I thought that you might want to know how some of your favorite Hubbard, Wisconsin natives are doing this New Year. Here’s a brief update.

Marcus Harnack has finished his fall semester at Hubbard State University. Thanks to an array of loans, grants and scholarships Marcus was enrolled full-time, majoring in engineering. His grade point after the first semester is 4.00. He has yet to receive a “B” in college. The general education courses such as psychology and English are not as interesting to Marcus, who prefers courses in math and the sciences. Working weekends at the foundry, Marcus has been able to pick up a little extra spending money and has found that college life isn’t bad at all. He doesn’t have as much money to throw around on luxuries, but that’s fine because he spends a great deal of time studying. He has applied for a research assistant position in the Chemistry department for the next school year. The chemistry professor told Marcus that he was a “shoe-in” to get the job, which will pay him an additional $4,200 a year.

Susan Johnson has moved out of her home, leaving her husband Craig to look after the kids. She’s hired an attorney to assist her with the divorce proceedings and he has assured her that she will get permanent custody of her children and will be allowed to move back into the house, regardless of the fact that she committed adultery. Her attorney’s exact words were: “When it’s all said and done, you’ll be back in the house and your Craig will be on the street.” Meanwhile, Susan has moved in with her sister and family, assuring them that her situation is “temporary.” She hasn’t seen or heard from Bill Haley since Craig found out about her indiscretion.

Jose Gonazales phoned Renaldo who was able to use his contacts to bring up additional workers from Mexico to work for Gonzales construction. Their documentation is phony and Jose knows it, but he’s got a big job to finish at the Hubbard Community Hospital and is behind on the construction of some four-unit apartment buildings on the west side of town. The illegal Mexican workers are a breath of fresh air. They work from early morning till evening, never complaining and eager to learn the new skills that Jose’s foremen are teaching them. A couple of weeks ago immigration authorities raided a pork processing plant just a few miles up the road, arresting over 100 illegals. Between worrying about being caught hiring the new (illegal) workers and not finishing his projects on time, Jose isn’t sleeping well at night. Lovely Angela, seeing him struggle, strokes his salt and pepper hair as he lays on his pillow saying, “It’s OK, baby. Everything will come out all right. God didn’t bring us this far to let us down now.”

Bill and Betty Harnack will have Christmas dinner as usual on Monday with their two sons. Their youngest son, Timmy, is now in middle school and is always thrilled to see his big brother Marcus. Timmy is a little perturbed with his father, who promised to take Timmy to the next packer game with he and Marcus. The problem is that Bill and Marcus didn’t make their annual trip to Lambeau field this year. Coupled with Marcus’ busy schedule and the fact that, as Timmy states it, “The Packers just suck!” the Harnacks decided to save their precious ticket money for another year.

Unity Wilson is in Minnesota for Christmas visiting her sister, Serenity. Both Unity and Serenity are thrilled that George Bush and the republicans lost to the democrats in the fall elections. Unity and Serenity are unified in their wishes for an immediate US withdrawal from Iraq, direct negotiations with both North Korea’s Kim Jung Il and Iranian President Mahmoud Ahmadinejad, a 100% increase on the income tax of all Americans making more than $100,000 per year, complete free and universal health care for all Americans, free tuition and fees for all students attending college, the immediate shut-down of all coal-burning power plants, and the assurance that the word “God” will be stricken from all currency and government buildings in the United States. It is also rumored that both Unity and Serenity have contributed funds to make sure that Osama Bin Laden can have a kidney transplant as soon as possible. According to Serenity, “Osama isn’t a terrorist; he’s just a freedom-fighter.” Unity has told Serenity that she should get a hybrid car to help the environment but Serenity can’t afford it on her wages at the Natural Foods Coop.

Sachin and Smita have gone to Chicago’s “little India” near Western Avenue and Devon Street to visit Smita’s father, Mukesh. Even though Christmas is not a Hindu holiday, it is an official holiday in both the United States and India so they have decided to spend it with family. Rumor has it that Smita has some very good news for her father! Likewise, Mayor Marsha Lipper-Daley has gone back to the windy city for a few days to visit her Mother and Father. Rumor has it that Marsha’s father had a good year in the investment banking business, with some of his employees receiving bonuses in six figures. He usually puts a new Lexus and about $250,000 in Marsha’s Christmas stocking each year, but having such a fantastic 2006, Marsha is hoping that Pops might even “add a zero” to her normal Christmas windfall.

