With the legislative session underway in Austin, Texans will once again face crucial questions about how to prioritize our spending. The difference this time is we face a budget surplus, rather than a shortfall. It’s a testament to the low-tax, less government regulation and litigation economic model that has made Texas the envy of the nation.
The LoneStarState has led America in job creation for several years, at one point accounting for 40 percent of all jobs created in America during the recession. We’ve seen Dallas, Houston and Austin thrive while Detroit slowly becomes a ghost town. We’ve seen California businesses flock to our state. We’ve seen Texas reinvent itself as a high tech powerhouse when a few decades ago we were known only for oil and cattle.
Texas quite simply works, and it’s not by accident. It’s a deliberate product of decisions that have been made in the decade since Republicans took over both houses of the Legislature for the first time since Reconstruction. Have those decisions been perfect? No. Could we have done even better? Sure.
All Texans, regardless of party, want to see Texas continue to be a great place to live, work and raise a family. But while we may agree on the destination, we disagree on the roadmap to get there. Republicans believe in the intrinsic value of the private sector and the free enterprise system, whereas Democrats place that same emphasis on growing our government. Republicans want to limit the scope of local, state and federal government control over our daily lives. Democrats seek to expand power and control by these entities and look to them for solutions to our problems.
Our state and nation face real problems, and expanding the role of government is a seductive shortcut to getting things done.Economies are built on fundamental rules that you can’t bypass with government action. That’s why government stimulus fails in the long run, but the freeing up of markets unleashes their potential for growth for years to come.
With a budget surplus this session, Democrats will call out like Chicken Little that the sky is falling and that we have to spend more money to stop it. I won’t disparage the argument. We can always have a healthy debate about our priorities. That debate will make us stronger in the end.
But to abandon those principles that have kept Texas’ economy the strongest in America would be foolish. Our budget surplus isn’t because we taxed too little, it’s because we’ve experienced economic growth that wasn’t there before, which is directly attributable to our own fiscal discipline. While the federal government is tottering on fiscal cliffs, Texas has retained top credit rankings from Moody’s Investor Services and Fitch Ratings. And our economy has thrived.
In the 2013 legislative session, Republicans are once again guided by three core principles: 1) respect for the taxpayer; 2) focus on the core functions of government; and 3) ensure Texas is prepared to meet the challenges of the next 20 years.
The differences between the Republican and Democratic approaches are clear and fundamental, and the real, practical effects of those policies are evident and inescapable. Texas has the strongest economy in America precisely because of Republican-led, strong fiscal policies, and we need to stick to the solutions that have served us well.
In Texas, we are fundamentally changing the role of government to get by with less from our government, not because we don’t want to solve our problems, but we recognize that a rising tide ultimately lifts all boats. There is no problem we face, as a state or nation, that can’t ultimately be solved by a little honest economic growth. And in Texas, we’ve built the model for America.
Rep. Linda Harper Brown (R – Irving) represents District 105 in the Texas House of Representatives.She also serves on the Executive Committee of the Texas House Republican Caucus.
As expected, Ben Bernanke officially launched a fourth round of quantitative easing (QE 4) with his announcement last week of $85 billion dollars worth of unsterilized purchases of MBS and Treasuries. In unprecedented fashion, the Fed also tied the continuation of its zero interest rate policy and trillion dollars per annum balance sheet expansion to an unemployment rate that stays above 6.5%. Now, pegging free money and endless counterfeiting to a specific unemployment figure would be a brilliant idea if printing money actually had the ability to increase employment. But it does not.
The Fed recently celebrated the fourth anniversary of zero percent rates and massive expansion of its balance sheet. However, even after this incredibly accommodative monetary policy has been in effect since 2009, the labor condition in this country has yet to show significant improvement. Last month’s Non-Farm Payroll report showed that the labor force participation rate and employment to population ratio is still shrinking. Goods-producing jobs continue to be lost and middle aged individuals are giving up looking for work. This is the only reason why the unemployment rate is falling. I guess if all those people currently looking for work decide it’s a better idea to stay home and watch soap operas instead, the unemployment rate would then become zero.
