Sean.E.Boy

Martial-ing the Populace

2012-01-28T16:05:00.005-05:00

Jonah Goldberg has a very good article critiquing President Obama's 2012 State of the Union address.

In the address, the president said of the military, “At a time when too many of our institutions have let us down, they exceed all expectations. They’re not consumed with personal ambition. They don’t obsess over their differences. They focus on the mission at hand. They work together. Imagine what we could accomplish if we followed their example. Think about the America within our reach.”

Goldberg responds, “…Obama is upending the very point of a military in a free society. We have a military to keep our society free. We do not have a military to teach us the best way to give up our freedom. Our warriors surrender their liberties and risk their lives to protect ours. The promise of American life for Obama is that if we all try our best and work our hardest, we can be like a military unit striving for a single goal. I’ve seen pictures of that from North Korea. No thank you, Mr. President.”

This is something I see very often, especially on facebook. How great everything would be if we could all agree. But no one really means this. They want agreement without compromise. Because compromise mucks everything up. What they really mean is “how great everything would be if everyone agreed with me.” Obama uses this trope painfully often. And to be fair, conservatives are just as guilty of the same sin but by taking a different tack; if you don’t agree with them, you are simply unpatriotic and hate your country. If you don’t agree with liberals, you are simply a troglodyte who hates humanity.

One can hold the idea that health insurance is a wonderful thing yet also think that state provided or mandated health insurance is an abomination without one’s head exploding.

One can agree that workers are perfectly within their rights to organize and bargain collectively in order to maximize their marginal benefit for their marginal product and yet also think that, say, teachers going on strike because they think contributing anything towards their benefits package is akin to the fabulous images of worker exploitation promulgated by the likes of Upton Sinclair is absurd.

It seems entirely reasonable to me to agree (or disagree) that America was well within her rights to attack Afghanistan after the 9/11 attacks and also believe that we had no right or reason to do anything in Iraq, or Libya for that matter. And believing that no government official, including the president of the United States, has the right to detain, much less kill, any human being (and not merely US citizens, which went out the window anyway) with out due process or a proper declaration of war is not treasonous. Nor is it dangerous.

Nor is it dangerous to consider that the constitution establishes and limits the federal government, not lays out which rights are reserved for American citizens in light of contemporary issues or that if you are not an American citizen, all bets are off.

Believing that the government has the authority to tell you what you must do or buy simply because Congress gave the OK; agreeing that the president has the authority to kill anyone he believes might pose a threat to our “security interests;” abdicating the doctrine that a man is capable of and responsible for his own welfare; rejecting the notion that governments exist to protect one’s wealth and not to redistribute it, this is what is dangerous.

Liars

2012-01-14T10:29:00.002-05:00

It appears as though the 2000 election was what "radicalized" Paul Krugman. Because George Bush was lying during his campaign and the "media" wouldn't call him on it.

A presidential candidate making spurious claims during his campaign combined with a pusillanimous (and ignorant) press? This is what drove Krugman over the edge?

We are to believe that he was the Big Kahuna of reasonableness prior to 2000?

This after eight years of Bill Clinton, the physical embodiment of pure and puerile prevarication.

This coming from the same man who endorsed John Edwards for president.

The question becomes, which is greater, Krugman's insolence, his naivete, his disingenuousness, his dishonesty or the depths he will plunge to find any sort of ad hominem?

Never Learning

2011-12-31T11:26:00.002-05:00

More proof that Republicans are out of their f***ing minds:

Caller: If you’re fortunate enough to be nominated, would you consider having Sarah Palin as your running mate?

Gingrich: She is certainly one of the people you would look at. I am a great admirer of hers and she was a remarkable reform governor of Alaska, she’s somebody who I think brings a great deal to the possibility of helping in government and that would be one of the possibilities. There are also some very important Cabinet positions that she could fill very, very well. I can’t imagine anybody who would do a better job of driving us to an energy solution than Gov. Palin, for example. Tell her that she would certainly be on the list of one of the people we would consider.

It is weird enough that Gingrich was, however briefly, a contender to be the nominee this year for the Republicans. But that anyone would consider having anything to do with Sarah Palin? A "remarkable reform governor?" What, precisely, does she "bring a great deal" of?

Why can't anyone on or of the right just be honest and admit that the woman is an idiot? She was out-witted by Katie Couric for Christ's sake.

These people are idiots.

Big Lies

2011-12-21T11:23:00.003-05:00

In a post titled "Romney's Big Lie," Paul Krugman places the following hypothetical in Mitt Romney's head:

Mitt Romney believes that corporations are people, and that only corporations and the wealthy have a right to be paid for the efforts. He wants to reduce middle-class Americans to serfs, forced to accept whatever pay corporations choose to give them.

