Market Rallies After Earthquake Leads to Evacuation of Capitol

Okay, so the market was moving upwards all day.  Nevertheless, it seems to have taken its most rapid climb of the day a short time after the 1:51 PM earthquake forced the evacuation of many government buildings in Washington, including the Capitol and White House.  Telling? Coincidence? Irony?   We'll leave it to the people to judge.

Can Muslims Beat the Islamists?

Andrew McCarthy sheds some interesting light on the ever-present debate over Islam and sharia.  In a well formulated editorial, McCarthy outlines the need for continued focus and discussion on sharia's interaction with the state and the tensions between secularism, moderate Islam, and Islamism (eg. radical Islam).  He argues that it is fair to critique radical interpretations of sharia in order to support moderate Muslim ideology.  He writes:

The hope, of course, is that between Muslim reformers who embrace our liberty culture, and the millions of Muslims who are peaceful, moderate people regardless of what their scriptures may literally command, alternative constructions of sharia will eventually discredit and marginalize the Islamist interpretation. It is a tough row to hoe.... But it is not impossible.

McCarthy develops his argument by poignantly, although admittedly imperfectly, contrasting modern Islam's trials to those experienced in the West's own history.  He outlines a few instances where the West had to move past strict interpretations of religion and reject the commingling of religion and state.

Government [in the US colonies] was based on God’s law, loyalty oaths were mandatory, Sabbath observance was strictly enforced, and brutal corporal punishments were carried out: Philip Radcliffe, for example, was whipped and had both ears cut off for “invectives against our church and government.” Others were executed, usually by hanging, for what, in effect, was the preaching of novel religious doctrines. 

Nor would we today recognize the original Virginia settlements as consonant with what we think of as our way of life. In Jamestown, too, religious duty blended seamlessly with civil law. We need not belabor the centrality of slavery to the developing agricultural economy. But for a time, a bachelor in Virginia was permitted to purchase a wife from among the young, unmarried women sent from England in order to make the colony more attractive. The price was 125 pounds of tobacco.

His conclusion is one of cautious optimism.  Islam has the ability to rise above the backwards, anti-liberal ways that are practiced in so many Muslim countries and preached by many fundamentalist scholars.  But this is only achievable if moderate Muslim voices join with those in the West to challenge and criticize the Islamist perspective.

It took a very long time to find the right balance between the sacred and the secular [in the West], and there is good reason to believe that our most serious problems today are caused by too much suppression of faith, not too little. But Islam has to be given a fair chance to strike this balance. We can’t tolerate jihadist atrocities, and we must fight Islamist efforts to erode our freedoms. But it will not do to smirk and say that Muslims have already had 14 centuries to get it together. How would we have done under that test? 

We have had to come a very long way to arrive at what we are rightly proud to call Western culture and American civil liberties. Our current battle is about preserving that inheritance for ourselves and making sure the Muslims in America who want it are free to have it. In factoring sharia into that battle, we need to be as humble as we are forceful.

Why Warren Buffett is Wrong on Taxes

Former chairman and CEO of American Express, Harvey Golub, writes on why Warren Buffett and Obama are wrong when arguing for higher taxes on the rich.

What gets me most upset is two other things about this argument: the unfair way taxes are collected, and the violation of the implicit social contract between me and my government that my taxes will be spent—effectively and efficiently—on purposes that support the general needs of the country. Before you call me greedy, make sure you operate fairly on both fronts.

Golub highlights statistics that the top 3% of taxpayers pay nearly 50% of taxes.  He also cites the inefficient collection of taxes - namely due to tax breaks and loopholes given to all sorts of special interests - and inefficient expenditure of taxes - on wasteful and unnecessary programs - to drive his message home.  Golub concludes "Here's my message: Before you 'ask' for more tax money from me and others, raise the $2.2 trillion you already collect each year more fairly and spend it more wisely. Then you'll need less of my money."