But more of the Fed’s easy money won’t help the real problem because the issue isn’t the cost of money but rather the over-indebted condition of the U.S. government and private sector. Keeping the interest rate on Treasuries low only enables the government to go further into debt. And consumers aren’t balking on buying more houses because mortgage rates are too high. The plain truth is this is a balance sheet recession and not one due to onerous interest rates. More of the Fed’s monetization may be able to bring down debt service payments a little bit further on consumer’s debt. However, it will also cause food and energy prices to be much higher than they would otherwise be. The damage done to the middle class will be much greater than any small benefit received from lower interest rates. Therefore, the net reduction in consumer’s purchasing power will serve to elevate the unemployment rate instead of bringing it lower.
Rather than aiding the economy and fixing the labor market, what the Bernanke Fed will succeed in doing is to ensure his unshrinkable balance sheet will not only destroy the economy but also drive the rate of inflation to unprecedented levels in this country.
Ben’s balance sheet was just $800 billion in 2007. It is now $2.9 trillion and is expected to grow to nearly $6 trillion by the end of 2015. A few more years of trillion dollar deficits that are completely monetized by the Fed should ensure that our government’s creditors will demand much more than 1.6% for a ten-year loan. The problem is that rising interest rates will cause the Fed to either rapidly and tremendously expand their money printing efforts, which could lead to hyperinflation; or begin to sell trillions of dollars worth of government debt at a time when bond yields are already rising. If yields at that time are rising due to the fact that our creditors have lost faith in our tax base and its ability to support our debt, just think how much higher yields will go once the bond market becomes aware that the Fed has become another massive seller.
This new Fed policy is incredibly dangerous and virtually guarantees our economy will suffer a severe depression in the near future. Bernanke should start shrinking his balance sheet and allow interest rates to normalize now. When the free market does it for him it will be too late.
Mr. Michael Pento is the President of Pento Portfolio Strategies and serves as Senior Market Analyst for Baltimore-based research firm Agora Financial.
There are many problems with legal education, ranging from its costs to its lack of emphasis on the practical skills a school’s graduates will need in the real world to the comparative lack of transparency of many law schools’ placement efforts.One of the most persistent complaints has to do with legal scholarship, and whether law professors (and the schools themselves) place an inordinate emphasis on publishing scholarly articles in law reviews compared with actual teaching.No less a figure than the Chief Justice of the U.S. Supreme Court, John G. Roberts, took a potshot at legal scholarship when he said “Pick up a copy of any law review that you see, and the first article is likely to be, you know, the influence of Immanuel Kant on evidentiary approaches in 18th-century Bulgaria, or something which I’m sure was of great interest to the academic that wrote it, but isn’t of much help to the bar.”And the Chief Justice is far from alone in his critiques.Another member of our highest court, Justice Stephen Breyer, once observed that “There is evidence that law review articles have left terra firma to soar into outer space.”
Law reviews ostensibly exist for two main reasons: to provide academic articles that can guide and influence judges, lawmakers, and practitioners and to give student editors valuable editing, research, and writing experience (not to mention a credential to add to their resumes).Yet most law review articles are rarely if ever cited.In fact, one study demonstrated that 43% of the law review articles in the Lexis-Nexis database had never been cited anywhere—not in appellate opinions, not by trial courts, not even in other law review articles.Despite this, law reviews are proliferating.According to the Current Index to Legal Periodicals, in 1960, there were 118 law reviews in the United States.Today, there are over 600.Georgetown alone has 11 scholarly law journals, while my alma mater, the University of Texas School of Law, has nine.Each year, over 10,000 articles are published by the nation’s law reviews, the overwhelming majority of which are rarely if ever cited.Only a tiny fraction will be of practical value to lawyers or influence a court or legislature.Most will simply pad the resumes of the law professors authoring them. This is nothing new.Fifty years ago, legal educator Harold Havighurst keenly observed that “Whereas most periodicals are published primarily in order that they may be read, the law reviews are published primarily in order that they may be written.”
