been noticing what we feel is a very cold undercurrent in the Obama Administration. Point and case are the recent comments by Homeland Security Secretary Janet Napolitano. Here are some of the highlights:

"Yes, Canada is not Mexico... Nonetheless, to the extent that terrorists have come into our country or suspected or known terrorists have entered our country across a border, it's been across the Canadian border." "The fact of the matter is that Canada allows people into its country that we do not allow into ours."

These are not the first blatantly untrue things the Secretary has stated (read our article here). It confuses us: Secretary Napolitano is supposed to be one of the most informed persons in the U.S. Federal Government. In her hands rest the administration of, well, homeland security. Nevertheless, her comments are hogwash. As the Canadian ambassador to the U.S., Michal Wilson, to comment:

As the 9/11 commission reported in 2004, all of the 9/11 terrorists arrived in the United States from outside North America. They flew to major U.S. airports. They entered the U.S. with documents issued by the United States government, and no 9/11 terrorists came from Canada.

Since Secretary Napolitano should know this, we are forced to conclude she must, in fact, be an idiot. Her powerful position in the Obama Administration makes her a dangerous idiot. If she is successful in her attempts to strangle the U.S./Canadian border, in a manner akin to the U.S./Mexico border, we fear she will be negatively impacting the ability of the United States to pull itself together at the end of the 2007 Depression.

Such a clamping-down on the U,S./Canadian border is the worst possible thing to do during the Depression. There is no other time when international friendship and cooperation more important than a Depression, and Canada is the nearest functional neighbour of the U.S. What Secretary Napolitano proposes to do is, in a word, madness. She is voicing a destructive, out-of-control obsession with 'terrorists' and 'national security,' and she does not have the wits to see what she is doing.

There are many more examples of this stupidity in the Federal Government, but we feel that Secretary Napolitano's personal brand does not get the attention it deserves. We frankly consider her as destructive as Treasury Secretary Timothy Geithner's incessant Goldman Sachs donations, or Federal Reserve Chairman Ben Bernanke's voodoo monetary policies. All three persons are working hard to destroy what hopes the United States has: Geithner destroys the wealth; Bernanke destroys the money; Napolitano destroys relationships with those who can help save us from the previous two.

Back-Door Protectionism

An article from the Globe and Mail caught out eye: Ms. Janet Napolitano, Secretary of the Department of Homeland Security, has stated that the U.S./Canadian border will be treated like "a real border," as she put it. “I've never actually spent much time on the Canadian border,” admits the Secretary, adding that she had commissioned a study to help educate her on the - dare we say lengthy? - subject.

This move by the Secretary is an ominous one; as the Globe and Mail put it, this is a "tariff-in-all-but-name." It is a bad precedent to set, as it is effectively an aggressive, protectionistic stance against the United State's far-better-off northern neighbour. Canada has a sounder banking system, and a sounder economy as a whole. The Secretary, in isolating the United States from the valuable asset that is Canada, is doing a very terrible disservice to her employer: the Citizens of the United States.

At the same time, though, we are not surprised by this new policy from the Obama Administration. If the Administration is indeed serious about creating jobs for Americans - any jobs will do - at all costs, then the relative soundness and functionality of Canada no longer seems like an asset for an ailing nation. Instead, Canada begins to look more like a threat. As the 2007 Depression continues, we would not be surprised if more anti-Canada policies, like this border-tightening, continue to appear.

In closing, we wish to repeat what the Globe and Mail observed at the end of the article:

"It seemed to be another lesson learned: when it comes to national security, the Obama administration's policies are often consonant with its Republican predecessor."

Enabling Destructive Economic Behaviour

Although we ourselves are not of the socialist persuasion, we agree with socialists that there are cases where government can actually provide useful services, and at a reasonable cost. So reasonable in fact, that the case for privatisation is not particularly compelling.

Unfortunately, at the national level, the USA seems incapable of delivering that sort of socialism (with the possible exception of the Post Office). Instead it engages in malignant lemon-socialism, where destructive enterprises are rewarded with life-prolonging capital infusions, or outright government ownership.

Take, for example, a number of large banks, Fannie, Freddie, and Wall Street firms. These outfits swindled the world's investors. All issues of criminal fraud aside, their activities were and continue to be enormously destructive economically.

Investors lost confidence in them. Any sane governing authority would simply shut them down. In any sort of free market economy, they would be done already. There are thousands of better run competitors out there to take up the slack. But yet, the Federal Government saw fit to step in and keep them going. Not because no one else was providing some useful service they are. In fact, they aren't producing any useful service at all. Quite the contrary.

Another example is the bailout of the 'Big Three' automobile manufacturers. As stated in a previous post, there are many good, sound business reasons for these companies to go out of business. It's not like there aren't lots of other companies which can make cars. If the USA has a glut of car making capacity, then a fair chunk of it needs to go away.

The core economic problem of the failed Soviet Union was that its central planners took valuable natural resources and turned them into useless waste. Ignoring issues of quality and desirability, they measured output strictly in tonnage. This was socialism at its worst.

Unfortunately, the USA is following in the footsteps of the Soviet Union. Its central planners are diverting ever larger portions of the nation's income into operations that produce little or no benefit. The litany is extensive, but includes bloated 'Defense' and 'Homeland Security', subsidies for airlines, automakers, banks, construction, insurance, mortgage companies, prisons, and real estate brokers.

Spending by Governments at all levels in the USA is about 40% of total national income. Also, about 50% of the population is dependent primarily on government for its income. This is a country fairly deep into some kind of socialism. Is it getting a good value for its commitment? Does the USA have enviable public education? a low rate of incarceration? free health care for all? a first-rate passenger rail system? The answer to these questions is a resounding "No!"

On top of that, Government in the USA is quite involved with the private sector. Does the USA have a healthy industrial base? a healthy balance of payments with the rest of the world? energy security? well-paid, content workers? No, again.

We are profiling a country at the verge of leaving the club of wealthy, advanced nations, if not heading for outright collapse. The response of the political leadership to the 2007 Depression is very telling: bailouts, handouts, and more pork. This will do nothing to make the nation more productive and increase its citizens' income. On the contrary, it will make the nation less productive and exacerbate the decline in income.