But sir, it's wafer thin

So I was reminded today that a few weeks ago I conducted a little poll here at ECM which asked my three-plus loyal readers to select one or more topics for a future essay. Climate change, nee global warming, came out the surprise winner. Compounding my astonishment at receiving more votes than I have readers, the "control" response concerning a request for instructions at having dropped a pencil received but a single vote. No matter my other preferences among the poll options, I would have voted for that myself. And although more than half the traffic here is generated from Star Wars-themed searches that turn up my recent foray into film criticism, nary a weary traveler selected the More Star Wars option. So go figure.

So climate change has seized the fancy of my several loyal readers, and I myself am somewhat curious as to what I'll uncover (see? objective inquiry without presumption of the outcome!). I've read a bit on the subject but a quick update or refresher on the latest writing on the subject won't hurt. It will likely be early summer before everything comes together and the long-awaited essay appears on the subject, but the waiting and the investment of additional time will make it only more delicious when it appears. And the whole climate change movement isn't likely to go away by then anyway, and if it does, then there's probably no need for me to write about it in the first place.

Besides, for the moment I sense an unexpected weakening of the Leninite BHO agenda in Washington. It's a long way from having been thwarted, and after all a tremendous amount of damage already has been done, but I'm hearing rumbles about slipping poll numbers and reluctance in the Congress to take on cap-and-trade, and that the $650B that was to provide in revenue (and politburo-type economic control) is now expected not to be available, calling into question the possibility of enacting the nakedly vote-buying Making Work Pay tax credit. If a touch of heretofore unsuspected democratic righteousness causes not one but two awful proposed programs to vanish at once, this can only be described as a good thing. But the reluctance to take up cap-and-trade pushes climate change a touch down the list of my priorities for the moment (leaving aside that my opinion of most of the political elements of the climate change movement, leaving aside the actual science, were actually a double-bluff XK-Red-27 technique to impose an otherwise obviously undesirable Bolshevik command-and-control apparatus which would be ultimately no less bloodthirsty than the original for its apparent love of the proletariat).

So for the moment my biggest concern is in matters economic. In that spirit I call attention to today's invaluable essay from Mark Steyn, entitled False Choice. It's wonderful enough to be worth quoting at length:

Writing in the Chicago Tribune last week, President Obama fell back on one of his favorite rhetorical tics: “But I also know,” he wrote, “that we need not choose between a chaotic and unforgiving capitalism and an oppressive government-run economy. That is a false choice that will not serve our people or any people.”

Really? For the moment, it’s a “false choice” mainly in the sense that he’s not offering it: “a chaotic and unforgiving capitalism” is not on the menu, which leaves “an oppressive government-run economy” as pretty much the only game in town. How oppressive is yet to be determined: To be sure, the official position remains that only “the richest five percent” will have taxes increased. But you’ll be surprised at the percentage of Americans who wind up in the richest five percent. This year federal government spending will rise to 28.5 per cent of GDP, the highest level ever, with the exception of the peak of the Second World War. The 44th president is proposing to add more to the national debt than the first 43 presidents combined, doubling it in the next six years, and tripling it within the decade. But to talk about it in percentages of this and trillions of that misses the point. It’s not about bookkeeping, it’s about government annexation of the economy, and thus of life: government supervision, government regulation, government control. No matter how small your small business is — plumbing, hairdressing, maple sugaring — the state will be burdening you with more permits, more paperwork, more bureaucracy.

And don’t plan on moving. Ahead of this week’s G20 summit in London, Timothy Geithner, America’s beloved Toxic Asset, called for “global regulation.” “Our hope,” said Toxic Tim, “is that we can work with Europe on a global framework, a global infrastructure which has appropriate global oversight . . . ”

“Global oversight:” Hmm. There’s a phrase to savor.

“We can’t,” he continued, “allow institutions to cherry pick among competing regulators and ship risk to where it faces the lowest standards and weakest constraints . . . ”

Just as a matter of interest, why not? If you don’t want to be subject to the punitive “oversight” of economically illiterate, demagogic legislators-for-life like Barney Frank, why shouldn’t you be “allowed” to move your business to some jurisdiction with a lighter regulatory touch?

[...]