His point being that Romney would be excoriated if he said such things. But the policies Romney favors would actually amount to this statement.

Romney's belief that corporations are people is not quite as nutty as Krugman would have his readers believe. I've asked before, why should a voluntary arrangement of several people have fewer rights than an individual person? At what point, at what critical mass, are rights forfeited? And how does requiring wealthy people to continue to pay more to the federal treasury, just not as much as the Obama administration and Krugman would like, constitute reducing middle-class to serfs? Who has been forced to accept the wages chosen to be given to him? A person may not like the wages being offered in return for his labor, but as far as I can tell these are still voluntary exchanges of labor for wages. If the genius professor has any evidence to the contrary, I'd love to see it.

He then quotes Romney directly to contrast it with his imagination and then writes, "But nothing Obama has ever said and none of his actions bear any resemblance to Romney’s portrait."

But Obama did say, "I think that when you spread the wealth around, it's good for everybody."

This supposes that elected officials and bureaucrats are less self-interested than their private sector brethren. They aren't. It also presumes that the "fair" distribution of wealth that is generated and earned by other people is a legitimate function of government. It isn't.

Beyond being completely wrong about everything, another spot-on piece by Professor Krugman.

When is a Tax Increase Not a Tax Increase

2011-12-14T20:30:00.002-05:00

This is something I've mentioned around these parts before. Allowing a law to expire that will result in higher taxes means you are effecting a tax increase. At least, that's what the Democrats and Obama administration are now saying. If Republican intransigence is allowed to continue and they won't budge on increasing taxes on the wealthy (getting the "millionaires" to pay thier "fair share" of Obama's plan), then the payroll tax cut won't be extended. And the middle-class will be hit with a tax increase.

But they weren't saying that last year, when letting the "Bush Tax Cuts" expire was not a tax increase.

So whether status quo ante is a good thing or a bad thing depends on how much you make.

Are these millionaires really job creators? Would an increase in the highest marginal rates harm the economy?

Stay tuned.

Thank Goodness the Liberals are in Charge

2011-12-14T05:43:00.003-05:00

and we got rid of that fascist Bush. Because liberals don't believe in summarily executing citizens without trial (& here); expanding our military footprint or indefinite military detention. You see, because I remember liberals (rightly) decrying the Bush administration for its intransigence regarding the constitution. And yet I have seen no sustained, credible criticism of the Obama administration for not only continuing every single one of those policies, but expanding them and claiming more executive discretion as far as the constitution is concerned.

Where is the outrage?

Whose Money is it Anyway

2011-11-22T23:21:00.005-05:00

The World's Greatest Thinker writes about a paper published by Peter Diamond of MIT and Emmanuel Saez of Berkeley discussing optimal tax rates on top earners.

The authors tip their hand right form the get-go stating that:

Models in optimal tax theory typically posit that the tax system should maximize a social welfare function subject to a government budget constraint, taking into account that individuals respond to taxes and transfers. Social welfare is larger when resources are more equally distributed"

So the tax system is in place to maximize social welfare. A sentiment, no doubt, that our beloved Super Genius embraces whole-heartedly.

Krugman then goes on and does everyone a favor by constructing three straw men he foresees as objections to the maximum tax rates on "high earners" suggested by the authors. His focus is on his third straw man: "You'll kill job creation!"

But I want to focus on his first, or rather, his response. His first straw man is, "Theft! Tyranny! OK, I hear you. This can’t be argued on rational grounds; I think there are a lot more important moral issues in the world than defending the right of the rich to keep their money, but whatever."

The fact that one can 1) think that taxation is theft, and 2) argue the point rationally is incomprehensible to Krugman. But the point is that, especially considering his readership, anyone who thinks that taxation is theft is irrational, because he says so, QED. And even if it were rational, it doesn't matter because he can conjure up other injustices or immoralities. By this logic, we needn't address any injustice because there will always be other injustices.

But he makes the point himself, "The right of the rich to keep their money." It is their money, legally obtained. I'll grant that a certain amount of taxation is necessary for society to function. But the rate should be kept as low as possible and people should be encouraged to fight to keep every cent they earn, avoiding taxation, legally of course, whenever possible. This is not greedy or irrational, it is perfectly understandable.

Oh, and the rate the authors think will optimize utility and not disincentivize those greedy top-earners? 70%.

Of Trees Falling in a Remote Forest

2011-10-23T14:42:00.002-04:00

and Libertarian candidates doing well politically.