Dave has been missing for quite a while. Some say he has gone to China for a couple of months. Others say he is in Thailand or Singapore. Still others swear that he has a girlfriend in Polynesia. The only thing folks know for sure is that Dave left a note on the garage in his distinct handwriting saying that he would be back to fire up the old pot-belly stove for his evening political round table on Tuesday, January 9th, 2007.

Tomorrow December 25th is the day that Christians celebrate the birth of their Lord and Savior, Jesus Christ. There are 2.1 billion Christians on the earth representing 33% of the world’s population. Christianity is followed by Islam (21% - 1.3 billion), Hindu (14% - 900 million), Chinese Traditional Confucianists (6 % - 394 million) and Buddhists 6% - 376 million). Ironically there are only 14 million Jews in the world, representing only .22% of the world’s population. Jesus was, after all, a Jew.

I’ve had the pleasure of meeting Christians, Hindus, Muslims, Confucianists, Buddhists, Sikhs, Jains, and Jews. While the deitys and worship protocol differ widely, practitioners of the world’s religions agree more than they disagree. Whether you are in Racine, Wisconsin, Bombay, India or Beirut, Lebanon there is a widely held acceptance that mankind holds an allegiance to a higher force. Corresponding to that belief is the responsibility to treat other human beings in a just and moral manner. Religion is literally a two-edged sword. It is a powerful, yet volatile force which can unite mankind in love or doom us all by fanning the flames of hatred.

Religion is the product of faith, as no one has yet succeeded in using the scientific method to prove the existence of God. Christians, in particular, accept Jesus Christ not simply as a prophet, but as God himself. To my knowledge, the deity of Jesus differentiates Christianity from all other word religions. In 1984 Mark Lowry was asked to write a little song as a meditation for a Christmas program at a church in Nashville. The song, “Mary, Did You Know?” has become a modern classic recorded by more than 30 different artists. For my Christian friends I print the lyrics of Lowry’s song below. Merry Christmas!

Mary, did you know that your baby boy
would one day walk on water?
Mary, did you know that your baby boy
would save our sons and daughters?

Did you know that your baby boy
has come to make you new;
the child that you delivered
will soon deliver you?

Mary, did you know that your baby boy
will give sight to a blind man?
Mary, did you know that your baby boy
will calm the storm with His hand?

Did you know that your baby boy
has walked where angels trod?
When you kiss your little baby,
you kiss the face of God!
Oh Mary did you know?

The blind will see, the deaf will hear
the dead will live again.
The lame will leap, the dumb will speak
the praises of the Lamb.

Mary, did you know that your baby boy
is Lord of all creation?
Mary, did you know that your baby boy
will one day rule the nations?

Mary, did you know that your baby boy
is Heaven’s perfect Lamb?
The sleeping child you’re holding
is the great I Am!

We economists lead frustrating lives, largely because the obvious conclusions of our work are so difficult to implement politically.  One of the universal conclusions of all economists is that when goods are “free” (priced at $0), consistent shortages will occur.  After all, nearly everyone will want a product or service when it is free, but little or nothing will be supplied at such a low price.  Low prices lead to shortages, not only with private goods like Sony X-Boxes, but also with public goods like highways and clean water.

Simply using price to allocate resources could solve some of the world’s most pressing social problems.  Refusal to use price has lead to a lot of unnecessary cost and misery for millions of people.  Examples where prices could change the world for the better include traffic congestion, organ donation, clean water, and adoption vs. abortion.

Traffic Congestion:  The Minnesota Department of Transportation has developed a MN Pass program on I-394, which runs from the western suburbs into downtown Minneapolis.  Car owners may purchase a transponder that mounts to the windshield.  Holders of the MN Pass transponders may travel in special express lanes, paying between 25 cents and $8 for a one-way commute into the city.  Those who want to travel into the city at peak rush-hour periods can shave 30 minutes off of their commute with the MN Pass.  Sensors in the pavement monitor the amount of traffic and the toll is adjusted accordingly.  As the traffic rises, so does the toll.  Drivers need not stop to pay tolls, as the transponders within the car allow the state to debit the credit card of the MN Pass holder.  Those who do not want to pay the toll may stay in the “free” lanes and go much slower.