But while Golub's argument is fair, there is a more fundamental issue in his essay.  In refuting calls by some of America's wealthiest, including Buffett, for higher tax rates on the rich, he writes:

Others could pay higher taxes if they choose. They could voluntarily write a check or they could advocate that their gifts to foundations should be made with after-tax dollars and not be deductible. They could also pay higher taxes if they were not allowed to set up foundations to avoid capital gains and estate taxes.

The issue here is one of coercion and choice.  Buffett might be right when he calls for the closing of loopholes that give special treatment to certain forms of income or certain individuals, but that does not translate into justification for increased tax rates.  If Buffett feels he owes something to the community, he is more than free to write a check to any institution he feels deserving - including the US Treasury.  However, to argue that tax increases on certain individuals are necessary, because one feels like he is paying too little, distorts the relationship between government and the individual in a dangerous manner.

Income is naturally the property of the individual who earned it.  The government only has the right to take from an individual in order to provide the appropriate services of the state.  In other words, government should minimize its burdens on individuals and should tax only to meet its essential and proper functions (what these functions are is a separate discussion but would include many tasks that cannot be provided by the private market, for instance, defense, security, certain infrastructure, establishing rules and laws, and other pure social goods).  Taxes are thus a pooling of individual property to provide for certain aspects of the common good.  In this manner, taxes could be perceived as establishing or investing in an institution (the government) that provides needed services that would otherwise be unavailable.  Accordingly, all should benefit from this system.

Buffett's and Obama's argument turn this conceptualization on its head, arguing that the appropriate level of taxes is rooted not in the need to pay for essential functions but in an arbitrary determination of what an individual should possess.  Under this understanding, income (or wealth) is not the natural property of the individual, but is awarded to them based on their need.  Any amount that surpasses this arbitrary definition of need does not rightly belong to the individual and must, to be fair, taken away.  Taxes are thus used to 'level the playing field'.  The individual, whether rich or poor, now lives at the goodwill of the state, allowed to possess only due to the graces of leviathan.  In fact, taken to the extreme this argument does not even require the government to provide anything.  If taxes are justified by taking 'excess' from those who have it, the government has achieved its goal of taxation (this is not to say the government does not have other goals) simply by taking the money.

Taxation is a tool needed for the government to achieve its proper functions.  It is not a goal unto itself.  To assume otherwise is to break down the very fabric of a capitalist, free-market, liberal society and sets dangerous precedents.  It is certainly appropriate to debate how tax burdens should be carried by different segments of society, but it is far too dangerous to allow such discussions to distort the purpose of taxation.  Taxes are a government's paycheck or its alms - not a tool for social engineering.

Hamas's Political Weakening May Help Israel

The political dynamics in the Middle East are slowly changing - quite possibly in Israel's favor.  A Reuters article reports that Iran has cut funding to Hamas due to the Palestinian movement's refusal to support besieged Syrian President Bashar Assad.  Hamas, which has its political headquarters in the Syrian capitol, Damascus, has long been used by Iran as a political and terrorist weapon against Israel (Hamas currently controls the Gaza Strip).  However, the Iranian leadership is obviously quite upset at Hamas's failure to support the fellow Iranian proxies in Syria.  Assad, who is backed by Iran, has been increasingly under threat as popular revolts against the dictator have increased.  The Syrian regime has also faced increasing illegitimacy across the globe as many leaders, including recently President Obama, have called for Assad's resignation.

Reuters also reports that Hamas has lost funding from its Muslim Brotherhood supporters who are fueling the Arab Spring revolts in Egypt.

Hamas is also widely believed to receive money from the Muslim Brotherhood, Egypt's most popular and organised political force. Diplomats said those payments also may have been reduced because the Brotherhood has diverted funds to support the so-called Arab Spring revolts.

Hamas's financial and political woes may bode well for Israel.  Hamas has recently indicated a desire for a ceasefire with Israel.  According to reports this ceasefire will go into effect Sunday evening. This followed a series of bloody attacks in southern Israel this past week, perpetrated by the PRC, a group of Muslim terrorist seemingly unaffiliated with Hamas.  Israel has responded forcefully to both the PRC attacks and subsequent rocket strikes from Gaza.

