WV Capitol Comments - Delegate Roger Hanshaw - 02.02.15

The Gilmer Free Press

For years, West Virginia has been considered by leaders in the business community as a less-than-desirable place to locate a business.  This year’s session of the West Virginia Legislature has been focused so far on taking the steps necessary to change that perception.  So many of the problems we face in the rural counties of central West Virginia could be improved with a more diverse economy and a stronger job market, and our challenge is doing what it takes to make that environment develop. 

The first few weeks of this year’s session saw several bills aimed at changing the legal climate in West Virginia.  Some of these measures include protecting landowners against lawsuits for open and obvious conditions on their property, and making defendants in a lawsuit liable for only the injuries they actually cause rather than all of a plaintiff’s injuries when there are multiple defendants.  It is important for small business owners and workers in West Virginia, and those elsewhere who might be looking to locate to West Virginia, to have certainty in our legal climate, and these steps move us closer to that goal.
Among the most significant proposals advancing through the legislature this year is a proposal to make West Virginia’s judiciary completely nonpartisan.  If adopted by both houses before the end of the session in March, this proposal would mean that all the magistrates, family court judges, circuit judges, and supreme court justices in West Virginia would run next year in a nonpartisan election.  All parties in a lawsuit must feel like they can get a fair hearing in West Virginia’s courts, and if nonpartisan judicial elections can help the parties have greater confidence in our courts, then this is a necessary step.

No matter how attractive we make West Virginia to those beyond our borders, improving our economy and creating new opportunity across our state is the job of every West Virginian, and that work starts by helping local people create and grow small businesses in the local communities of our state.  I have heard from many of the county officials across our District over the past several weeks, and it is clear that much needs to be done to make sure our counties remain strong and able to handle local problems with local solutions.  For the counties in our District, Calhoun, Clay, and Gilmer Counties, the regional jail bills continue to be a tremendous weight around the necks of our county governments.  County commissioners, prosecutors, circuit judges, and interested citizens from our District have offered a number of creative solutions for dealing with our jail bills and reducing the amounts that counties must pay.  In the coming weeks I plan on meeting with more people to explore which of these proposals might make sense for our counties and determine what steps we must take to make them happen.  I would welcome your input.

We will soon be nearing the half-way mark for the 2015 legislative session, and there is still much work to be done.  Making our communities attractive places for men and women to start and grow a small business will take a team effort.  A key priority for all of us must be protecting the local businesses we currently have, and using their success to launch other enterprises in the small towns of rural West Virginia.  Sometimes this will require state action, and where it does, the legislature must act where needed to make sure the men and women who own and operate small businesses in our communities remain able to do so.  In other cases, the future of small businesses in our communities will be determined by our own willingness to buy from local retailers and seek out the services of local service providers.  I am a great advocate for small businesses and the men and women who run them, and if you have thoughts about how we can make these businesses more prosperous and successful, I hope you will share them. 

The doors of the State Capitol are open to every citizen of our State, and I would be delighted to have you visit during this year’s legislative session.  If you find yourself in Charleston, please feel free to stop by.  Sharing your thoughts and ideas is an important part of making sure the concerns of our District are heard.  I hope you will take that opportunity.  I can be reached in Room 229E at the State Capitol, or at 304.340-.3135 or at .  I look forward to seeing you when you visit our Capitol.

Have a great week.


Ron Paul: ‘Two Percent Inflation’ and The Fed’s Current Mandate

The Gilmer Free Press

Over the last 100 years the Fed has had many mandates and policy changes in its pursuit of becoming the chief central economic planner for the United States. Not only has it pursued this utopian dream of planning the US economy and financing every boondoggle conceivable in the welfare/warfare state, it has become the manipulator of the premier world reserve currency.