For most law professors, publishing is less a tool for influencing judges or lawmakers than a means to professional advancement along the academic ladder in the “publish or perish” world of those seeking tenure.While appellate courts do cite to law review articles (particularly if they address a growing trend in the law or a split in authority among courts confronting an issue in common), the infrequency of this has led professors to adopt other benchmarks of their own influence.A kind of pecking order has evolved, with law professors measuring themselves by the prestige of the institution publishing them (a top-ranked law school counts for more than, say, the Western Podunk State Law Review); by whether their work appears in the school’s “flagship” law review as opposed to a “specialty” law journal; and even by the number of pages and citations featured in their articles.Whether or not the work is well-written and has something timely or meaningful to say seems to be mere afterthoughts.In addition, most law professors look down upon publishing in “practitioner-oriented” publications like bar journals—despite the fact that such journals almost invariably reach a wider audience (the Texas Bar Journal, for example, has a readership of over 90,000, while the venerated Harvard Law Review had 1,896 subscribers during the 2010–2011 academic year) and therefore have a much better chance of actually being read by lawyers and judges.
Even as a part-time law professor, I have to confess to feeling that little thrill at seeing my work being mentioned.To date, my writings have been cited in over 3 dozen law review articles, from flagship law reviews at top tier schools like the Duke Law Journal to specialty journals like the Rutgers Computer and Technology Law Journal.Although most of the time I’m cited in the field for which I’m best known (social media and the law, and other Internet-related legal issues), there have been a few surprising recognitions of my work.A “Legally Speaking” column I wrote about a controversial court decision banning inmate use of the “Dungeons and Dragons” roleplaying game was cited in an article on censorship in prisons appearing in a 2012 issue of the Northwestern Journal of Law & Social Policy.Another “Legally Speaking” column on compensation for exonerated prisoners was cited in a Western New England Law Review article examining how best to compensate the wrongfully imprisoned.A story I did on restaurant critics getting sued for bad reviews wound up being cited as authority in the University of Missouri (Kansas City) Law Review article “The Good, the Bad, and the Gross: A Critical Review of Food Review Defamation Law.”A column I did on governmental response to Arizona’s “show us your papers” law was cited in a Duke Law Journal article on federal preemption and state regulation of immigration, while pieces on lawyer misconduct have found their way into articles on legal ethics in the New Mexico Law Review, the Maryland Law Review, and the American University Journal of Gender, Social Policy and the Law.Perhaps the biggest surprise for me was when I saw a magazine article I wrote on traditional Irish law being cited in an article on Ireland’s blasphemy law in the Case Western Reserve Journal of International Law.
Since I’m not a full-time law professor, I’m not constrained by the looming shadow of tenure, and I don’t feel compelled to engage in an academic version of “counting coup” by only publishing in the most prestigious law reviews.I like my work to be read, and to matter by adding to a body of thought about a particular subject, such that other lawyers, judges, and even lawmakers can benefit.After all, isn’t that what really counts?
President Obama's intransigence on economic matters is increasingly clear, so compromise seems unlikely and a succession of tax increases and wasteful spending programs seems inevitable. Meanwhile Ben Bernanke’s Fed enables this dangerous course by massive "quantitative easing." Assuming Bernanke is succeeded by a like-minded colleague (more on that below) we will thus suffer this economically poisonous combination of policies until January 2017. The U.S. economy is unlikely to make it that far in anything like its present shape.
Neither Obama's nor Bernanke's damaging policies would be possible without the cooperation of the other. If the Fed was maintaining short-term rates at above the rate of inflation, without buying large quantities of Treasuries, the Treasury would have great difficulty financing endless $1 trillion deficits without pushing up long-term interest rates to intolerable levels and loading future years with huge debt interest payments. Without Obama and his deficits Bernanke would have great difficulty purchasing $1 trillion of long-term Treasuries and Agency securities annually, since new Treasury bonds would only be issued to replace retiring bonds. The distortions he created by doing so would disrupt the bond market, feeding rapidly into a level of consumer price inflation that he would have a statutory duty to address.