All of this seems to suggest that the political turmoil within the Arab states may be weakening Israel's enemies.  Growing infighting among anti-Israel groups, the weakening of dictatorial Arab regimes, and the loss of Iranian influence appear to have strengthened Israel's position.  While the loss of Egypt's Mubarak and the possible increase in Islamist power in Egypt, may have some detrimental effects for Israel, ultimately it appears that the weakening of Hamas, Syria, and Iran may be quite beneficial for Israel. (Egypt, under Mubarak, was a nominal ally of Israel's and now may be taking a more Islamist-friendly approach, as the recent PRC attacks, launched from Egyptian-controlled Sinai, show.) 

Chris Christie is Tired of the Crazies

New Jersey's Republican Governor, Chris Christie, has come forward with a powerful and, like usual, robust defense of a recent appointment of a Muslim judge, Sohail Mohammed.  When questioned whether his appointment could lead to sharia law in New Jersey courts, Christie went on the attack, declaring that "Ignorance is behind the criticism of Sohail Mohammed.... Sharia Law has nothing to do with this at all, it’s crazy!"  He went on to exclaim that he is "tired of dealing with the crazies." (See video clip at 2:47.)

Once again Chris Christie manages to impress with his demeanor and no-BS style.  His honesty, candor, and ability to avoid the mudslinging of politics, is laudable - characteristics that other politicians should try to emulate.

But, not only is Christie's response commendable, his argument is dead-on.  Far too many Americans are too willing to denigrate good Muslim-Americans just because of their religious beliefs.  Republican presidential candidate Herman Cain is one of the most recent examples.  This sort of religious stigmatization is completely un-American.  As a nation, we are supposed to be committed to freedom of religion and acknowledge that an individual's private beliefs do not automatically disqualify him from holding public office.  But even worse, such rampant vitriol against Muslims distracts from real threats and creates false "lines-in-the-sand".  Radical Islamists threaten this country, not all Muslims.  America should be wise to make allies with good Muslim-Americans, not engage in counterproductive fear-mongering and stereotyping.

Why the GOP Won the Debt Debate

As argued yesterday, the debt deal compromise is not perfect, but it is nevertheless a fair deal.  William McGurn, at the Wall Street Journal, outlines why the deal is a large win for the Republicans.

It's that the deal has Democrats, including the president, essentially signing on to the Republican framework for defining the Beltway's budget problem: spending that is too high rather than taxes that are too low.... And come the 2012 elections this deal will help force the debate that all conservatives have wanted all along—about the size, scope, and proper mission of our federal government.... That puts 2012 on terms much friendlier to the argument that Republicans need to make to the American people. It runs like this: If you are want a government in Washington that spends less, that taxes less, and encourages our private sector to grow, you need a Republican in the White House.

The win lies not so much in the details of the compromise - there is certainly a mix of good and bad in this regard - but in the fact that the right has changed the terms of the debate.  America has a long history of relying on a leftist framework to government and budgetary issues; namely, big government spending is good and taxes must be increased to fill any budgetary gap.  Now, serious government retrenchment is on the table.  The right is still a long distance away from actually crafting a government in the proper, limited fashion supported by conservatives, but by beginning to alter the frames of discussion we are one large step closer to achieving that.

Is the Far-Left Trying to Rewrite the Constitution?

Some on the far left are urging Obama to disregard his own debt ceiling deal in favor of using the "nuclear option" to unilaterally raise the debt limit.  This argument, raised by a number of House Democrats, relies upon a weak interpretation of the fourteenth amendment, which states:

The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.

The claim seizes upon the lines "[t]he validity of the public debt of the United States... shall not be questioned" dubiously asserting that this signifies the constitution allows the president to unilaterally issue debt.  However, the argument is so full of holes that even the administration has categorically rejected it.  Obama stated, “I have talked to my lawyers...  They are not persuaded that that is a winning argument.”  