As Fed Chairman Ben Bernanke explained to me, the once profoundly successful world currency – gold – was no longer money. This meant that he believed, and the world has accepted, the fiat dollar as the most important currency of the world, and the US has the privilege and responsibility for managing it. He might even believe, along with his Fed colleagues, both past and present, that the fiat dollar will replace gold for millennia to come. I remain unconvinced.

At its inception the Fed got its marching orders: to become the ultimate lender of last resort to banks and business interests. And to do that it needed an “elastic” currency.  The supporters of the new central bank in 1913 were well aware that commodity money did not “stretch” enough to satisfy the politician’s appetite for welfare and war spending. A printing press and computer, along with the removal of the gold standard, would eventually provide the tools for a worldwide fiat currency. We’ve been there since 1971 and the results are not good.

Many modifications of policy mandates occurred between 1913 and 1971, and the Fed continues today in a desperate effort to prevent the total unwinding and collapse of a monetary system built on sand. A storm is brewing and when it hits, it will reveal the fragility of the entire world financial system.

The Fed and its friends in the financial industry are frantically hoping their next mandate or strategy for managing the system will continue to bail them out of each new crisis.

The seeds were sown with the passage of the Federal Reserve Act in December 1913. The lender of last resort would target special beneficiaries with its ability to create unlimited credit. It was granted power to channel credit in a special way. Average citizens, struggling with a mortgage or a small business about to go under, were not the Fed’s concern. Commercial, agricultural, and industrial paper was to be bought when the Fed’s friends were in trouble and the economy needed to be propped up. At its inception the Fed was given no permission to buy speculative financial debt or U.S. Treasury debt.

It didn’t take long for Congress to amend the Federal Reserve Act to allow the purchase of US debt to finance World War I and subsequently all the many wars to follow. These changes eventually led to trillions of dollars being used in the current crisis to bail out banks and mortgage companies in over their heads with derivative speculations and worthless mortgage-backed securities.

It took a while to go from a gold standard in 1913 to the unbelievable paper bailouts that occurred during the crash of 2008 and 2009.

In 1979 the dual mandate was proposed by Congress to solve the problem of high inflation and high unemployment, which defied the conventional wisdom of the Phillips curve that supported the idea that inflation could be a trade-off for decreasing unemployment. The stagflation of the 1970s was an eye-opener for all the establishment and government economists. None of them had anticipated the serious financial and banking problems in the 1970s that concluded with very high interest rates.

That’s when the Congress instructed the Fed to follow a “dual mandate” to achieve, through monetary manipulation, a policy of “stable prices” and “maximum employment.” The goal was to have Congress wave a wand and presto the problem would be solved, without the Fed giving up power to create money out of thin air that allows it to guarantee a bailout for its Wall Street friends and the financial markets when needed.

The dual mandate was really a triple mandate. The Fed was also instructed to maintain “moderate long-term interest rates.” “Moderate” was not defined. I now have personally witnessed nominal interest rates as high as 21% and rates below 1%. Real interest rates today are actually below zero.

The dual, or the triple mandate, has only compounded the problems we face today. Temporary relief was achieved in the 1980s and confidence in the dollar was restored after Volcker raised interest rates up to 21%, but structural problems remained.

Nevertheless, the stock market crashed in 1987 and the Fed needed more help. President Reagan’s Executive Order 12631 created the President’s Working Group on Financial Markets, also known as the Plunge Protection Team. This Executive Order gave more power to the Federal Reserve, Treasury, Commodity Futures Trading Commission, and the Securities and Exchange Commission to come to the rescue of Wall Street if market declines got out of hand. Though their friends on Wall Street were bailed out in the 2000 and 2008 panics, this new power obviously did not create a sound economy. Secrecy was of the utmost importance to prevent the public from seeing just how this “mandate” operated and exactly who was benefiting.

Since 2008 real economic growth has not returned. From the viewpoint of the central economic planners, wages aren’t going up fast enough, which is like saying the currency is not being debased rapidly enough. That’s the same explanation they give for prices not rising fast enough as measured by the government-rigged Consumer Price Index. In essence it seems like they believe that making the cost of living go up for average people is a solution to the economic crisis. Rather bizarre!