Herman Cain may not be a dyed-in-the-wool Libertarian, but he is at least receptive to those ideal and the second-most such candidate in the field of contenders for the Republican nomination. He is also the far and away leader in a University of Iowa poll among likely voters(Romney is 2nd, Paul 3rd).

Ron Paul just raised >$2.5 million in 24 hours and is polling well across the country. Even some of the Occupy Wall Street types have embraced the logic behind "End the Fed."

And what are we concentrating on? How a couple of empty haircuts are treating each other.

Whither Jobs?

2011-10-18T23:35:00.003-04:00

Reason magazine has a good article up on what government action can be done to create jobs. It is a brief survey of writers, economists, professors and entrepreneurs and, Reason being a Libertarian joint, the answers all revolve around reducing government interference in the market place of employment (the lone exception being Bruce Bartlett whose snit over being unceremoniously dumped by conservatives after crapping on George W. Bush, a well-deserved crapping I might add, has led him to degenerate into a card-carrying, left-wing disciple of Lord Keynes).

My favorite contribution is from the inimitable Mike Munger from Duke University:

Separate Jobs from Health Care

Michael Munger

I win drinks in bars sometimes by betting on the answers to two questions. First, what nation in the world “lost” the most jobs between 1990 and 2005? Second, what nation in the world leads in the value of manufacturing products?

The answers are the U.S. and China, but not in that order. China lost by far the most manufacturing jobs between 1990 and 2005, and the U.S. still leads the next largest manufacturing economy by a full 25 percent.

Think about it: In 1990, a “factory” in China was a large shed with 1,200 workers with sewing machines, sitting beside a pile of patterns, cloth, and scraps. Today that factory is 100 times as productive, but it only has 30 employees tending modern and lightning fast machines.

The same thing has happened in the U.S., in industry after industry. As we increased our output, we “lost” jobs to increased productivity. We didn’t ship those jobs to China; China lost even more jobs than we did.

The difference is that China more than replaced its lost jobs with new jobs, in new industries. Until recently, the U.S. has always been able to do that, too. What has changed?

The problem is both obvious and hard to see: It’s health care costs. The U.S. has produced quite a few new service sector jobs, jobs at the lower end of the pay scale, jobs that don’t usually come with health benefits.

But those “good” jobs, the ones that the president is looking for? Health care costs have driven a wedge between what employers pay and what they get in terms of productivity. Wages for workers in many industries have been flat, or nearly flat, in real terms since 1990. But total compensation, especially health care costs on the best jobs, has increased at a rate of more than 3 percent per year on average.

Employers paying more, workers seeing no increase in take-home pay: a constantly increasing wedge being driven into job growth. More than all of our productivity growth has been sucked into the voracious maw of health care costs. Until we break the connection between jobs and health care, there is no way for the U.S. to begin to recover job growth.

Unfortunately, the fiasco of health care reform in 2009 made this problem worse, not better. The new law created a complex, expensive system with no cost controls. And since insurance cannot cost less than the care it covers, this implicit but very real tax on job creation is hamstringing the recovery.

* * * * *

Professor Munger is a frequent guest on the EconTalk podcast with Russ Roberts. The EconTalk podcast is a tremendous source of information. My favorite is the discussion on price gouging, about which I've written previously.

Two days in and I've broken my new non-posting past 11pm rule twice.

More on the Occupiers

2011-10-17T23:17:00.001-04:00

A couple quick points regarding some of the demands or whatever they are of the Occupiers:

The top 1% of earners in this country pay >38% of federal income taxes; almost 50% of others pay no federal income tax.

The American economy is not a closed system. Yes, the top 1% are taking in a higher percentage of GDP. But GDP growth over the last 40 years has out-paced population growth. The pie has grown at a faster clip than the number of people at the party, as it were.

Also, since the economy isn't a closed system, person A making $500 million/year doesn't "cost" me, you or anyone else one red cent. His wages, my wages and yours are based on the marginal product of our respective labor. Steve Jobs' $7billion estate didn't take money from anyone else.

The system is not perfect and life is not fair. Our country was established to create a more perfect union, the founders knew that it would never be perfect. They also established a government that was to promote the general welfare. A capitalist system where young people protesting the evils of capitalism while carrying iPhones and dressed in the heighth of hipster fashions and other benefits of said capitalism is exactly what this country is about.

The video below shows what some of the protesters in Oakland feel about the evils of capitalism and their utter disregard for property rights. I am not a fan of the ominous music piped through the background nor of the sketchy editing and I have no idea what Tea Party Television is (I am not a fan of the tea party movement, though I may agree with some of their beliefs).

