Capitalism Rules

Supreme Court Campaign Finance Ruling

I was very pleased when I heard about the recent Supreme Court ruling on the McCain-Feingold campaign finance reform bill. Specifically, the Court ruled that corporations have a first amendment right to spend money to support or oppose political candidates. You can check out a New York Times article on it here.

The issue is entirely about freedom of expression and whether it extends to corporations. The McCain-Feingold bill has an exemption for news, commentaries and editorials, so it protects the business of corporations such as news outlets and blogs. The problem with the bill is that a corporation is really just a collection of people assembled into a legal entity - the corporation. So the bill would limit freedom of speech for people if they are members of a corporation. That's a severe restriction of freedom of speech.

We citizens naturally react to the idea of corporations advertising for or against political candidates and issues. If corporations can influence elections and legislation, doesn't that undermine the democratic process? Perhaps, but freedom of expression is the most important right protected by our constitution. Campaign finance reform should reform campaign finance for politicians, not limit freedom for individuals. We need disclosure of funding sources from our politicians. The whole idea is for us, the electorate, to know the source of funding for our candidates so we know what we are voting for. 

I think the Court got it right. It surprises and concerns me that the decision was 5-4.

Hayek vs. Keynes Rap

Want to learn about economics? Check out this funny Rap video from John Papola and Russ Roberts comparing the philosophies of John Maynard Keynes and Friedrich August Hayek. Which economist do you think Capitalism Rules likes?

Ben Bernanke Reconfirmed

Ben Bernanke was reconfirmed as Fed Chairman yesterday. This was no surprise, although there is a fair amount of speculation on the significance of the vote of 70-30 in favor. It really doesn't matter, he's the man for another four years.

Bernanke is bad for capitalism for a couple of reasons.

1. He is a promoter of the idea that certain businesses are "too big to fail" and need to be propped up by the government - General Motors and AIG being the two most obvious examples. Saving General Motors causes multiple problems. Bankruptcy would have punished the executives and UAW that destroyed GM. I know, what about all those poor employees that lose their jobs. Their divisions would have been sold to companies with competent management, or they would be forced to do something new and productive. Maybe some of them would start a new auto company and build a decent car.
2. He likes to print money. By flooding the economy with money Bernanke has set the U.S. up for a bout of inflation that is just  starting to surface. The price of gold has more than doubled in the 5 years Bernanke has run the Fed. I'm very nervous about it.

A Fed Chairman that sees the value in a strong dollar would be a big improvement. Maybe next time.

Obama's State of the Union Address

President Obama gave his State of the Union address last night. I'm not going to talk about it from a political perspective. Frankly, it doesn't matter to me one way or another if the Republicans or Democrats score political points off of the speech. This is Capitalism Rules - and what I care about is free market capitalism. So I'll comment on the address from that perspective.

And from the capitalist perspective, what was said was not very encouraging. The political pundits on television noted that the President is backing off of health care reform at least somewhat. I suppose you could draw that conclusion because he didn't bang on the table shout that we will have health care reform. But he stated that a government health care program is still on the agenda. There are many indications that our health care problems are cause by regulation that thwart competition and innovation.

"Because of the steps we took, there are about two million Americans working right now who would otherwise be unemployed." What? Our government spent one trillion dollars to save two million jobs? That's $500,000 per job. That would actually be funny if it wasn't real money. That's assuming it's true - a bad assumption in my opinion. The stimulus increased the size of our government and the debt burden on this country - while unemployment increased every month before leveling off at 10% in October.

We cut taxes". A tax credit is not a tax cut. One time credits don't prompt people to invest in the economy. They simply promote a specific type of spending, for example home buying, that as a direct result will most likely be the wrong type of spending.

"We face a deficit of trust" - A deficit? Hey, here's an idea: after Bernanke is reconfirmed he can get just print some more trust like he's been doing with money and everything will be perfect.

"Starting in 2011, we are prepared to freeze government spending for three years." Right after the election, right? Sure, that's gonna happen (I must have a deficit of trust).

There were plenty more anti-capitalism comments about taxing banker bonuses and repurposing TARP money repaid by banks. More fodder for another time.

California Trans Fat Ban Takes Effect

On January 1st, 2010, the California law banning use of trans fats at restaurants takes effect. The law is almost universally hailed as a great positive action for the health of America. Trans fats are bad for you and we should all avoid them - granted. But a law to ban their use? Come on. Laws like that are bad for us both as citizens and as consumers.

This law was passed in 2008 and just now went into effect.

First of all, there is the cost of enforcement. The health department will be adding

Evil Excessive Profit

Nothing stirs up anger at the evils of capitalism like a good rant on "excessive profit" for evil corporations. Excessive profit must be bad - after all, it's excessive. Nobody ever complains about excessive puppies or kittens - they're too cute to be excessive. Excessive profit rants usually come from politicians that want to dictate the right amount of profit or socialists who believe that the right amount of profit is...none.

But here is the thing. Profit is the very reason products are improved and prices decrease. That's right - in a free market prices decrease over time precisely because of the desire to increase profit. That's because profit is the reward for providing a better product to your customers than your competitors. By better, I mean either more desirable or less expensive to produce. If your product is more desirable, you can charge a higher price. If you produce an equally desirable product at a lower cost, you make more money on each item you sell. Either way you make more profit. As competition with the same motives tries to improve their products and reduce cost, pressure mounts to lower prices. The best companies, those that make the better products, use their higher profits to fund improvements so they can increase profits in the future.

Take, for example, automobiles. Cars have continued to get better – more cool features, better looking and more fun to drive, safer, more efficient – while prices have gone down. All because car companies want to sell more cars than their competitors and make higher profit. All this is good for you and me – the consumer.

So next time you hear someone whining about how a company makes too much profit, call them a communist and move on.

Praise for Peter DeFazio?

The Hill was praising Rep. Peter DeFazio (D, Ore.), for standing by his principles in this article.

His principles are pretty anti-capitalism in general, but one in particular got my attention. DeFazio has been pushing the transportation reauthorization bill, and he "wants to tax Wall Street to help pay for the programs" through a tax on financial transactions.

I guess DeFazio thinks that the folks on Wall Street are going to pay the tax out of their pay checks, or maybe they'll stop drinking martinis.

News flash: all taxes are paid by consumers.

Any tax imposed on Wall Street will show up in the fees for the financial transactions. Witness the airport taxes and the tobacco tax. Corporate income tax may be little less obvious, but corporations exist for after-tax profit, not pre-tax. Dividends cant be paid with money given to Uncle Sam, so the the price of goods and services goes up to cover the tax.

All this may seem obvious to anyone that ever ran a lemonade stand, but politicians are accustomed to writing checks out of other peoples' checking accounts, so maybe they have an excuse.

Capitalism Rules first blog post

...Aircraft fore cabin door opens. To the cheers of thousands of screaming late teenage kids who camped over night, a spokesman for Capitalism Rules appears at the top of the stairs, smiling and waving. He says...

I'd like to present to you the Capitalism Rules blog. Here you will find the latest news and riveting commentary related to capitalism. The objective is to be objective, but also to expose anti-capitalism propaganda for what it is. You'll occasionally see guest postings from people we like about whatever they like, for the sake of variety...and vacation time.

This blog came about because a Google search for "capitalism" produced an uncountable number of articles about Michael Moore, my arch-nemesis.

So bookmark this blog, add our RSS feed and email the link your friends, especially the communist ones. And let us know what you think and what you want to hear discussed or highlighted in the future.

...At least that's how we imagine it here at Capitalism Rules.

Mark Krikorian
Capitalism Rules