The truth is that this part of fourteenth amendment, which was written in the midst of the Civil War, was drawn up to prevent Congress or the president from repudiating existing debts. This was rooted in the fear that after reunification with the South, former Confederate legislators would try to wipe out Union debt.  Its aim was to ensure that a congress could not backtrack on the promises of previous congresses, undoing commitments made to debtors and thus injuring the debtors and the United States.  The amendment in no way authorized the president to unconditionally incur new debt and certainly did not question the primacy of Congress’s responsibility to issue debt or the constitutionality of a debt limit.  Stanford's Michael McConnell sums up the constitutional law nicely.

Section Four of the Fourteenth Amendment does not create a back-door method for the Administration to borrow more money without congressional authorization. For Congress to limit the amount of the debt does not “question” the “validity” of the debt that has been “authorized by law.” At most, it means that paying the public debts and pension obligations of the United States, as they become due, has priority over all other spending. 

The leftist perspective is merely an attempt to twist the constitution to prevent needed fiscal reforms.  Not only is it unconstitutional for Congress to abdicate this responsibility - Article 1, Section 8 of the Constitution says that only "[t]he Congress shall have Power... To borrow Money on the credit of the United States" - but, as argued elsewhere, such an interpretation would place the United States in dire straits, removing a huge check on rampant expenditure.

A Fine Debt Deal

The bipartisan deal, announced yesterday by the White House, to raise the debt ceiling alongside significant spending cuts has not only helped avert an economic crisis, but has started a much needed process towards fixing America's fiscal situation.  As Speaker of the House, John Boehner (R-OH) said, "[It is not] the greatest deal in the world.... But it shows how much we've changed the terms of the debate in this town....”

The deal, which has yet to be voted on by either chamber of congress but is largely expected to pass, includes immediate cuts and an increase in the debt ceiling.  This is to be followed by a second round of cuts and debt ceiling raises, backed by the recommendation of a bipartisan committee.  Notably absent at this stage are any tax increases or a balanced budget amendment.  Both issues will be raised by the time of the second round of cuts.

Republicans should be quite happy with the outcome.  While the deal certainly has not achieved everything that the GOP desired, it is a good first step.  Reforming the fiscal condition of this country is a process.  After some 80 years of fiscal misguidance, it is far too ambitious to expect all of the needed changes to be implemented during one summer's battle over the debt ceiling.  What this battle has done is begin to change the national mentality.  It has rewritten the terms of debate in a manner that is more conducive to further reforming the fiscally unsound policies of the post-war era.  For the first time, debt limit increases have been linked to to spending cuts.  As Senate Majority Leader Harry Reid (D-NV) bemoaned, the debt ceiling has been unconditionally raised 74 times since 1962.  This has now changed and each future debt limit increase will most certainly involve debates over additional cuts.

In one sense, it is probably good that the Republicans have not received everything that they want - and everything the economy needs - in this one deal.  If the GOP had managed to drive through a "dance-in-the-streets" deal - one complete with a balanced budget amendment, fulsome plan to reduce our national debt, and severe cuts to government spending and entitlements - the debate would be prematurely terminated.  This may have thus provided the needed fiscal changes, but would accordingly fail to make them lasting.  It would only be a matter of time before the left regained the position to scale back these reforms.

The fact is while these needed changes are apparent to many, especially on the right, they are unfortunately not obvious to all Americans.  Fixing policies is only half the game, changing the American mentality is the real crux of the battle.  Unfortunately, many Americans are not quite ready to completely revamp their thinking about deficit spending and the government's fiscal responsibilities.  Accordingly, winning too much, too soon could undermine the broader discussion that is needed.  America needs to realize the necessity of making these reforms and turn from its all-the-time-Keynesianism deficit spending mentality to one of long-term fiscal responsibility.  The process that the battle over the debt ceiling has started will provide the continued platform to present these arguments.  These reforms will only become permanent if the American ethos is severely altered. Spending beyond our means is unsustainable, but unfortunately much of America will need to be convinced of this through a drawn out debate.

Republicans should be sanguine with their success.  No, it is not perfect, but it is an amazing start.  For a party that only controls one-third of the government and has faced a Democratic opposition that started on the far-left of American politics, it has been an astounding feat to so change the national dialogue.  There is still much more work to done, and given the ingrained and long-established interests it will not be easy; yet a historical process has begun.  For this we should be proud.