Since the inception of the MN Pass program, more than 1,200 vehicles move at an average speed of 55 miles per hour through the express lanes during rush hours.  Because those 1,200 vehicles are in the express lanes, speeds in the free lanes have increased from 2 to 8 percent.  The daily $4,400 in toll fee revenues has allowed the express lanes to meet operating expenses.  The economic lesson:  price highway usage above zero and you will avoid congestion!

Organ Donation.  Thousands of Americans wait for life-sustaining organs, particularly kidneys.  It is illegal to sell kidneys in the United States, making their supply dependent upon organ donors.  Thousands of Americans die every year because they cannot get one of these “free” kidneys.  This doesn’t surprise economists.  After all, at a “price” of zero very few kidneys will be donated.  No kidney donation and someone dies; it’s that simple.  Kidneys need to be priced.  Hospitals should be certified to pay donors, say $10,000-$20,000 for a good kidney.  The kidney would have to be removed at a certified U.S. hospital where transplants take place.  A well-documented interview process with the prospective donor and his/her family would be required before any kidney could be harvested.  This would thwart possibilities of involuntary donated kidneys and organs shipped in from abroad.
If such a program were introduced, there would be plenty of kidneys.  Because people need only one kidney to survive, the monetary incentive to donate an organ would dramatically increase the supply of kidneys and save thousands of lives every year.  Other than the pure emotional argument that “it is immoral to sell body parts”, there is absolutely no reason this plan can’t be implemented.  It is particularly frustrating to economists that thousands of people die each year for the lack of a “price” on kidneys.

Clean Water:  In less developed countries clean water is of paramount importance.  It is estimated that it takes about $10 a month to supply a family with clean water.  We “price” our water in the United States and as a result have a continual supply of clean water.  Often in poor countries, even when wells and filtration systems are in place, the water is priced at zero.  As a result the wells are overused, the filter supply is exhausted and the water system breaks down.  Attaching even a negligible price on the water rations its use and ensures that the infrastructure continues to operate.  The lesson repeats itself; even water shouldn’t be completely free.

Adoption vs. Abortion.  Most Americans prefer adoption to abortion whenever possible, yet many single females choose to keep their babies rather than release them for adoption by families that desperately want them.  The birth mother is expected to “gift” the baby to the receiving family.  In other words, the price of adoptable babies is zero.  Here we go again!  The zero price causes a shortage of adoptable babies.  What if adoption agencies could offer, say $25,000 for a healthy baby?  The money would make it much easier for single moms to make their babies ready for adoption.  If controlled and regulated by certified adoption agencies, future parents could even meet the birth mother in advance, paying for her pre-natal care and hospital expenses, as well as the payment for the child.  Of course, ironclad adoption agreements would have to be enforced in the courts.   Counselors would be required to meet with birth moms to ensure that they were making informed, rational decisions.   The results of infant “pricing” would be fewer children raised in poverty and single birth moms with much brighter emotional and financial futures.

The above examples aren’t just some “organ selling, baby merchant” economist’s fantasy.  They represent a legitimate and long-overdue pricing solution to some very important, even life-threatening problems.  Why are economists so misunderstood?  Why can’t the politicians listen to us?  Let’s try pricing!  Take it from an economist; the world would be a much better place!

In last week’s blog I stated, “The United States will begin substantial troop reductions from Iraq by the end of 2007 with virtually none of our objectives having been met in that country.”  I wrote those words with extreme reluctance because I believe that our entry into Iraq was done with noble intentions.  Indeed, a free, democratic, secular, and secure Iraq would have done a lot to improve the future of the Middle East.  In defense of President Bush, who had to deal with conditions of uncertainty, it’s easy for a guy like me to be a Monday morning quarterback and analyze what went wrong over the past four years.  Nevertheless, I’m going to conduct that painful analysis.

Why did President Bush’s dream for a secular, democratic Iraq fail?  The failure occurred for three reasons; (1) the invasion and occupation of the country was poorly conceived and administered, (2) we could not or would not provide the necessary security in Iraq and (3) the citizens of Iraq are not yet ready to unify and put away violence in their society.