But then, when it comes to their own property, some of the protesters do seem to have an appreciation for property rights. I guess it's OK so long as what is being taken is being taken from other people.

I have a new rule about not writing or posting after 11:00pm and I've instantly broken it. If there are any significant errors in grammar or reasoning, please either excuse me or let me know nicely.

Don't Hate the Player(s)

2011-10-08T10:48:00.002-04:00

On the morrow of the Philadelphia Phillies being eliminated from the 2011 Major League Baseball playoffs I have been reading on facebook and elsewhere that the team was eliminated because the players didn't do "their job." Some have implied, while others have said explicitly, that based on how well the players are paid, this alleged failure is made worse. Incidental to this argument is that since the players are paid so handsomely, the cost of attending a baseball game (or any professional sporting event) has become prohibitive to the "common fan." The syllogism runs thus: the players demand a lot of money (to play a kids game!); the owners need to generate that money from somewhere; ticket prices are high, therefore the players are responsible for the high ticket prices. Ancillary to this is that thus they should perform at a level that brings the most pleasure to the fans (the high cost of attending an event should provide maximum utility).*

This is so common a refrain that it is almost cliché. It also has everything precisely backwards.

Major League Baseball consists of 30 teams, each has a pool of 40 players that can be available to fill a game-day roster of 25 positions. So at any given time, there are 1200 major leaguers, 750 of whom can play at any given time.** Supply of the number of teams, the number of players and the number of opportunities to watch baseball are limited.

The Phillies have a current streak of over 200 straight sell-outs at Citizens Bank Park, where a standing-room only ticket costs $17. The fact that there is tremendous demand for access to their games is what allows the team to charge what it does for seats (for a very formal and technical treatment of the elasticity of demand for major league baseball tickets, see here). Other factors include the per capita income of the Philadelphia area, the age of the stadium (and its amenities) and the team’s performance.

What does not determine the price to attend a game is what the Phillies have to pay the players. True, the Phillies need to field a good team to generate fan interest, and attendance, and I don’t deny that at the very margin there is a feedback loop. But the players salaries, league-wide, are a consequence of the interest the American people have in baseball and the fact that we will pay $25 to park far away from a ballpark, $40/seat, $5/hot dog or watch three minutes of commercials between every half-inning and two minutes between each pitching change, not a determinant.

Of course I wish the Phillies won last night. But they didn’t. And that has nothing to do with what they are paid.

I hope to get more into the economics of sports here, mostly for selfish reasons but also because it proves most of the truths about economics in general, is easy for most people to grasp and a lot more interesting than monetary theory and Keynesian rubbish.

Anyone interested in a great history of baseball, with a focus on the relationship between the owners and the players, should read The Lords of the Realm by John Helyar. I read this before the 1994 season and my interest in the business of sports has been piqued since.

*this is my blog, so I get to frame the syllogisms. I know this is a very rough sketch, but I was up late last night watching baseball so cut me some slack. Make comments and I will address any valid concerns there or in a later post.

**regular season, of course; rosters are expanded during the playoffs, but salaries are paid over the course of the regular season and based on the sample of work provided by any particular player over that span, so I’m sticking with this

A Brilliant Observation

2011-10-06T11:18:00.002-04:00

on the passing of Steve Jobs by Kevin Williamson at National Review. Money quote:

Once you figure out why your cell phone gets better and cheaper every year but
your public schools get more expensive and less effective, you can apply that
model to answer a great many questions about public policy.

We Few, We Happy Few...

2011-10-03T21:17:00.002-04:00

We Band of Idiots.

The great unwashed marching or whatever it is they are doing in New York isn't the only protest being staged against "the man" right now. There was a group staging "Occupy DC" in Washington over the weekend. They are college students. And they want student loans forgiven, their free lunch as it were, not having learned that TANSTAAFL.

Video below, but some highlights. First of all, if the young woman who speaks from about 2:21 to 4:24 is a student at Harvard, the admissions staff should be expunged. This isn't because she holds political beliefs with which I disagree. I have no problem with that. The problem is that she's a fucking idiot who cannot form a sentence. I watched it twice and am amazed the lass had the whole breath/blink/heartbeat thing down. Maybe she's just rockin' the Harvard gear as an aspiration.