Unfortunately, all of it costs money he doesn’t have. So he has to borrow it, in your name. Where does the world’s hyperpower go to borrow more dough than anyone’s ever borrowed in human history? More to the point, given that, partly at the behest of Obama and Geithner, almost every other western government is ramping up national debt to cover massive bank bailouts and other phony-baloney “stimuli,” is there enough money out there to buy up the debt that’s already been run up? Last week, at the official British Treasury auction, investors failed to buy the full complement of so-called “gilt-edged” 40-year bonds. Two such auctions have already failed in Germany. The U.S. Treasury, facing similar investor reluctance to snap up $34 billion of five-year notes, was forced to increase the interest it will pay on them. The Chinese and the Saudis have long taken the view that it’s to their advantage to own as much of the western world as they can snaffle up, but it’s unclear whether even they have pockets deep enough for what America and the many Bailoutistans of Europe are proposing to spend.

In their first two months, Obama and Geithner have done nothing but vaporize your wealth, and your children’s future. What began as an economic crisis is now principally a political usurpation. And, to return to the president’s “false choice,” that “chaotic and unforgiving capitalism” is exactly what we need right now. It’s the quickest, cheapest, fairest, most-efficient route to economic stabilization and renewal. A regimented and eternally forgiving global command economy with no moral hazard will destroy us all.

As they say, read the whole thing.

I think matters have reached a point where the legislative branch of the federal government has become nothing but a bunch of corrupt, unaccountable, self-dealing petty-tyrants-for-life. And I think what we need is a comprehensive framework of ideas--or one big idea--to restore accountability to the people in the manner of Newt Gingrich's 1994 Contract With America, which for all its faults mainly delivered on its promises and was ultimately betrayed because of the corrupting power of power itself. The elephants of the middle 'aughts lost their way, their principles, and all sense of restraint or accountability after a decade in power. It's taken the donkey two months to replicate that feat.

The problems with reform are that we trust in a group of men to govern us instead of the system. A favorite accounting aphorism is "let the system be the solution." When everything is ad hoc and the operators exercises maximum control to evaluate treatment of each item before it is recorded, the system inevitably fails because of the fallibility of its operators. When a system of rules, carefully adhered to, governs outcomes instead of individual judgments performed a thousand times over, results are better and more consistent, and errors made systematically are more easily detected and corrected than those which are introduced by hand at each of a million decision junctures.

The relevance here is that the donkey and the elephant have both proven themselves incapable of running a limited government when put in charge of a system which is essentially the rule of men instead of the rule of law (though, to be sure, I think the donkey's errors are more destructive and enervating). It is time we return to a system of the rule of law, not the rule of men, even if a constitutional amendment is required to pry the reins of power from their hands.

Quoth Madison in Federalist 51:

In republican government, the legislative authority necessarily predominates. The remedy for this inconveniency is to divide the legislature into different branches; and to render them, by different modes of election and different principles of action, as little connected with each other as the nature of their common functions and their common dependence on the society will admit. It may even be necessary to guard against dangerous encroachments by still further precautions. (Emphasis mine.)

It is unfortunate, however unapologetically undemocratic it is to point out, that one of the essential checks on the tyranny of the legislature has been undone by the 17th Amendment to the Constitution, which reduced the separation between the houses of the congress by rendering similar their modes of election. Since undoing that seems unlikely and any such plan would in all likelihood be falsely accused of racism by some convenient demagogue, perhaps it is time to consider some of Madison's "still further precautions" against the dangerous encroachments of the outlaw federal congress.

I am assembling my thoughts on this into an essay which will end up taking precedence over the one about climate change. In the meantime, I welcome your thoughts as to what one single constitutional amendment would do the most good to permanently restrict the type of behavior emitting from the congress these days.

As an accountant, I can't help but find this funny, no matter how big a geek that makes me

Dinosaur Comics is hilarious and I recommend it with enthusiasm.

You'll like this sort of thing, if this is the sort of thing you like.

There's more!

AIGainst all enemies, foreign and domestic

Does anybody recognize this guy?

There is an interesting and kind of disturbing kerfluffle taking place the past few days over the now-infamous AIG bonuses, evidently paid to some of the worst offenders in the now-taxpayer-owned venture.

I have mixed feelings on the matter: it's of course offensive, unconscionable, etc, to use taxpayer money to pay these sorts of bonuses ($165M paid to 73 people per the Journal); let's get all our moral outrage out of the way up front here. Sure, angry and mortified, check.