Both Obama and Bernanke appear determined to continue pursuing their ruinous policies. Obama has announced he will not permit spending cuts in connection with a debt ceiling hike, while Bernanke on January 14 said the "worst thing the Fed could do" would be to raise rates "prematurely." Had we gone over the "fiscal cliff" as this column advocated, more than three quarters of the federal deficit would have been eliminated, and further deficits could have been prevented by the Republican House of Representatives. However the GOP House leadership wimped out, and as a result we are left in a position where taxes on the rich have already been raised substantially, but the deficit has been left almost unaffected – indeed it has been increased in the first year by the disgraceful $60 billion of tax breaks granted to politically favored corporations and scam artists.
Obama is with us until January 2017, but Bernanke has indicated he may retire next January when his term of office is up. In general Bernanke’s is the scalp lovers of sound policy should seek. Obama's damage has already been done, and while he may prevent any near-term attempt to address the deficit, Republican control of the House means he cannot increase spending more than marginally. Every extra month of Bernankeism, on the other hand, distorts the economy further.
It was not difficult to determine before his appointment that Bernanke would be a disaster as Fed chairman; this column said so in a piece published a week before he was appointed, remarking that "Bernanke's approach to monetary policy, in which all economic problems can be solved by creating money, is that of the 1919-23 Weimar Republic, which achieved in September and October 1923 inflation rates of 2,500% per month." This column can claim only partial credit for prescience; in the event we got the policy, but did not suffer the predicted inflation, being rewarded by an exceptionally deep and prolonged recession instead. Such are the vagaries of economic prognostication!
Next time around, there are few candidates who might move to a tighter policy, although former Fed Vice Chairman Roger Ferguson, currently CEO of the pension fund TIAA-CREF, is eminently qualified and as a registered Democrat is at least a plausible appointment for President Obama. More likely however is the current Fed Vice chairman Janet Yellen, whose published views suggest that she would favor even more easing. However as a known liberal Democrat without Bernanke's long service she might find it more difficult to attract a majority on the Federal Open Market Committee than has Bernanke. A Yellen Fed would thus probably be a modest improvement over the current one. One disquieting suggestion I have seen recently is that New York Mayor Mike Bloomberg might want the job; his combination of primitive Keynesianism and proven tendency to meddle obtrusively in everybody's lives would be truly frightening in a job with such power.
Thus it is highly unlikely that Bernanke's successor will be much of an improvement. Hence we are for the next four years likely to be subject to ultra-loose monetary policy and trillion-dollar budget deficits.
One area where my crystal ball is now unclear is whether this will cause an outburst of inflation. By monetarist theory it should; M2 money supply has risen at an annual rate of 9.9% in the last 6 months while the St Louis Fed's MZM, the nearest proxy we have to M3, has risen at 10.6% in the same period. With output rising at only 2%, that should produce inflation of around 8%.
Milton Friedman said "Inflation is always and everywhere a monetary phenomenon," so where the hell is it? Leads and lags are all very well, but even taking into account a flat stretch between mid-2009 and mid-2010 M2 has been growing at an annual rate of 7.2% since the end of 2007, far in excess of the feeble 2.3% growth in nominal GDP. Monetary "velocity," that elusive concept, has dropped like a rock (mathematically, it had to given the data), but its ability to do so without any reasonable explanation in itself makes monetary theory look increasingly chimerical.
More likely than a sudden resurgence of Weimar-like inflation is a market crash. Global sub-zero real interest rates have boosted corporate profits to record levels (in terms of US GDP) as well as the value of bonds, commodities and other assets. The Dow Jones index remains about 6,000 points higher, in terms of U.S. GDP, than when Greenspan began easing monetary policy in February 1995. Gold is at double its 1980 high. U.S. house prices have bottomed out and are rapidly reflating. Global foreign exchange reserves have been increasing at 16% annually since the Asian crash of late 1997.
For the current market to be sustainable for another four years the value of capital assets would have to have moved to a permanently higher level in terms of the value of everything else. Capital assets have become the destination for the world's excess money supply, but it doesn't seem likely that even Ben Bernanke and his colleagues can sustain this disequilibrium forever. Most likely, like tech stock prices in 1997-2000 and house prices in 2004-06, the overvaluation will persist long enough for a substantial body of dozy opinion to decide it's permanent and put all their money on it continuing, doubtless leveraging up to the eyeballs to do so.