But my favorite part, the part that lies at the core of progressive socialist thought not just in early 21st century America but through the entire history of socialism, is this:

7:24-7:51

Student: Well, I mean, I obviously believe that my ideas are persuasive enough and beneficial enough to society that people should subscribe to them [at the conclusions of their own reason [sic]] and their own sense of right and wrong but frankly some people don’t, and yet…

Q: And at the end of the day you’ll use force against those people

Student: I believe that it is the role of the government to use force

Q: So you won’t do it yourself you’ll hire someone else to do it basically?

Student: That’s what a government is.

This is Paul Krugman saying that if you don't agree with the ideal of Progressivism and the idea that government is merely a large insurance company with an army, you are wrong. Your opinion isn't merely different than his, it is wrong. This is Thomas Friedman saying that he would prefer to be ruled by "enlightened autocrats, like they have in China." This is the complete abandonment of reason and persuasion. Think like us, or die.

Because Socialism and Progressivism are the abandonment of reason and logic. They work on emotion, not reality.

And if these kids are this stupid after attending college, why on earth would taxpayers want to forgive their loans? They should be paying extra interest.

The Question is, Does She Actually Believe This Nonsense

2011-09-28T08:09:00.001-04:00

from the Corner at National Review:

Palin on 2012: ‘Does a Title Shackle a Person?’

September 28, 2011 7:39 A.M.

By Katrina Trinko

In an interview last night, Sarah Palin suggested that she feared she would lose influence if she decided to run for the presidency.

“Is a title worth it?” Palin said in response to a question from Fox News host Greta Van Susteren about her presidential plans. “Does a title shackle a person? Are they — someone like me, who’s a maverick — you know, I do go rogue and I call it like I see it, and I don’t mind stirring it up in order to get people to think and debate aggressively, and to find solutions to or the problems that our country is facing.”

“Somebody like me — is a title and is a campaign too shackling?” Palin continued. “Does that prohibit me from being out there, out of a box, not allowing handlers to shape me and to force my message to be what donors or what contributors or what political pundits want it to be? Does a title take away my freedom to call it like I see it and to affect positive change that we need in this country? That’s the biggest contemplation piece in my process.”

Creating Barriers, Not Jobs

2011-09-25T20:31:00.003-04:00

In 1897 the State of New York passed what was known as the Bakeshop Act (more properly known as section 110, article 8, chapter 415 of the Laws of 1897, or the labor law of the State of New York). It said that "no employee shall be ... permitted to work in a biscuit, bread, or cake bakery or confectionery establishment more than sixty hours in any one week." So even if an employee were willing and able to work 61 or 65 hours in a given week and the employer was willing and able to pay the employee for said work on previously agreed upon terms, and both the employee and employer were to honor those terms, the employer could be held criminally liable.

Joseph Lochner owned a bakery in Utica, NY, Lochner's Home Bakery. In 1899 he was fined $25 for violating the act; in 1901 he drew a second fine for $50. He contested the fee in court as a denial of (substantive*) due process, the freedom to contract with anyone to do anything so long as the activity wasn't proscribed by the legitimate authority exercised under the state's "police power" (e.g., prostitution). He lost in appellate court and the New York Court of Appeals (the highest court in the state). He then appealed to the United States Supreme Court and in one of the greatest decisions ever handed down by that fine tribunal, good ole Mr. Lochner won and the Progressives of the time lost. See here and here for an overview of the case (overviews that do not share my enthusiasm for the decision, by the way) and here for a nice article by George Will about a new book regarding the decision. The full decision of the court, including a famous (and awful) dissent penned by Justice Oliver Wendell Holmes, is here. Holmes explicitly expresses hostility to the concept of laissez-faire (which certainly didn't exist at the time), to Herbert Spencer and to the notion that individuals and firms know what is better for themselves than the government does (it is important to note well that there was no allegation of coercion on the part of Mr. Lochner nor any claim that he did not remunerate his employees for their labor above and beyond the capricious and arbitrary limit of 60 hours).

This is all a very long preface to address the notion that the government can "create jobs."

First there is the idea that the government can invest where private capital fears to tread, leading to new products and services that, for whatever reason, the market would not create of its own accord. The Solyndra Scandal show rather well how nonsensical this idea is (see previous post). But let's just imagine that solar energy panels are indeed the way to the future; that our dear leaders, shoveling money that they take great care in garnishing from the people who create and earn it to firms that had the vision to support the candidate who ended up winning, have some sort of prescience as to what will "work;" that the scam, er investment, pays off. "Success" will be cried from the hills. Yes, but, as the Great Bastiat pointed out all too well, that is what is seen. What of the investment that didn't or couldn't happen due to the fact that there was less capital in the private market to fund it? What invention or innovation was denied existence because money was taken away from those whose job it is is to fund exactly these sorts of things? The new technology will more than pay for itself, the true believer will claim. Now that we will have houses and cars and factories that will run from the power of sunlight and remove us from the yoke of "foreign" oil and "dirty" coal there will be more capital free to fund any investment that anyone can think of, right?