The obsession now is to get price inflation up to at least a 2% level per year. The assumption is that if the Fed can get prices to rise, the economy will rebound. This too is monetary policy nonsense.

If the result of a congressional mandate placed on the Fed for moderate and stable interest rates results in interest rates ranging from 0% to 21%, then believing the Fed can achieve a healthy economy by getting consumer prices to increase by 2% per year is a pie-in-the-sky dream. Money managers CAN’T do it and if they could it would achieve nothing except compounding the errors that have been driving monetary policy for a hundred years.

A mandate for 2% price inflation is not only a goal for the central planners in the United States but for most central bankers worldwide.

It’s interesting to note that the idea of a 2% inflation rate was conceived 25 years ago in New Zealand to curtail double-digit price inflation. The claim was made that since conditions improved in New Zealand after they lowered their inflation rate to 2% that there was something magical about it. And from this they assumed that anything lower than 2% must be a detriment and the inflation rate must be raised. Of course, the only tool central bankers have to achieve this rate is to print money and hope it flows in the direction of raising the particular prices that the Fed wants to raise.

One problem is that although newly created money by central banks does inflate prices, the central planners can’t control which prices will increase or when it will happen. Instead of consumer prices rising, the price inflation may go into other areas, as determined by millions of individuals making their own choices. Today we can find very high prices for stocks, bonds, educational costs, medical care and food, yet the CPI stays under 2%.

The CPI, though the Fed currently wants it to be even higher, is misreported on the low side. The Fed’s real goal is to make sure there is no opposition to the money printing press they need to run at full speed to keep the financial markets afloat. This is for the purpose of propping up in particular stock prices, debt derivatives, and bonds in order to take care of their friends on Wall Street.

This “mandate” that the Fed follows, unlike others, is of their own creation. No questions are asked by the legislators, who are always in need of monetary inflation to paper over the debt run up by welfare/warfare spending. There will be a day when the obsession with the goal of zero interest rates and 2% price inflation will be laughed at by future economic historians. It will be seen as just as silly as John Law’s inflationary scheme in the 18th century for perpetual wealth for France by creating the Mississippi bubble – which ended in disaster. After a mere two years, 1719 to 1720, of runaway inflation Law was forced to leave France in disgrace. The current scenario will not be precisely the same as with this giant bubble but the consequences will very likely be much greater than that which occurred with the bursting of the Mississippi bubble.

The fiat dollar standard is worldwide and nothing similar to this has ever existed before. The Fed and all the world central banks now endorse the monetary principles that motivated John Law in his goal of a new paradigm for French prosperity. His thesis was simple: first increase paper notes in order to increase the money supply in circulation. This he claimed would revitalize the finances of the French government and the French economy. His theory was no more complicated than that.

This is exactly what the Federal Reserve has been attempting to do for the past six years. It has created $4 trillion of new money, and used it to buy government Treasury bills and $1.7 trillion of worthless home mortgages. Real growth and a high standard of living for a large majority of Americans have not occurred, whereas the Wall Street elite have done quite well. This has resulted in aggravating the persistent class warfare that has been going on for quite some time.

The Fed has failed at following its many mandates, whether legislatively directed or spontaneously decided upon by the Fed itself – like the 2% price inflation rate. But in addition, to compound the mischief caused by distorting the much-needed market rate of interest, the Fed is much more involved than just running the printing presses. It regulates and manages the inflation tax. The Fed was the chief architect of the bailouts in 2008. It facilitates the accumulation of government debt, whether it’s to finance wars or the welfare transfer programs directed at both rich and poor. The Fed provides a backstop for the speculative derivatives dealings of the banks considered too big to fail. Together with the FDIC’s insurance for bank accounts, these programs generate a huge moral hazard while the Fed obfuscates monetary and economic reality.