But. There are two really big problems here with what the Congress is trying to do, and what BHO is badgering AIG to do, namely to return the money. Let's deal with the smaller of the two first:

Bonuses are funny things in the banking industry. I think banking bonuses are about as hard to stomach as Alex Rodriguez's steroids-inflated salary. I sure don't get that type of bonus as an accountant. But they are kind of like inflation in a way: actual inflation is hard to take, but what really keeps economists and central bankers up at night is the possibility of increasing inflation expectations. When the expectation of inflation takes hold it becomes largely self-sustaining and self-fulfilling--ask Jimmy Carter and Paul Volcker. This is why Bernanke spent so much time during last year's excursion into the realm of $147 oil talking insouciantly about "inflation expectations are well anchored," and so forth.

The problem with forcibly curtailing bonuses in the financial industry is that they are expected. They are just as expected (however unjustified) as a $44M contract for a pitcher with a career winning percentage just over .500 (cough Dan Heran). If you single out one company and forbid competitive bonuses, or one baseball team and mandate they not pay salaries competitive with those offered elsewhere, you get a slow-motion self-destruct sequence as talent predictably drifts away and new talent stubbornly refuses to be recruited. Policy has consequences, no matter how much you wish it didn't.

And, having injected $160B of taxpayer money into AIG, it would be kind of preferable not to voluntarily begin a chain reaction which necessarily must eventuate in AIG's certain implosion down the road just because we feel good about tipping that first domino. If we wanted AIG to fail, we had a golden opportunity last year to simply let it fail and allow for an orderly disposal of its assets in a bankruptcy. In a free market economy, we punish mistakes by permitting bankruptcies to happen. In the modern, perilously-close-to-socialist America, the only business mistakes we punish are when executives fail to genuflect quickly enough to avoid the displeasure of the Congress.

Which brings me to the larger point. There is an interesting post from David Freddoso over at the National Review blog, the Corner:

But why is Obama so outraged and surprised? Today we learn that he signed the very bill that quite clearly made those bonuses legal — the $787 billion stimulus package he had traveled around the nation promoting. The bill includes restrictions on executive compensation, but creates an exception for bonuses contractually obligated before February 11 of this year. The provision, and the exception, were inserted into the bill by the chairman of the Senate Banking Committee, Chris Dodd (D, Conn.), who has received more than $100,000 from AIG employees in the last 20 years, had written and inserted the relevant provision, with the relevant loophole. How can he, the president, or anyone else who voted for the stimulus, suddenly act surprised? Don't tell us they didn't read the bill.

House Republicans are already calling for a return of the money, and holding a press conference. Here is the statement from House Minority Whip Eric Cantor (R, Va.) from this afternoon.
“Today, news reports reveal that a last minute provision in the stimulus bill inserted by Democrats protected bonuses like those received by AIG executives. Taxpayers deserve better than this from their government, and this is just the latest reason why legislation must be transparent for all Americans to see before it is recklessly signed into law.”

UPDATE: Here is the loophole, from the section of the stimulus package that deals with compensation rules for TARP recipients:
The prohibition required under clause (i) shall not be construed to prohibit any bonus payment required to be paid pursuant to a written employment contract executed on or before February 11, 2009, as such valid employment contracts are determined by the Secretary or the designee of the Secretary.

Frankly, it's hard to imagine how the government could prevent such contracts from being honored. But the presence of this loophole, in black and white, certainly gives the lie to all of this phony outrage — by the senator who created the loophole, by the president who signed it into law, and by everyone else who voted for the stimulus package.

Well, yes. But the difficulty in imagining it doesn't seem to have stopped the Congress from trying (from today's Journal):

Congress Looks to a Tax to Recoup Bonus Money

By JONATHAN WEISMAN, NAFTALI BENDAVID and DEBORAH SOLOMON

WASHINGTON -- Lawmakers moved to tax away almost all of the $165 million in bonuses paid to employees of tottering insurance titan American International Group Inc. as Obama administration officials scrambled to assign blame for the payouts.

Legislators, including Senate Finance Committee Chairman Max Baucus (D., Mont.), proposed to levy a special tax on the so-called retention bonuses paid to 73 people in AIG's Financial Products subsidiary. Recipients of the funds include 11 persons who no longer work at the company. Details of the various tax plans differed, but one idea calls for a tax rate of 90% to 95%, with much of the remainder claimed by state and local levies. Some lawmakers saw the move as an attempt to pressure the employees into giving up their bonuses voluntarily.

