Cal Thomas (archive)
(printer-friendly version)July 11, 2002
The politicians are coming: lock your portfolios
There's nothing scarier than a politician in heat, especially in an election year. As The Wall Street Journal rightly editorialized Wednesday as Democrats and Republicans pontificated about corporate wrongdoing: "Everything you're hearing now from Washington is aimed at winning the November elections, not calming financial markets."
Democrats believe they've found the issue for which they've been desperately searching to bring down President Bush's high approval ratings. Democrats will haul out their familiar class-warfare weapons when, in fact, many of those who have profited from the surging economy of the past two decades are first-time small investors who are Democrats.
Republicans will try to prove they are not the party of big business (as if there's something wrong with that considering the profits made by wise Democrat and Republican investors). Both parties will attempt to show voters they are doing something when, in fact, doing something, if it is the wrong thing, might be worse than doing nothing at all.
Capitalism is a delicate balancing act, and, like a gyroscope, which guides a large spacecraft (or missile) to a desired target, even the slightest error can throw it off course and bring disastrous results.
In his speech Tuesday (July 9) in New York, President Bush sounded the right themes, stressing the need for more character in business leaders and high standards of business ethics, as well as tougher penalties for those who have neither character nor ethics and violate the law.
The most important approach is to establish the framework for reducing malfeasance before it occurs. Democrats would establish another government regulatory agency that would do more to strangle the capitalistic goose and make it unable to lay as many golden eggs. Republicans support a bill, passed by the House in April with overwhelming bipartisan support, that would create significant reforms, along with those already proposed by the Securities and Exchange Commission, to improve accounting practices and lessen the likelihood that corporate books could be cooked in the future.
An excellent critique of Republican and Democrat proposals to address the current business turmoil has been prepared by David C. John of The Heritage Foundation (www.heritage.org/staff/john.html). John is supportive of the House bill (H.R. 3763) because, "rather than seeking to provide a statutory answer for every problem, it recognizes that this is a job for experts and gives the SEC the authority necessary to prevent future abuses. The bill creates Public Regulatory Organizations (PROs), privately organized entities that would review audits and auditors and take disciplinary action when necessary. Any disciplinary actions would be reported immediately to the SEC. No publicly audited company could submit required financial statements to the SEC unless its accountants are in good standing with a PRO."
In addition to the House bill, the SEC has proposed some good reforms, which include a requirement that CEOs personally vouch for company financial statements. As a major disincentive against book cooking, the SEC wants to forbid corporate officers from being allowed to profit from false financial statements.
The Democrat-controlled Senate, which has its share of Republican and Democrat members with questionable ethical backgrounds, proposes a new federal agency with unlimited powers to regulate accounting firms (Public Accounting Reform and Investor Protection Act-S. 2673).
Attempting to design federal laws that would adequately regulate a rapidly changing economy would produce economic side effects that might prove worse than the disease. In the financial world, one size does not fit all and trying to squeeze all businesses into a single mold would harm business and, thus, the economy. No bill is better than the Senate proposal, but the House measure, coupled with the proposed SEC reforms, would address the current outrages without rendering the economic goose infertile.
The temptation of some greedy CEOs is personal enrichment. But the temptation of many politicians is political survival. The former can be dealt with in the ways mentioned above. But giving politicians free reign to "fix" the excesses of a few, as significant as they are, would send the wrong messages to business and to the nation's investors.
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©2002 Tribune Media Services
Cal Thomas implies that he is against further regulation of Accounting firms without any analysis or argument at all. In fact, his entire piece seems to lack real content. Pathetic.
The way the accounting firms are structured, the financial rewards for cutting corners are simply too great, particularly when GAAP is flawed, and sometimes celebrates form over substance. All of this is about to change however, no matter how much Cal baby dislikes it for reasons he has not deigned to share with us, because that might entail having to put some real thought and work into an article, rather than churning something out that is cut and paste.
That's not true. Mr. Thomas provides the basics and provides links to the actual proposals. He's right, it belongs with an independent group, not the Senate...especially this crooked Senate.
Capitalism is a delicate balancing act, and, like a gyroscope, which guides a large spacecraft (or missile) to a desired target, even the slightest error can throw it off course and bring disastrous results.
Free-market capitalism is virtually indestructible. To bad no location on Earth experiences free-market capitalism. On a line from point A to point Z, near one end of the line is a poverty stricken third world hell-hole represented by B. Proceeding towards Z is the United States market-economy at about H or I.
However, about a hundred-fifty years ago, relative to that time period the United States market-economy was at about U or V. The market-economy at that time, allowed to run it's course would have out-competed slavery and the then recent surge toward a parasitical government and arrived at Z -- a free-market capitalist economy in the late 1880s or early 90s.
Now this, if we were to superimpose today's U.S. market-economy on an 1850 time-period it would be at A or B relative to that time. In other words, government intervention and regulation would have killed the Industrial Revolution in the United States.
Now come back to 2002 and ponder what government intervention and regulation of the past hundred-fifty years has likely thwarted. We just don't know because whatever market values may have grown up never had a chance.
However, we can deduce that many of the technologies that science and business has brought us to date would have occurred much earlier than they did. For example, jet aircraft in the 1920s, man on the Moon in the mid 30s, followed by home computers two to three years later and the Internet a year after that. The information age and communication age would not have been ages, rather, they'd have been technologies advance occurring in the same decade. Should we have long ago had cures for cancer and already be well past the infancy stage of nanotechnology?
Now consider what government intervention brought on. Civil war, the draft, WWI, the Internal Revenue Service and a slew of alphabet agencies, WWII, Racism, a cold war, war on drugs, war on poverty, welfare state and on and on the list goes. None of those are products of a free-market-capitalist economy. All of those are the machinations of politicians and bureaucrats.
Politics is not the answer. Politics is the problem!
Whether it's democrats and republicans fighting an illusion of war which is two sides of the same coin, the lesser of two evils always begets evil. As hard-working Mr. Brown use to jokingly say to us neighborhood kids, "do you want a fat lip or busted eyebrow?"
All other political parties, though not a problem as there is only two sides to a coin, they too are the illusion of choice in a war whose only real casualties are citizens and the prosperity they create via whatever market-economy they have managed to keep at a distance from intervening politicians and bureaucrats. And that is always at risk of soon being invaded by parasitical-politicians and self-serving bureaucrats.
The War of Two Worlds
Value Creators versus Value Destroyers
Politics is not the solution. It's the problem!
Government/bureaucracy cannot survive without business/science. In general, business/science, the individual and family is the host and government/bureaucracy is the parasite.
Yes, keep valid government services that protect individual rights and private property rights -- military defense, FBI, CIA, police and courts. With the rest of government striped away those few valid services would be several fold more efficient and effective than they are today.
Underwriters Laboratory is a private sector business that has to compete in a capitalist market. Underwriters laboratory is a good example of success where government fails.
Any government agency that is a value to the people and society -- which there are but a few -- could better serve the people by being in the private sector where competition demands maximum performance.
Wake up! They are the parasites. We are the host. We don't need them. They need us.