The Federal Reserve reports that it has over 300 PhD’s on its payroll. There are hundreds more in the Federal Reserve’s District Banks and many more associated scholars under contract at many universities. The exact cost to get all this wonderful advice is unknown. The Federal Reserve on its website assures the American public that these economists “represent an exceptional diverse range of interest in specific area of expertise.” Of course this is with the exception that gold is of no interest to them in their hundreds and thousands of papers written for the Fed.

This academic effort by subsidized learned professors ensures that our college graduates are well-indoctrinated in the ways of inflation and economic planning. As a consequence too, essentially all members of Congress have learned these same lessons.

Fed policy is a hodgepodge of monetary mismanagement and economic interference in the marketplace. Sadly, little effort is being made to seriously consider real monetary reform, which is what we need. That will only come after a major currency crisis.

I have quite frequently made the point about the error of central banks assuming that they know exactly what interest rates best serve the economy and at what rate price inflation should be. Currently the obsession with a 2% increase in the CPI per year and a zero rate of interest is rather silly.

In spite of all the mandates, flip-flopping on policy, and irrational regulatory exuberance, there’s an overwhelming fear that is shared by all central bankers, on which they dwell day and night. That is the dreaded possibility of DEFLATION.

A major problem is that of defining the terms commonly used. It’s hard to explain a policy dealing with deflation when Keynesians claim a falling average price level – something hard to measure – is deflation, when the Austrian free-market school describes deflation as a decrease in the money supply.

The hysterical fear of deflation is because deflation is equated with the 1930s Great Depression and all central banks now are doing everything conceivable to prevent that from happening again through massive monetary inflation. Though the money supply is rapidly rising and some prices like oil are falling, we are NOT experiencing deflation.

Under today’s conditions, fighting the deflation phantom only prevents the needed correction and liquidation from decades of an inflationary/mal-investment bubble economy.

It is true that even though there is lots of monetary inflation being generated, much of it is not going where the planners would like it to go. Economic growth is stagnant and lots of bubbles are being formed, like in stocks, student debt, oil drilling, and others. Our economic planners don’t realize it but they are having trouble with centrally controlling individual “human action.”

Real economic growth is being hindered by a rational and justified loss of confidence in planning business expansions. This is a consequence of the chaos caused by the Fed’s encouragement of over-taxation, excessive regulations, and diverting wealth away from domestic investments and instead using it in wealth-consuming and dangerous unnecessary wars overseas. Without the Fed monetizing debt, these excesses would not occur.

Lessons yet to be learned:

1. Increasing money and credit by the Fed is not the same as increasing wealth. It in fact does the opposite.

2. More government spending is not equivalent to increasing wealth.

3. Liquidation of debt and correction in wages, salaries, and consumer prices is not the monster that many fear.

4. Corrections, allowed to run their course, are beneficial and should not be prolonged by bailouts with massive monetary inflation.

5. The people spending their own money is far superior to the government spending it for them.

6. Propping up stock and bond prices, the current Fed goal, is not a road to economic recovery.

7. Though bailouts help the insiders and the elite 1%, they hinder the economic recovery.

8. Production and savings should be the source of capital needed for economic growth.

9. Monetary expansion can never substitute for savings but guarantees mal–investment.

10. Market rates of interest are required to provide for the economic calculation necessary for growth and reversing an economic downturn.

11. Wars provide no solution to a recession/depression. Wars only make a country poorer while war profiteers benefit.

12. Bits of paper with ink on them or computer entries are not money – gold is.

13. Higher consumer prices per se have nothing to do with a healthy economy.

14. Lower consumer prices should be expected in a healthy economy as we experienced with computers, TVs, and cell phones.
All this effort by thousands of planners in the Federal Reserve, Congress, and the bureaucracy to achieve a stable financial system and healthy economic growth has failed.