Maybe. But maybe not. Again, you have the wishes of the few pretending to know not only what is best for everyone else, but to know better than the market how to allocate scare resources most efficiently.

How about the argument that government generally creates jobs?

"Not exactly" would be putting it mildly. A "job" in its most basic form is simply an agreement entered into between two parties to accomplish a certain task. What can the government do to facilitate such agreements? Precious little. What can the government do to act as an obstacle to such agreements? A lot.

Think of stimulus funds to a community to build a prison. The community needs the new prison (for whatever reason). The federal government has the money (thanks to current and future taxpayers). Keynesian analysis says that the feds giving the money to the locals to contract the prison to be built will inject "liquidity" into the economy. The individuals put to work (who were presumably unemployed, but this is generally not the case) will spend the money that they earn and, through the magic of the multiplier effect, the net gain in GDP will more than offset the drain on GDP through less consumption due to taxes paid and less investment due to crowding out. Thus $100 million taken from federal coffers (our pockets) will lead to, say, $130 million in future spending meaning a net gain of $30 of GDP that didn't exist before (the negative effects of less investment and dead-weight loss of the current and future taxes is much tougher to quantify so economists, especially Keynesians, simply ignore these negative externalities or quip that in the long run we are all dead, so no worries...and I am not bullshitting about that).

For sake of argument, let's pretend that this is true. $100 million from the feds to the locals will lead to about $30 million in net gain in consumption, focused in a particular area. Now does the government create any new jobs?

No.

The local are not free to hire whomever they want to build the prison. Bids must be accepted by a certain number of firms, a fixed quantity of those bids must come from businesses owned and/or operated by "minorities." The materials must usually be obtained from specific firms or through certain bureaucratic channels. And the workers must be paid what the government deems "prevailing wages." Every step of the process must be reviewed and approved by overseers from the various federal agencies involved in the appropriations procedures.

So the locals cannot farm out the work to the firm that will build the prison in the least amount of time, for the least amount of money using materials that cost the least to procure. In fact, the prison, if it is ever completed, will be built in the exact way that no sensible person would ever go about having something built. Certainly not how somebody who is responsible for the cost of the project would act. It will take longer to build than originally projected. It will cost more than originally projected. It will not last as long or be as functional as originally projected. And the people responsible for the mess that is created will put this as exhibit "a" as to why they should be re-elected. The costs are that which is unseen.

Bear in mind that the president himself laughed at the notion that a "shovel-ready" job meant that the job was "shovel-ready" or that there was ever such an animal.

Mind also that the work performed will usually be required to be done by union employees. Unions maintain wages higher than the market price by political (& coercive) manipulation and restricting membership. If the supply is held below what is required for demand to be met, the cost is increased; the market is not allowed to function properly by allowing the supply of the labor (for example, the unemployed) and the demand for the labor (the local government) to figure out what the locals are willing and able to pay to get the job done and what the workers are willing and able to accept to do the work. Everyone's freedom is curtailed and the taxpayer loses more money to boot: lose, lose, lose. Oh, and nary a single job was either created or saved.

This is a hypothetical based loosely on an actual event that happened in Montgomery County, PA. I can't find the links, but think seriously about what I wrote and think seriously about what is more plausible: my account of what happened or the Obama/Krugman/Keynes version of "reality?"

Government does not create jobs. It gets in the way of the processes that create jobs. And even when a job is created by the government, like making a new position for a bureaucrat, the gain created by that "new job" is more than offset by the loss in productivity in the economy and the dead-weight loss of the current and future taxes necessary to pay for that job.

*As a matter of course, I find the notion of the judicially created notion of "substantive" due process troublesome. It doesn't exist in the constitution and has no antecedent in the common law. It means, basically, whatever the judge(s) want it to mean at any particular time. As a libertarian, I like it when it is used to expand the notion of individual liberty and curb the power and authority of any level of government and I dislike it when it is used to expand the power and authority of any state actor or agency at the expense of individual liberty.

Let Us Count the Ways

2011-09-25T20:03:00.004-04:00

An idiotic post from the increasingly idiotic Paul Krugman regarding the Solyndra Scandal. This company was given more than $500 million of taxpayer money bankrolling a company that just happened to back the Obama campaign. Relativists will rightly point out that Republicans give sweetheart deals to companies that back them all the time. Libertarians will point out that government shouldn't be in the business of trying to determine which products will receive any form of subsidy; a pox on both their houses and the fact that both sides do the same thing doesn't make it less noisome.

