American Elephants


Scott Brown: Let America Be America Again! by The Elephant's Child

How Bureaucracy Simplifies Our Lives: by The Elephant's Child

Diane Katz has the enviable job of wading through Washington’s massive webs of red tape to discover new and excruciatingly silly regulations that are strangling the economy. Barack Obama has insisted that regulation is NOT a problem, and besides the great mass of American people must be regulated to make them safe.

— The new Consumer Financial Protection Bureau (the one with the illegal head, appointed during a Congressional recess when Congress was in session ) is busily issuing regulations. It has devised a 1,099-page proposal to streamline the mortgage process. The creation of this blueprint for a more “consumer-friendly ” mortgage is described in a 533-page report titled “Evolution of the integrated TILA-RESPA disclosures.” (TILA stands for Truth in Lending Act, and RESPA is Real Estate Settlement Procedures Act).

They found the most effective way to reduce confusion surrounding the APR (annual percentage  rate) was to add the simple statement “This is not your interest rate.”

In only two years the CFPB has grown from zero to 900 employees.  However, to redesign the mortgage documents they required the assistance  of Kleimann Communication Group, a self-described “small, agile, woman-owned business: at a cost to taxpayers of nearly $900,000. Naturally next year they need a 32 percent budget increase to $448 million. As Diane Katz explains:

So let’s recap: We have a 2,300-page statute giving rise to a 1,099-page regulation to simplify mortgages, which is spelled out in a 533-page report that chronicles consumer testing from one end of the country to the other. All of which indicates that home loans would likely be a lot simpler if government was a lot less involved.

So what could the mindset of Christopher Dodd and Barney Frank have been that they thought this was a good idea?

— Here’s another: In its ceaseless quest to protect us from ourselves, Congress in 2009 compelled credit card companies to confirm an applicant’s “ability to pay” before approving an account. Lawmakers apparently decide that Visa, MasterCard, Discover and the like somehow lacked the incentive to manage their own credit risk, (As opposed to, say, the elected officials who have racked up $1.2 trillion in national debt this year).

The new regulation is widely interpreted as prohibiting millions of stay-at-home moms ( and a fed dads) from obtaining credit cards of their own altogether. That’s because the “ability to pay” regulation requires credit card applicants to have an independent source of income to open an account or else to find a so-signer.

— One of Ms. Katz’s more entertaining discoveries has been that the notorious diet dictator, “Nanny” Bloomberg, Mayor of New York City, the man who’s trying to ban the sale of soda in cups larger than 16 oz. (The Big Gulp)— is a big fan of hot dogs: (Beef, Water, Salt, Sorbitol, Sodium Lactate, Hydrolyzed Soy, Corn Gluten Protein and Wheat Gluten Protein, Paprika, Natural Flavorings, Sodium Diacetate, Sodium Phosphate, Sodium Erythorbate, Sodium Nitrate). Makes you want to run right out and get one with mustard and relish.

The first of these regulations is Number 35 on Diane Katz’s list. While it must be fun to seek out this nonsense, it is a flashing warning sign for the economy. Silly, unnecessary regulations impose tremendous costs in time and funds for struggling businesses. Imagine: a brand new agency to issue regulations— grown to 900 employees in just two years



The Worst Drought Since the Dust Bowl, Global Unrest, Expensive Food. by The Elephant's Child

That corn is certainly not as high as an elephant’s eye— at least not any elephants around here. A far cry from what healthy corn is supposed to look like.

In the last five years, rising food prices twice have caused global waves of social unrest.  Drought in the Midwest  is raising prices for corn and soybeans, and commodity speculation could make it worse. Prices here in the United States will be up, but for many nations it can be disastrous. The ongoing drought is the worst since the Dust Bowl and is expected to last until  October. America is the world’s largest exporter of corn, wheat and soy beans and global prices for those commodities have already surged to record levels. There is some rain in the forecast, but it may not be enough.

The exact role that food prices play in unrest is hard to isolate, but the New England Complex Systems Institute (NECSI) has found biofuels responsible for a slow upwards rise in prices, and speculation responsible for the spikes. With drought-triggered price rises, the grim forecast becomes even worse. NECSI has found that the geographical character of violence changed immediately after the price spikes, changing from ethnically localized to widespread. The amount of unrest in the Arab Spring caused by rises in food prices is hard to determine. Experts have said that “In the short run, USDA needs to figure out a way to remove the mandate on ethanol use from corn. If we could free up 20 to 30 percent of the U.S. crop, reduced as it is, it would bring corn prices down very quickly.”

A major contributor to the problems is the U.S. Congress. Agribusiness in 2008 spent $173.5 million lobbying for farmers to become rent-seekers. In the case of the 2008 Farm Bill the recipients of subsidies of $30,000 or more, had average household income of $210,000. “Government-granted privilege,” says Matthew Mitchell of the Mercatus Center, “is an extraordinarily destructive force:” because it not only results in a misallocation of resources and slower growth, it undermines civil society and the legitimacy of government by providing a rich soil for corruption.

The greatest plague to the honest Midwest farmer is not unfavorable weather, pestilence or disease.  Far worse is the plague of politicians who create an artificial market in which only those with influence can truly compete. A monopoly protected by the government has little incentive to  provide good service, and in the long run, the result of anti-competitive policies is less innovation, lower growth and a smaller pie to share. The farm bill represents the capture of the legislative process by special interests.

Everybody knows that the Farm Bill  is a bad thing. Politicians condemn it. But nothing changes. Next year  we will still agree that it is a bad thing. Politicians will condemn it, and nothing will change except a higher national debt number.

Meanwhile, while hunger stalks the Middle East, the U.S. Air Force spent $50 per gallon on biofuels for a demonstration last month, intended to show “the promise of the alternative energy source.” That’s more than double what the U.S. Navy spent as part of its so-called Great Green Fleet demonstration.  For the Green Fleet demonstration the Navy spent $12 million on 450,000 gallons of fuel, or approximately $26 a gallon. Combining the fuel with petroleum in a 50-50 mixture reduces the cost per gallon to around $15, more than four times the cost of petroleum alone. The company that provided the Navy’s biofuel, Solazyme, was a recipient of a $21.8 million stimulus grant to build a biofuel refinery. So this proves the usefulness of the biofuels industry?

“Our use of fossil fuels is a very real threat to our national security” the Navy insisted in defending the purchase. The Navy has apparently not heard that the U.S. sits on enough oil and natural gas to power the country for hundreds of years. The administration seems to e looking for ways to push alternative fuels without congressional action, so the military is a logical place to start, if that is your goal.

Assumptions about economies of scale and commercial-size refining capabilities, the Pentagon still expects to pay a $2.2 billion premium on annual fuel costs by 2020. This makes an extraordinary amount of common sense in an era when they are slashing military spending to levels described as dangerous. I have to assume that this is just direct orders from Obama. He seems to be one of the last adults to still believe in global warming, and to believe that his move to replace fossil fuels with corn ethanol will save the planet. Everybody has their own personal fantasies. That is Obama’s.




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