Some lawmakers may see it that way. This voter sees it rather differently and this stems from the fact that I see a government's duties as being narrow and limited: provide for common defense, ensure the rule of law and property rights, and provide an architecture in which persons who haven't broken a law can go about their business unmolested, free to pursue economic success or religious fulfilment or a great suntan or whatever makes an individual happy. I fail to find much in the Constitution or the Federalist Papers which suggests government should be involved in managing outcomes like this.

Because, at the insistence of the possibly criminal Chris Dodd, these AIG bonuses are legal. Shallow, greedy, possibly competitively necessary, whatever: they don't appear to have been illegal under a plain reading of the law. To write a law after the fact which criminalizes the bonuses appears to me to plainly run afoul of Article 1, Section 9 of the Constitution, which states among other Limitations on Congress, that "No Bill of Attainder or ex post facto Law shall be passed." That they may not be quite criminalizing the behavior, only seeking to write a law after the fact which de facto (if not de jure) prohibits the offending behavior and then find a way to apply this prohibition retroactively sounds rather like they have at best perhaps not violated the letter of Article 1, Section 9, while they have in fact willfully and almost gleefully micturated upon its plain spirit and intent. Bravo, gentlemen, and not even 8 weeks into Dear Leader's Reign (I almost said Reign of Terror).

If the Congress is willing to disregard the Constitution (and not for the first time just this year, either) in order to achieve the outcomes it prefers, and in order to select the winners and the losers depending solely on their own judgment (not to say depending on the size of their campaign contributions), we are in danger of having the Constitution itself rendered useless in broad disregard. One might argue the courts essentially supplanted the plain text of the Constitution with their own particular flavor of momentary whimsy years ago, and it's possible that the other two branches are even now racing to catch up.

The government has demonstrated that its chief principle in managing its affairs will be to adopt those positions which maximize its own control over events and the citizens of our fair republic and has done so while evidencing a, shall we say, diminished regard for the rule of law. History, and our mascot for the day at the top of the post, should teach us that this is an unwelcome omen.

The Most Evil Man in America, week of 3/9/2009

This week let's award our inaugural Most Evil Man in America award to Anna Burger, since we're totally into equality of opportunity here and it would be wrong to disqualify anyone in advance from this prestigious award merely because of her gender. And thus we can comfortably anticipate the many weeks in which Nancy Pelosi will win this coveted award in future.

From today's Journal:

The Union Cudgel
Big Labor gets nasty on 'card check.'

Big Labor's drive to eliminate secret ballots for union elections has united American business in opposition, so labor chiefs are putting on the brass knuckles: The new strategy is to threaten companies with government retaliation if they don't stop lobbying against turning U.S. labor markets into Europe.

We wrote on February 13 about the letter from the labor consortium Change to Win to the Financial Services Roundtable, demanding that banks receiving Troubled Asset Relief Program money keep quiet about union "card check." To its credit, the banking lobby hasn't backed down. Now Big Labor is escalating, demanding in a February 23 letter to Secretary Timothy Geithner that Treasury muzzle the companies if they won't muzzle themselves.

"Firms receiving significant TARP assistance continue to lobby against the interests of hard working taxpayers," says the letter from Change to Win Chair Anna Burger. "For example, these firms continue to oppose legislation that would allow bankruptcy judges to modify mortgage loan terms, establish a Credit Cardholder's Bill of Rights and protect consumers from corporations that bury mandatory arbitration clauses in fine print."

There's at least two things wrong with this which make this such a fine example of the type of thinking it takes to win our award.

First, and most obviously, it totally disregards the fact that policy has consequences. American lawmaking has been rife with this particular intellectual fatuity for decades now, so this is hardly newly invented by Mrs Burger. But just in this single sentence, she has called for three policies which would have entirely predictable unintended consequences:

"allow bankruptcy judges to modify mortgage loan terms"
This is a favorite of the left these days, and finds much favor with probable future MEMA award winners such as Chris Dodd and the evil Barney Frank. It's much like the rest of their thinking on banking and mortgage policy in general, dating at least to the Community Reinvestment Act of 1977. The idea then was that these independent for-profit banks were behaving in a manner deemed unsalutary by certain aggrieved donkeys, in this case by a perceived discrimination in loan-making which disadvantaged individuals in certain neighborhoods. It may be unfortunate or insensitive to point out, but there are certain neighborhoods or zip codes with statistically high concentrations of poverty and/or unemployment, and were I a banker or a shareholder in a bank, I would most decidedly expect to make a less-than-fully-proportionate number of loans to such a neighborhood or zip code, merely in the interest of my own fiduciary responsibility of looking after other people's money. But, no matter how reasonable the logic or responsible the actors, the outcome is otherwise from the Congress' desires, so, lo!--a new law must be enacted which, if it does other than simply continue to permit bankers to act in reasonable and responsible ways with the money in their care, it must by definition encourage them to act unreasonably and irresponsibly, no?