First, the United States went to war “on the cheap” and without the political will or an adequate understanding of what would be necessary to succeed in Iraq.  As Iraq’s insurgents and militias ran amok, took hostages and decapitated anyone that disagreed with them, we played by “civilized” rules of conduct, sparing civilian casualties and catering to the comfort of prisoners.  To succeed in a madhouse like Iraq we needed to go in with vastly more soldiers and resources.  From the first day of our presence we needed to shoot on sight anyone who carried a weapon, to demand all weapons be turned over to American authorities and to kill all males of any household that possessed weapons.   Anyone who destroyed infrastructure or interfered with private contractors should have been shot on sight.  As Saddam Hussein had figured out years earlier, brute force was the only way to temporarily quell the violent tendencies of Iraq’s religious zealots bent on civil war.

Second, because we never succeeded in establishing any form of law and order or security in Iraq, our “liberator” title soon changed to that of “occupier.”  In Iraq our soldiers were not unlike those of the British army in 1775, marching in solid formation down a road near Concord Massachusetts.  Like the American Revolutionary Army, which violated the rules of warfare by shooting the British from hidden spots in the woods, the “insurgents” in Iraq built roadside bombs and snuck up behind us firing rocket-propelled grenades.  No matter what happened in Iraq, in the minds of the Iraqis it was our fault.  We were now the perceived reason for all of their problems.  We were the enemy.  We re-learned an unfortunate but well-established history lesson, that the occupation of a country, particularly one whose citizens do not appreciate your presence, is almost always a losing battle.

Finally, the most poignant reason that a free, democratic, secular Iraq is not possible is that the Iraqi people are ready for neither democracy nor peace.  They have to get a civil war off their chest first.  Sometimes a country needs a good civil war.  We needed one in 1860 and the Iraqis need one now.  The notion that the United States needs to “train Iraqi security forces” is a joke.  They already know how to shoot each other.  As New York Times columnist Tom Friedman says, we need to leave Iraq and make the Iraqi’s “pay retail” for their civil war.  As long as the United States is present, they can fight their sectarian war “wholesale”.

Right now America has no diplomatic or military leverage in Iraq.  Surrounding Arab nations enjoy our suffering, unwilling to lift a hand to help us.  Iran, smug in the fact that we are bogged down in Iraq, has unabashedly gone ahead with its nuclear weapons program and has called for the extermination of Israel.  Even Syria has become emboldened.  Ironically, our leverage in the region will increase only when we depart from Iraq.  Then the Iranian backed Shiite’s can fight the Syrian backed Sunis in the long-awaited Muslim civil war, allowing fundamentalist Islamists to kill each other until they get their fill of violence and bloodshed.  The nations that now gleefully enjoy our misery won’t have the United States to kick around anymore.  They will either be drawn into the fighting or will have to spend the necessary diplomatic capital to solve their own problems in the Middle East.

From an American point of view, the real tragedy of the Iraq conflict is that we have to date lost the lives of nearly three thousand of our precious, enthusiastic, educated young people who have entered this war with the best of intentions and have served above and beyond the call of duty.  These young people accepted the idealism and goal of their leader and commanding officer, George Bush, to assist the Iraqi people in establishing a brighter future.  There’s plenty of blame to go around for Iraq debacle, but one thing is certain, NONE of that blame can assigned to the brave and dedicated people of our military forces.

Individually, as we progress through life, we make mistakes that cost us time and money.  We must pay for our mistakes.  Countries do the same thing, but the cost of mistakes is far greater because it involves the loss of lives.  Our intentions in Iraq were good and our desire for a prosperous, peaceful, democratic Middle East is justified.  It just isn’t going to happen now, no matter how long we stay in Iraq.

I don’t think we need to couch our departure from Iraq in terms of “victory” or “failure”.  All we need to do is to say to the world, “We tried to foster the necessary changes for a peaceful and democratic Iraq.  We were rebuffed by those whom we thought would help us and we vastly overestimated the resolve of the Iraqi people to disavow violence and take charge of their own country and security.  We gave it our best shot.  Unfortunately our mission in Iraq cost us a lot of money and the lives of thousands of the finest young people the world will ever know.  Our prosperous economy will quickly dissolve our “treasure” losses in Iraq, but we will never forget our young people who have given their lives in this cause.  Like their President, they were idealists who volunteered to make Iraq a better place.  Now we have come to the sad realization that the best way we can honor them is to leave and let the Iraqis solve their own problems.”

Regrettably, kicking and screaming, I’ve come to the conclusion that we won’t succeed in Iraq.  It’s time to leave, as soon as logistically possible.  We owe the Iraqi’s nothing for they’ve squandered the democratic inheritance that we tried to provide.  The Iraqi’s are human beings, yes, but right now at this time in history, they’re not worth saving.