Anyway, Krugman's post in its entirety:

The Solyndra Scandal

Haven’t written about this. But it is indeed a terrible scandal, because the private sector never ever puts money into ventures that end up failing:

That is the whole post.

He fails, of course, to realize the difference between private investors betting on what consumers will get behind via voluntary exchange in the market and government using money taken from individuals under pain of law and giving it to select individuals as political patronage. The failure of a private concern is equivalent to the government giving a half billion dollars of other people's money to a private firm in return for political support, regardless of the fact that the firm's business plan was fatally flawed from the start. In February, the government also gave up its "first lien" position in an asinine bid to attract more private investment into the failing company. So the chances of American's getting any of their money back is not virtually nil. It is absolutely zero.

Creative destruction, innovation, the beauty and power of the market are lost on the Progressive. Government deciding what is best for you, determined by base political calculus, is the way of things. And anyone else who disagrees with this worldview is just too stupid to realize how right, how brilliant. the Progressives are.

On Tax & Circumstance

2011-09-20T23:16:00.004-04:00

I was listening to a show called Radio Times that is produced by my local public radio station and they were discussing President Obama's job's/deficit reduction/recovery program, specifically whether "millionaires" should pay more in taxes.

The discussion is an extrapolation of the "Buffett Rule," because Warren Buffett recently stated that his effective tax rate is almost half of what his secretary's is. Greg Mankiw does a fine job of parsing the numbers and basically calling shenanigans on Buffett's populist nonsense here. What is important to note is that almost 46% of households filing a tax return under the current system pay no federal income tax at all (this does not include the payroll tax collected for Social Security, Medicare or Medicaid, but then, as Professor Krugman (and Professor Samuelson before him) notes so well, that is on account of the "Ponzi game aspect," despite the fact that he now claims not to have meant what he so clearly wrote. Please see Robert Murphy here and Alex Tabarrok here).

Anyway, back to the radio show. The host is interviewing a gentleman named Seth Hanlon who works for the Center for American Progress ("Progressive Ideas for a Strong, Just, and Free America" serial commas included, no doubt). So you just know we're going to get a really objective look at the proposal.

At one point the host asks, "Would higher taxes lead to job growth?"

Almost a challenging question. And the answer, of course, is no. There is not much debate about this among anyone really. And presumably, Mr. Hanlon knows this. So he doesn't answer the question. He says that the plan is for taxes to increase only on the "wealthy," and that they are going to go back to the level they were before the "Bush tax cuts." He then makes the point that there was robust economic growth in the 90s, when these tax rates were in effect....therefore, ipso facto, correlation is now causation. Higher taxes mean more robust economic growth.

This is, obviously, asinine.

Now you can (try to) make the point that the rich should pay more in taxes in order to reduce the deficit. My answer to that would be that congress has shown an uncanny knack for spending all of the revenue it it receives and then then spending more, so even if revenues were to increase, so would spending (mind you, that if money collected under the FICA "contributions" were kept in trust for the purposes for which they were collected, there would be no problem with Social Security for decades. As it is, the money was spent on "other shit" (technical phrase) and replaced with Treasury notes that we have the happy benefit of owing, plus interest).

You can make the point that the rich don't need as much money as they have. However, this is morally repugnant and indefensible. The easiest thing in the world to do is spend someone else's money and any income, legally obtained, is the property of the person who earned it. Government has no right or claim on anyone else's property, regardless of how much any one person may have. As another aside, Mr. Buffett is free to send as much of his personal fortune as he chooses in to the United States Treasury. He is also free not to set up a charitable trust to shield his considerable estate from federal inheritance tax. He has chosen to do neither.

The 90s also benefitted from something we have come to call the "Tech Bubble," which may have had more to do with the economic growth of the decade rather than the marginal tax rates.

Brother, Can You Spare a Bridge?

2011-09-15T23:14:00.002-04:00

Where will the money come from?

The Sherman Minton Bridge, which connects Louisville, KY and New Albany, IN, was shut down last Friday after cracks were discovered in steel beams.

There are a couple of head scratching questions. First and foremost is how long it will take to repair the bridge. Estimates range from three months to two years, but officials still don't know. This is unacceptable. First of all, metallurgical analysis shouldn't take more than a few days, and that should be lessened significantly taking the severity of the situation into account. In other words, "officials" should have known by no later than Tuesday what the analysis and engineers inspection reports said.