Today the problem is not much different: the offending banks want to enforce their rights which were established in a voluntary contract between two free and willing parties by seizing the collateral they counted on when making the loan in the first place.

Let's pause for a moment and consider why mortgage loans are typically the lowest-rate borrowing vehicle available for individuals. In spite of the seemingly interminable wait to recover their principal, banks are willing to extend credit to buy a home for lower rates than they charge for a 4-year loan on a car, which after all is also a collateralized loan. This obviously is due to the quality of the collateral, both in its tendency not to depreciate like a car does (present housing market notwithstanding) and its tendency not to disappear should the repo man come looking for it. Once the Congress convinces banks that its private contracts will be forcibly rewritten should the Congress find it convenient for their purposes to do so, the quality of that collateral has been permanently downgraded. Today it might be a forced write-down in principal, tomorrow it might be an outright ban on foreclosure, but a bank with no confidence in the sanctity of its 30-year contract and security agreement will charge a higher interest rate to protect against its expected losses due to, ahem, the vicissitudes of public policy. Mortgage interest rates would be permanently skewed higher for any comparable set of economic conditions, and that sort of confidence-destroying would be hard to undo. If interest rates for car loans are 1-2% higher than for a mortgage, you would likely permanently add a similar amount to mortgages. On a $150,000 loan for 30 years, increasing the rate from 6% to 7% costs the borrower an extra $35,506 in interest over the life of the loan. That is the consequence of Mrs Burger's proposal: in order to protect those who recently made bad decisions in the mortgage market, the rest of us would have to pay for other people's mortgages not only directly via higher taxes, but also indirectly, via higher interest expense on our own future borrowings.

"establish a Credit Cardholder's Bill of Rights"
I assume she's still talking about a bill similar to the previous Congress' HR 5244, which she supported at the time. You can get into the details of this bill which never became law if you want, but suffice to say in short form: it's more of the same as the above. Banks' rights under the law are diminished, their right to change interest rates to existing customers if those customers' employment or credit situation makes them a worse credit risk are restricted, etc. I hate credit card companies as much or more than the next guy, but forbidding them from calibrating their prices for credit in response to changes in the default risks posed by their debtors is going to do one of two things: make them make fewer loans (or issue lower credit lines) in the first place, to a pool of only exceptionally-low-risk applicants; or charge everyone a higher rate out of the gate to compensate for the fact that they know they won't be able to adjust the rates of the one guy down the road who suddenly looks like a bad risk. Credit card companies are merciless and probably evil, granted, so to expect them to simply swallow the consequences on these proposed restrictions without passing on the cost to their customers in some way simply strains credulity. But no matter to Mrs Burger, as there oughta be a law 'gainst this unconscionable stuff.

"protect consumers from corporations that bury mandatory arbitration clauses in fine print"
If you think the best first recourse is to sue every time you have a dispute, or can think only of those swell punitive damages you can receive to permit you to live like a king in Patagonia off the Herculean effort you undertook to speak truth to power, etc, then arbitration is likely not for you. But, though Mrs Burger is clearly not among them, some may think the shyster lawyers involved in litigating every little thing for millions of dollars in the expectation that they'll win at least a few and pocket 33% and live like kings in Patagonia from the Herculean effort of litigating this one case are a bigger problem in society than a company trying to avoid facing countless spurious lawsuits which eventually prove more costly to defend than to settle in spite of their innocence.

Let's be generous, in the absence of hard data, and call this one an honest difference of opinion with Mrs Burger. But if you prohibit this practice, what will happen?