As we leave 2006 bound for a new year, I’m going out on a limb to make some predictions about the future.  I don’t exactly have great credentials to make this forecast, but probably won’t do any worse than the pundits.  I want to warn readers in advance that my last prediction is sobering.  I hope it is avoidable, but unfortunately I believe that it will happen.  Buckle your seatbelts….here we go!

Barak Obama, the junior Senator from Illinois, will be elected President of the United States in 2008.  Born in Hawaii in 1961, the son of a white mother and a black father, Obama graduated from Columbia University in 1983 and received a law degree from Harvard in 1991.  A well-grounded family man, Obama lives with his wife, Michelle and his two daughters, Malia, 8, and Sasha, 5, on Chicago’s South Side, where they attend Trinity United Church of Christ.

Obama, like most Democrats, advocates a larger role for government than is necessary or prudent.  In his latest book, The Audacity of Hope, Obama asserts that every American who wants to work should be guaranteed a “living wage”.  This is poppycock, of course, for it begs the larger question, “Who is obligated to provide that living wage?”  Are business owners obligated to sacrifice profits for wages?  Is the government going to provide those jobs?  If so, where is the money going to come from?  Obama also rejects educational vouchers as a solution to what I believe is our most pathetic national tragedy, the failure of our public schools.  He thinks that public schools can be fixed with more money and the cooperation of teachers unions.  The record of the past thirty years clearly shows that increased additional funding has not helped public schools and anyone who believes that teachers unions will be even slightly cooperative hasn’t been around those folks for very long.  Nevertheless, Obama isn’t completely stupid on economics.  He recognizes the benefits of free trade to American consumers and generally appreciates free enterprise.  Unlike most Democrats, he is open-minded on economic issues, which is encouraging.

Despite Obama’s lack of tenure and experience in Washington, Presidents are elected on the basis of image and charisma and Obama is incredibly rich in both.  Not since John Kennedy has this country seen a politician as infectious and riveting as Obama.  An excellent orator as demonstrated by his keynote address at the 2004 democratic national convention, if Obama chooses to run for President, Hillary Clinton doesn’t have a chance of getting the Democratic Party nomination.  Obama can muster more charm in thirty seconds than Hillary can display in an entire evening.  In an open forum debate with Obama, Hillary Clinton would be cannon fodder.  The Democrats would be stupid to nominate anyone other than Obama and they aren’t going to be stupid this time around.  I predict that once Obama has secured the Democratic nomination and his campaign gets up to full steam, there isn’t a Republican on earth that can beat him in 2008.

The United States will begin substantial troop reductions from Iraq by the end of 2007 with virtually none of our objectives having been met in that country.  While our withdrawal will be couched in victorious terms, when it is all said and done Iraq will be neither democratic nor free as a result of our presence there.  It will be controlled by a Mullah, the Iranians, Syrians, or by some other strongman, but the situation there will not be measurably improved.  For terrorists Iraq will again be as fertile of a training ground as any other country in the Middle East.  Our departure from Iraq will free up Al Qaeda’s men and resources, allowing them to accelerate their program of domestic terrorism within the United States.  History will show that from 2002 through 2006 the United States and its people did not yet have the political will to do what was necessary to secure our objectives in Iraq or to fight radical Islam.

Another terrorist attack, even more devastating than the destruction of the World Trade Towers, will occur in the United States before 2016.  This attack will be the one that finally awakens and unifies both the American public and the entire civilized world.  There will be no more coddling of radical Islamists, no more debate about the rights of prisoners and detainees, and no more complaints about the methods used to capture and kill terrorists.  Even the French, Russians and Chinese will join the battle as the gloves will come off and the clash between rational human beings and radical Islam will be officially underway.   Once reasonably civilized human beings actually realize that their indifference to radical Islam is a direct threat to their way of life, the unification of international resources and purposes will eventually be enough to defeat radical Islamists and their institutions.  This will be a long, drawn-out struggle, but those who value freedom, educated discourse, and the sanctity of human life will eventually prevail.

That’s it for now.  Let’s see how these predictions play out.  I plan to be around for the next ten years and will periodically review the accuracy of these predictions.  Meanwhile, keep your chin up, continue to work hard, re-invent yourself, innovate, love and prosper!   This is a good and great life.  Live it to the fullest!