It must be the case that it has all been misdirected. And just maybe a free market and a limited government philosophy are the answers for sorting it all out without the economic planners setting interest and CPI rate increases.

A simpler solution to achieving a healthy economy would be to concentrate on providing a “SOUND DOLLAR” as the Founders of the country suggested. A gold dollar will always outperform a paper dollar in duration and economic performance while holding government growth in check. This is the only monetary system that protects liberty while enhancing the opportunity for peace and prosperity.

HigherEd: Politics of the 529 Plan

The Gilmer Free Press

President Obama’s backpedaling this week on a provision in his tax plan that would have gutted benefits for college-savings plans highlights the challenges facing advocates for low-income students who want to overhaul higher education tax breaks.

The collapse of the White House’s 529 savings account proposal, just days after it was announced, suggests that simplifying and retooling college tax breaks so they benefit more low-income families—and fewer wealthier ones—is an idea that enjoys third-rail status in Washington.

Obama administration officials had argued that their plan, to eliminate the tax exemption for withdrawals from 529 savings plans, would have ended a tax break that was ineffective and not well targeted. They said that 70% of the tax benefits went to households with incomes over $200,000.

A 2012 Government Accountability Office study found that roughly half of families with 529 and similar plans had incomes above $150,000; the other half of families with the accounts earned less than that.

The 529 plan changes would have raised revenue for the government by a relatively small amount: about $1 billion over 10 years, Jason Furman, chairman of the White House Council of Economic Advisers, told Bloomberg last week. And only 3% of families currently use 529 plans or similar accounts.

The political backlash, though, was swift. Many Congressional Republicans and fiscal conservatives, predictably, came out swinging against the 529 plan changes. They criticized the administration for trying to hike taxes on families saving for college.

But the White House was forced to drop the plan on Tuesday after catching heat from its own party. House Democratic leader Nancy Pelosi, according to press reports, personally lobbied administration officials aboard Air Force One to drop the 529 tax proposal. 

Even though the provision was to be just one small part of an Obama budget proposal that stands virtually no chance of becoming law, Congressional Democrats were apparently unwilling to be remotely associated with scaling back college tax breaks for some families.

The episode underscores the political will behind existing college tax breaks, which many researchers and policy experts have said need to be overhauled.

“The politics are a lot of rich people really like these things for their kids and grandchildren, and they use it as an estate planning mechanism,” said Sandy Baum, a professor of higher education at George Washington University and senior fellow at the Urban Institute. “The political constituency for them is strong.“

It’s a recurring dynamic, too, Baum said.

For instance, as the number of Pell Grant recipients swelled during the recession, many policy makers were eying benefit cuts to keep the program afloat. The increase in education tax credits was also large, she said, but hardly anyone was talking about scaling that program back.

Advocates for low-income students say the money spent on tax breaks would be far better used to boost aid for students with higher financial need.

Kim Cook, the executive director of the National College Access Network, said she’s concerned that some existing tax breaks are largely helping students who would already go to college without needing aid. “Some of these tax benefits are extremely popular and will be difficult to dismantle,” she said. “We see those as lost opportunities to target aid to those students who need it most.”

Still, some of the other higher education tax changes in the Obama proposal do have bipartisan support.

Among those provisions are making permanent the American Opportunity Tax Credit and making it more refundable so that more low-income families who do not owe taxes can benefit.

David Socolow is director of the Center for Postsecondary and Economic Success at CLASP, which advocates for low-income students and has pushed for changes within existing higher education tax credits so that they are more targeted to low-income students.

“Congress is likely to continue to deliver student aid in the form of grants, in the form of loans, and in the form of tax benefits,” he said. “Our goal is to make the tax benefits program better, and having them be both refundable and advanceable is a major priority.” 