Once the silly money has piled in, as with housing in 2007 and tech stocks in 2000, valuations will start to slip. Most likely this will be seen first in the Treasury bond market, where even Bernanke's trillions will prove insufficient to keep the 10-year yield below 2% forever. That will cause a price collapse similar to that of 2007, where previously unassailable financial institutions will be found to have eroded their capital base by overinvestment in T-bonds. Since the Treasury bond market is so huge this in turn will cause a sell-off in the world's equity markets, with corporate earnings being eroded by the rise in interest rates.
Another example of such a slow-motion collapse is Japan after 1990, where eventually a high percentage of Japan's most admired corporations were found to have speculated excessively in short-term "tokkin" funds. In that case, the major banks propped up the loser corporations, wrecking the banking system, filling the country with zombie corporations and causing a 20-year period of economic sluggishness. In the early years of that period, Japan's policy responses remained fairly orthodox, but since Ben Bernanke's visit to the country in 1998, dispensing truly awful advice, it has been plagued by misguided Keynesian "stimulus" and money-printing by the central bank, prolonging the downturn more or less ad infinitum. On the Japan analogy, if U.S. policy remains as bad as Japan's has been, we are due a downturn lasting until 2035 or so.
If the Obama/Bernanke policies do not cause inflation, but instead produce a collapse of markets and a major recession, we will finally have an answer to the century-old battle between monetarists, Keynesians and the Austrian school of economists. Keynesian economists will be discredited by the failure of $1 trillion annually of deficit "stimulus" to stimulate anything beyond an asset bubble, with unemployment remaining stubbornly high. Monetarists will be discredited by the failure of Bernanke's gigantic monetary stimulus to produce economic recovery, and by the corresponding absence of a serious burst of inflation. The winner in the intellectual battle will be the Austrian school, in its pure Ludwig von Mises form, which will have seen monetary and fiscal expansion produce only a mountain of "malinvestment," the collapse of which will take several years and a major depression to work out. Of course, that economic victory will be of little consolation to those of us forced to live through the depression, although we can hope that the next such episode in 2070 or so will be solved more effectively, with Keynes and Friedman relegated to the sidelines.
As for the timing, I have said before that I don't think 2013 will be the year in which the bubble bursts – there is as yet insufficient speculative frenzy, although the market temperature is certainly rising. Moreover, it would be a pity to have such a record-breaking blow-off without a serious speculative bubble in gold similar to that of 1978-80 – which if the $1500-1900 gold price of the past 15 months is regarded as a base, suggests a gold price peaking certainly above $3,000, very possibly above $5,000. Equally, it would seem impossible for the present bubble to outlast President Obama, and fairly unlikely for it to last into the election year of 2016. The 18-month period between July 2014 and December 2015 would thus be my best guess for the onset of collapse, with a prolonged rolling crisis lasting for the greater part of that period being the most likely outcome. 2016 and 2017 would then be years of grinding depression, benefiting the 2016 electoral prospects of both Republicans and extremist fruitcakes on both ends of the spectrum.
In the very long term, U.S. reserves of cheap energy, the intellectual capital in its research facilities and the political distaste of its people for infinite Washington expansion are pretty good guarantees that we will again see prosperity. But it's not going to happen within the next four years.
Martin Hutchinson is the author of "Great Conservatives" (Academica Press, 2005) -- details can be found on the Web site www.greatconservatives.comand co-author with Professor Kevin Dowd of “Alchemists of Loss” (Wiley – 2010). Both now available on Amazon.com, Great Conservatives only in a Kindle edition, Alchemists of Loss in both Kindle and print editions.
Not long ago, while “talking shop” with several other lawyers, the conversation turned to a colleague’s rather unusual, even foolhardy, strategic choices about how to proceed in a case.One of the other attorneys proclaimed our colleague’s plan as “downright insane,” and was surprised when I responded that just because he was crazy didn’t mean he couldn’t practice law.After all, I said, there are legally insane lawyers and even judges practicing today.