Any company with one of these mandatory arbitration policies must believe that this will save them money--else, why do it? Maybe they think each case will cost 20% less if it's arbitrated, maybe they think the arbitrator will never find against them, etc, but clearly they only do it if they think this will reduce some expense somewhere--warranty expense, legal expense, whatever. If this expense-reduction tool is legislated away, every CEO or board of directors who anticipates an increase in, eg., warranty expense from this can either keep their prices the same and eat the increased warranty cost, hurting their shareholders and also their workers as they now have less profit to reinvest into the company--or they can just jack up prices for everyone so that one guy who's gung-ho to have his day in court can do so.

There's a collective theme to all these items. In addition to the unintended consequence, which never seems to accidentally be a benefit, the theme here is that prices are increased for everyone so a select handful of stakeholders--home speculators, credit card spendthrifts, guys who like to sue--can have their cake and eat it too. Once you push enough handpicked constituencies through that graft mill, goods and services get pretty expensive for everyone.

Which brings me to another problem with Mrs Burger. She's advocating card check, which is designed so as to facilitate a more easy unionizing process for any particular shop. There can be no disputing its intent, which is to produce more unionized workers in this country. If this succeeds, consider for a moment how much your 99-cent box of paperclips will cost if it's made in a union plant with generous retirement benefits in California instead of in the Korean plant where it currently is. The same goes for everything else you buy. Do you think your $4.99 sub at Subway will be made any quicker or more cheaply by a union workforce with strict work rules? No: it's all a ploy to force us to band together and buy someone else a union lifestyle since none of us would want to pay for that ourselves. It's extortion, no different in substance from what the credit card banks do.

That Mrs Burger also commits the grande liberal faux-pas of also attempting to restrict the free speech of her opponents by asking the government to quash their lobbying efforts merely adds predictable insult to injury. No reasonable reading of the intent or spirit of freedom of speech permits Mrs Burger's calls for her opposition to be silenced to make any sense. Why do all these liberal types always want to silence their critics, rather than simply out-debating them? Why is it otherwise than cynical to disregard the secrecy of balloting just because secret ballots seem so often to go against your preferred outcome?

So, for all these sins that we've noticed and likely others that we have not, Mrs Burger wins the coveted Most Evil Man in America award for the week of 3/9/2009. Now someone should just design an appropriate trophy and post it in the comments section.

I do notice that no matter how many of these things we do, somehow I never end up being the 1 in 9 who gets a fat government check in the mail

From today's Journal:

Mortgage Bailout to Aid 1 in 9 U.S. Homeowners

By MICHAEL M. PHILLIPS and RUTH SIMON

WASHINGTON -- The Obama administration announced details of a housing-rescue plan it said would help as many as many as one in nine homeowners, from low-income Americans struggling to avoid foreclosure to well-off borrowers who owe more than their homes are worth.

Because if there's one thing more he can do to get on my nerves, it's make me pay the mortgage of people who make more money than I do and who live in a nicer house than I do. Honestly, does anyone proofread these things for simple sensibility before making these announcements?

The package represents an effort to tackle the political challenges inherent in any housing rescue. While the administration wants a sweeping program that would prevent millions of foreclosures, it doesn't want to be seen as rewarding the greedy or reckless.

Am I being hypersensitive by noting that the administration doesn't want to be seen as rewarding the reckless, while proffering no comment on its preference toward actually rewarding the reckless? I swear, it was early 1994 before I got this cynical over Bill Clinton.

It remains uncertain how successful the administration will be in overcoming one of the biggest problems to forestall private efforts to fix troubled mortgages: the objections of investors who own mortgage-backed securities.

I'm not sure when Dear Leader began caring about the investor class, except possibly if one means "caring about" in a malicious, possibly carnivorous sort of way.

Administration officials made a point of noting that the loan-modification program will not aid people who bought homes merely as investments[.]

As I was saying.

The second main component of the plan calls for Fannie Mae and Freddie Mac, the government-backed mortgage giants, to refinance loans for millions of borrowers who may owe more than their homes are worth, even if they are wealthy enough to afford their current payments. There is no income ceiling for beneficiaries. But they must have mortgages held or guaranteed by Fannie Mae or Freddie Mac, and they cannot owe more than 105% of the current value of their home.

That raises the possibility that homeowners considered well-off by national standards may qualify for public aid.

"It's not income-targeted," says a Freddie Mac official. "It's targeted to these borrowers who have been caught in the current environment."

