We are in for a wild ride for the next two years.

The effect seems worldwide. A political class is addicted to spending your money, a worldwide financial crises occurs and sources of funding dry up. Craving their next fix, they suddenly realize that they really can’t raise taxes to the level they want because everyone and their sister is pointing out that it was FDR not Hoover that caused the Great Depression with bad policy and higher taxes after the banking/market crises of 1929. And with the latest bailout programs the deficit is already at record highs. What’s a politico to do?

Cast their eyes about and find the pools of available cash. What pools are there? Private endowments. Corporate philanthropy. 401(k)s. Pension funds.

Senator Charles Grassley (R – Iowa) and Representative Peter Welsh (D-Vermont) are looking into how universities and colleges are spending their endowments. Seems like any college with over $500 MM in ready cash may be required to allow Congress to tell them how to spend it. Welsh is introducing legislation to force colleges to spend a minimum of 5% per year of their endowments to offset tuition. Guess who gets to make the rules on how it’s spent? Is this enforceable? How many colleges rely on government student loans; or research grants from NSF, NIH, and the like?

Corporate philanthropy? California legislators want to require foundations to report race, gender, and sexual orientation of their trustees, staff and recipients. And what if the giving isn’t in line with the legislative vogue? Kiss off those tax deductions.

Governor Rod Blagojevich, has already raided the State of Illinois’ retirement and pension funds. They are currently underfunded by billions, courtesy of a raid to continue spending on RodWerks.

Anyone remember Alicia Munnell of the first years (1995) of the Clinton administration, before Newt Gingrich rode in to block the insanity? She eyed the trillions of dollars invested in pension plans and devised a “one-time tax” plan to take $450BB of the money because its previous tax deferred status was deemed unfair.

And the effect is not just in the US. Take Argentina where, on October 21st, President Christina Kirchner has nationalized $30BB of pensions to access the cash for her debt payments. Congress is paying attention to Argentina. Speaker Pelosi and House Ways and Means Chairman McDermott are hearing ideas on what is effectively the nationalization of 401(k) plans in a “lets get a head start on socialism” special session of the House. Wall Street investors obviously can’t be trusted to generate a decent rate of return. Congress would guarantee 3% under one plan. That is provided that they didn’t suck the funds dry like that other “lockbox” fund we now have.

As I have mentioned before, having a government of the Party, by the Party and for the Party is a guarantee that wild spending will not perish from the Earth. So does government in general and Congress in specific have the wherewithall to make the optimal decisions on how to spend your money?


Several years ago I heard a Millercomm talk by Charles Townes, the inventor of the maser. Interesting fellow. One of his talking points was the creation of the government institute for sponsoring science at the end of WWII. The US had the Radiation Lab, which extended development of the radar, and the Manhattan Project at Los Alamos and Oak Ridge which developed atomic energy, as well as the precursors to IBM and digital computers. All very successful and arguably responsible for ending WWII in a victory.

Harvard President James Bryant Conant was the head of this group whose purpose was to direct government funding to obtain the most bang for the buck. Conant and Vannevar Bush believed in big government sponsored science. They honestly believed that they could effectively direct science in the United States and provide the best use of public funds.

Townes pointed out that the post war government spend billions on investigating science directed by these intellectuals. And that they missed a few things: the invention of the maser and its daughter the laser; the transistor and the integrated circuit; fiber optics; polymers; (the list goes on). The program was good at giving money to the big labs but the transitional technologies that created today’s world were generated out of the free market.

Let’s keep our assets out of Congressional control and let the free market, which allowed America to become a place where people can attain their visions, thrive.

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