~~  Michael Stratford ~~

The McKinley Capitol Report: 01.30.15

The Gilmer Free Press

Restoring Postal Service Standards

On July 01, 2012 the United States Postal Service (USPS) initiated an aggressive plan to cut costs by closing rural post offices, mail processing facilities, and reducing First Class Mail delivery. This has had a disproportionate impact on businesses and families in rural areas. That is why I introduced a bipartisan resolution (H.Res.54) calling for an end to the postal slowdown and a return to prior service standards.

We’ve heard from hundreds of West Virginians – newspapers, businesses, and individual postal customers negatively impacted by these delivery changes. By restoring prompt and reliable service, we can rebuild trust in the postal service and give rural Americans peace of mind.

The fall 2013 closure of the USPS Mail Processing Facility in Bridgeport, WV has required mail to be shipped to Pittsburgh or Charleston for processing, resulting in delays, increased costs, and unreliable service. This month, USPS announced it would end overnight delivery of First Class Mail in a further efforts to cut costs.

This postal slowdown is causing real harm across West Virginia as credit card bills are delayed, consumers cancel unreliable newspapers, and timely medicine deliveries are threatened. The Post Office should reconsider these changes and work with Congress to develop an alternative model.

Protecting our Federal Corrections Workers

This week I introduced legislation, along with my colleagues Rep. Tom Marino (PA-10), and Rep. Matt Cartwright (PA-17), that will protect Federal Corrections workers by allowing them to carry pepper spray. The bill is named after Eric Williams, a Federal Corrections Officer in Pennsylvania who was brutally killed by an inmate in 2013.

Any worker who enters his or her workplace should feel safe every day. However, that’s not the case with federal corrections workers who often have no line of defense during conflicts inside prison walls.

We listened to horrific stories about violence against guards from constituents who work in our federal prisons and decided to take action. Their job is dangerous and stressful. This proposal will help give correctional officers and their families some peace of mind.

The legislation would make permanent a Federal Bureau of Prisons pilot program that allows correctional workers to carry pepper spray. In addition, it will expand the pepper spray availability to medium and higher security facilities and require Federal Correctional workers to complete training courses before carrying and using the spray.

The bill is supported by the National Association of Police Organizations, the Council of Local Prisons, and the Federal Law Enforcement Officers Association, and was found by the Congressional Budget Office to have no cost to the taxpayers. Similar legislation was introduced in the 113th Congress.

Working to End Human Trafficking

Building on the bipartisan work started in the last Congress, the House acted to pass 6 bills to tackle human trafficking, prostitution and sex slavery this week.  Every year, thousands of men, women and children fall into the hands of traffickers and, according to the House Judiciary Committee, over 300,000 American youth are at risk of becoming victims of sex trafficking.

As a father and a husband these votes were especially significant for me.  We need to remain ready to support any effort that combats this despicable practice and brings those who take part in it to justice.  Over the past few years, the House has made it a priority to address human trafficking.  Many of the bills passed this week were passed by the House in 2014, but never considered in the Senate.  The new Senate should consider these bills as soon as possible and get them to President Obama’s desk.

A Close Win Over TCU

This past Saturday my family and I were fortunate to w atch an exciting game between the Mountaineers and TCU. Both teams traded the lead and brought the game into overtime, but the young freshman Jevon Carter was able to seal a Mountaineers win with his free-throws in the closing seconds. The 86-85 victory was a solid conference win for our Mountaineers, who are now ranked #2.

WVU basketball is in the midst of a great 2014-2015 season. Bob Huggins and his boys, after a win over KSU, look set to knock Kansas out of their top spot in the Big 12. I look forward to another great game as WV U faces off against Texas Tech tomorrow at the Coliseum. Let’s go Mountaineers!

Planning a Trip to Washington?

Visiting Washington is an exciting and educational experience. My door is always open, so please doesn’t hesitate to stop by my office. In addition, my staff can serve as a resource to you in booking tours for your trip.

If you are ever in the Washington D.C. office please drop in and say hello. If you want an appointment just give my office a call at 202.225.4172, or submit a request on my website at
                                          The Gilmer Free Press

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