Friday, January 15, 2010

Prop Them Up, and Knock 'Em Back Down

"[G]overnment's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it." -Ronald Reagan

In 2008, the government convinced the American people that our financial system was on the verge of collapse.

In 2009, it assured us that it averted such a disaster.

In 2010, President Obama wants to tax the banks into the stone age.

Talk about smoke and mirrors! I have no doubt that policy makers legitimately believed that swift actions were necessary to maintain the flow of credit and prevent another Great Depression. Unfortunately, that apparent necessity gave way to politics as usual. The government is now transforming the TARP from a shield used to block financial Armageddon, and into a spear used to attack the banks—odd, since TARP's premise was that the banks are vital economic components.

The bottom line is that the Democratic leadership is fighting for political survival, and the banks are as good a bogeyman to target as any. Their primary policy objectives of economic stimulus, health care reform, and cap-and-trade have fallen flat, so they're resorting to economic populism—find someone that most people hate, and punish him.

Well, this new tax will punish the banks—along with their customers. Loans are terribly difficult to procure as it is because banks—still in survival mode—want to preserve their capital. So, if the government forcibly extracts more capital from the banks, does that mean the banks will increase or decrease their lending? The answer must even be obvious to those who support this terrible idea, but apparently they prefer populist theatrics over good policy. Hopefully this intensifies the drubbing they will incur during this year's midterm elections.

Avatar: a Film about Property Rights?

People are raving about the new film Avatar, and I can attest that it's living up to the hype—frankly, I've never seen anything like it. I won't give away anything vital, but most Americans perceive an underlying theme of racial and ethnic tension. The Chinese, however, appear to view it as a defense of private property rights. The Wall Street Journal reports:

Hollywood blockbusters aren't usually notable for their artistic or political subtlety. And James Cameron's latest sci-fi hit, "Avatar," would seem to be no exception, going by the lament of some critics that the film's impressive special effects are undercut by a skimpy story line and flat dialogue.

That, however, is not how many Chinese see the film, which tells the story of rapacious humans trying to evict the blue-skinned natives of the planet Pandora in order to extract some exceedingly valuable mineral. This is standard politically correct fare for a Western audience, conveying a message of racial sensitivity and environmental awareness. In China, however, it has more rebellious undertones.

That's because Chinese local governments in cahoots with developers have become infamous for forcibly seeking to evict residents from their homes with little compensation and often without their consent. The holdouts are known as "nail households," since their homes are sometimes left stranded in the middle of busy construction sites. More often, however, they are driven away by paid thugs. Private property is one of the most sensitive issues in the country today, and "Avatar" has given the resisters a shot in the arm.

Even in Hong Kong, the "Avatar" banner has been taken up by antigovernment activists trying to defeat a plan to demolish a village to make way for a new high-speed railway line. One mysterious benefactor reportedly donated movie tickets to the villagers to stoke their enthusiasm for protests.

Fascinating. I need to watch that movie again with that perspective in mind.

Hat tip to Prof. Donald Boudreaux at Cafe Hayek.