OK, this is an important distinction, leaving aside that the "official" in question has simply skipped all the hard parts about proving that this mess is something that just happened to "these borrowers," and simply assumed that was so and jumped to the end where the caring federal government solves "these borrowers'" problems with my money. What's interesting and perhaps less maddeningly predictable is that people who are merely rich can benefit from the program, as the donkeys believe helping some nickel-and-dime garden-variety fatcat is a small price to pay for the eventual nationalization of our entire mortgage system. The investor class--as distinct from the class who are merely reasonably wealthy--has a pernicious inclination to make money that hasn't been formally blessed by Nancy Pelosi, and gets whacked twice by this whole approach: once as the mortgage-backed securities are written down, and again by excluding investors in real estate.

Don't misunderstand. I don't think we should do any of this, at all. But if Dear Leader is committed to throwing around my money with such abandon, it's instructive to note who he welcomes and who he excludes from the manna of his benificence.

At the end of December, 8.3 million borrowers, representing one in five U.S. single-family homes with mortgage debt, owed more than their houses were worth, according to a report Wednesday by First American CoreLogic, a Santa Ana, Calif., real-estate research firm.

Let me be the first to actually say, with regard to being underwater on a mortgage, so what? In general, especially if we're limiting our discussion (as above) to people who bought homes with the idea of living in them, going underwater on the loan just doesn't have much practical effect unless or until you need to sell it. So, yes, if in some trail-of-tears duress such a homeowner is forced to sell his house and move, being underwater would be really inconvenient. But otherwise, what's the big deal?

The ability to service a mortgage is related to the cash flow in and the cash flow out, and some unrelated third-party's valuation of the asset pledged as security for the loan is a problem for the lender, not the borrower. If your house suddenly fell to half its current value but nothing else changed, the only thing going on is that the people entering the market now will be relatively better off than you since they'd buy comparable houses for much smaller loans. Your ability to service your loan has not changed a bit. Just keep making your regularly scheduled payments and everything will eventually work its way out. If you lose your job too, you have a serious problem, but note that that's a totally separate problem from the mere fact of your negative equity. Also, you wouldn't be able to use your home's equity as a credit card to buy Escalades and trips to Aruba, but that's pretty much dried up on its own anyway.

Even if a large swath of the country suddenly had negative equity, there's no reason this need trigger a wave of abandoned houses either. If your house fell to half its current value, you might not like to continue making the original payments, but in many ways it beats living in a cardboard box so in general there's a sort of inertia which mitigates in favor of continuing to make the payments.

I will point out that this whole negative-equity phenomenon isn't entirely new and previously unseen in our fair republic. Anyone who's bought a new car with zero down is underwater for the first 18 months they own it. The path out of this is well understood (make 18 monthly payments and your equity goes positive), widely implemented, and this negative equity has not sparked a rash of brand-new but abandoned vehicles littering the sidewalks merely because "it's cheaper to walk away than keep making payments if it's worth less than I owe on it."

Finally, if you want to really fix this whole economy and you want to do it John Drunkard Keynes style, the best move would be simply to bail out everyone's credit card debt, on which the country is most assuredly underwater, if by that you mean the related assets are worth less than the related debt. As an added bonus, you can bet the debt will be maxed out again in short order, thereby stimulating the economy. Brilliant!

Everyone unfortunate enough to be in the 49% who still has to pay income taxes should prepare to write a check to the government for 100% of what they earn, in order to ensure the permanent maintenance of this procession of various and sundry hand-picked constituencies, one after another, 8.3 million sheep at a time.

Have you hugged your Tocqueville today?

So perhaps the poll for this week should be: do you want BHO's Excellent Adventure of a budget/stimulus/recovery fantasy to work, or don't you?

I have mixed feelings on this: recessions, especially bad ones, are not to be wished for; but on the other hand, the success (or appearance of success) of an economic plan which reduces all of us to the level of Tocqueville's "industrious animals" has the (equally?) deleterious effect of rendering permanent such programs as Dear Leader can implement. I am convinced that even the success (much less its failed but permanent implementation) of the BHO atrocity exhibition is to doom our fair republic to share the European fate, to have our wills enervated at the teat of the government tutelage, to emasculate those among us prepared to work and compete and do the unpleasant tasks involved in providing for our families.

Is the success of this program to be wished, even at the expense of a recession? Or would a nation of free men rather be 20% poorer but continue to live as free men instead of being enslaved to the tender, caring mercies of a benevlolent despot of a federal government?

I ask rhetorically, of course. But this is what our nation has reduced to: a craven desire for comfort above freedom, and it will prove costly in the end.