Sound surprising?Then consider this: last November, the Texas 3rd Court of Appeals received a brief from the attorney for Randy Gourley, appealing charges of theft against Gourley for allegedly trying to sell prescription animal medications online.The brief came from Carolyn Barnes, duly licensed to practice law in Texas since 1984.But Barnes’ address was not quite what you’d expect for a member of the bar—Unit 3B of KerrvilleStateHospital, which just happens to be an inpatient psychiatric facility.Barnes has been there since 2011, when she was found mentally incompetent to stand trial on criminal charges of aggravated assault with a deadly weapon.It seems that Barnes is accused of firing a gun at a census worker outside her home in 2010; the lawyer says the incident never happened, while the census worker disagrees.At the Kerrville facility, Barnes has access to a cellphone, a fax machine, the U.S. Postal Service, and the Internet.She even completed continuing legal education course work online in order to make her law license current.
The Court of Appeals sent Barnes’ filing on behalf of Gourley back to a Williamson County court-at-law, stating “We question whether Barnes, having been found incompetent to stand trial in her own matter, may represent Gourley in this separate matter.”Barnes, of course, asserts that the fact that she’s still licensed to practice law should indicate that she’s competent to stand trial in her own case and should be released from her involuntary commitment to Kerrville.After all, she points out, being “competent” means understanding the charges against her and being able to participate meaningfully in her own defense; if she’s licensed to represent clients in Texas courts, Barnes says, “then I’m fully competent to stand trial.”The Williamson County D.A.’s office, on the other hand, maintains that Barnes—by virtue of her involuntary commitment and being adjudged incompetent to stand trial in her own case—has no business representing clients.It has asked State Bar of Texas regulators to suspend Barnes’ license.
The case raises interesting questions, not only about how the State Bar polices the legal profession to protect the public from lawyers who are under a mental disability or illness that keeps them from practicing law, but also about the nature of mental illness itself.Under State Bar disciplinary rules, an attorney can lose his or her license due to “any physical, mental, or emotional condition” that prevents him or her from practicing law.After receiving and investigating a complaint (which is confidential), the State Bar refers the matter to the Board of Disciplinary Appeals (BODA), which is a group of 12 lawyers appointed by the Supreme Court of Texas.BODA, in turn, directs the case to an ad hoc District Disciplinary Committee (composed of a lawyer, a doctor, and a public—i.e., non-lawyer—member).But there are no specific standards that define just what constitutes a “disability” that would warrant prohibiting an attorney from practicing law.The committee may rely on testimony from doctors or other healthcare providers, as well as medical records that are introduced as evidence.And, if the committee determines that the lawyer does have a disability that prevents him from practicing law, it sends the case back to BODA for license suspension.Lawyers who want to return to practicing law after a disability finding must persuade BODA that they are better (such as when an attorney with a drug or alcohol dependency completes a stint in rehab).
At least the State Bar of Texas is concerned with having measures in place to protect the public in the event of a lawyer operating under a disability.In Chicago, they elect the mentally ill to judicial office, while the Department of Justice is actively recruiting for lawyers with “psychiatric disabilities.”Last November, Cook County, Illinois voters re-elected Judge Cynthia Brim to her $182,000-a year post as a Cook County Circuit Court judge, despite the fact that Judge Brim (who suffers from bipolar disorder) had previously been declared “legally insane” by a court-appointed psychiatrist.Why was there a court-appointed psychiatrist, you ask?Judge Brim, at the time of her re-election, was a defendant in a battery case.Yet this fact, complaints over a period of years over her “bizarre behavior,” or the Cook County Bar Association rating of her as “not qualified,” didn’t prevent the Cook County Democratic Party from backing her or the voters for voting for her with 63.5% of the vote.
And, in a classic case of your tax dollars at work, the Justice Department—in what can only be described as “political correctness” run amok—issued a directive in 2012 to recruit new employees (including lawyers) with “psychiatric disabilities” and “severe intellectual disabilities . . . .”This wasn’t merely a ban on discriminating against applicants with such disabilities.On May 31, 2012, Assistant Attorney General Tom Perez issued a directive to affirmatively recruit those with such “targeted disabilities.”Carolyn Barnes, the U.S. government may have a job for you.