As far as the time it takes to make the repairs, I would love to know what branch of the bureaucracy is in charge of coming up with these estimates. In September 1999 Hurricane Floyd buckled a very small bridge just south of New Hope, PA. The span is just over 15 feet. Residents were told to be happy that the repairs took just less than one year.

A bridge of just about the same size two block away from my house is also under repair, it was not damaged by the earthquake or hurricane, I believe it is just routine. The estimate is that it will be done in four months. The trucks came in and ripped the black-top off. And...no one has seen a worker on the sight since. So if this is done by Christmas, I'll eat my shoe.

There is another bridge a few miles away that crosses over the Pennsylvania Turnpike. I believe that this was also a matter of regular maintenance. It has been closed almost two years and I don't know that anyone knows when it will be done.

There is no reason why that bridge cannot be repaired in less than one year considering how important it is to the two states involved, and the goal should be no more than six months. It is estimated that replacing the bridge could take "years." Nothing more specific or any reason for such a vague answer is given.

But the big question is how will the repairs or replacement be paid for? Initial estimates to repair the cracks will cost $10 million; more extensive repairs would cost $60 million and replacing the bridge would cost "several hundred million dollars" (again with no context or explanation for the arbitrary and meaningless estimate). Everyone, including (disappointingly) Rand Paul, is running to the federal government, of course.

Thankfully, the Federal Highway Administration has an "emergency relief program." Ohhhh, but there is a problem: the law specifically states that "in no event" may funds "be used for repair or reconstruction of bridges that have been permanently closed because of imminent danger of collapse."

But that certainly isn’t going to stop the congresscritters and other urchins from trying to suck everything they can get from other people.

Now, I don’t necessarily have a problem with the federal government spending federal funds on roads, bridges &c, so long as those projects are directly involved in interstate commerce. And the Sherman Minton Bridge certainly fits that description. So let’s look at some numbers.

Anyone buying gas in Indiana pays 15¢ per gallon to the state treasury and the good folks in Kentucky collect 18¢ per gallon. This is all on top of the 18.4¢/g the federal government collects (closer to home, the Commonwealth of Pennsylvania collects an obscene 31.1¢/g, see here). In 2008 the federal government collected $37.9 billion in fuel taxes, Indiana collected $856 million and Kentucky raked in $617 million, see here. Indiana contributed 1.84% to national GDP in 2010 and Kentucky kicked in 1.11%, see here.

So a little common sense sprinkled with back of the envelope mathematics would show that collectively, the two states are entitled to 2.95% of the federal highway funds (you get back what you contribute, no?) which comes to over $1.1 billion dollars. This is on top of the $1.47 billion that the two states collected in fuel taxes that is ostensibly to be used for things like this. So I just found over $2.5 billion dollars from which these grubby little idiots can parse out the “several hundred million” or so that it would take to replace the bridge with enough left over to repair the one that they ignored and caused this problem to begin with. Building and maintaining roads and bridges is a legitimate function of government, and the federal government using federal funds to assist in maintaining those roads and bridges that affect interstate commerce is also legitimate. Because government at all levels have gone beyond their purview and keep expanding their bishopric to include, well, everything and not concentrating on that which it should, everyone suffers, and pays, more.

More resources are wasted; more people become dependent on government for services that the government can’t and should be providing; more capital is removed from the market; less is produced. So bridges crumble and then the politicians who are the most responsible for the fact that the bridges are crumbling get together, act serious and demand to know where they can get the money to fix their own mess. And in two years, or however long it takes to get the benighted thing fixed, they will all pose for pictures with an obnoxious ribbon and fake scissors and block traffic for just a few extra more minutes. Because they’re doing the people’s work.

Nasar on Economic Genius

2011-09-15T19:45:00.004-04:00

Sylvia Nasar, the former New York Times economics reporter who wrote A Beautiful Mind (which I am almost embarrassed to admit that I haven't read despite enjoying the movie so thoroughly) has just published a new book called Grand Pursuit: the Story of Economic Genius.

The book was recently excerpted on Bloomberg.com in five parts.

Part I; Part II; Part III; Part IV and Part V.

Since my wife never reads this site I can freely say that I have ordered mine already and should have it in hand tomorrow. This will do nothing for the backlog that I already have hanging over me, but so it goes.

I hope (and believe) it will not fall into the "Great Thinkers" trap that many economic histories suffer (notably Richard Heilbroner's The Worldly Philosophers). There is nothing wrong with short biographies of the giants of any field, but it tends to do a disservice to the discipline. Murray Rothbard addressed this tendency in this lecture (audio here ≈ 20:30).

"I think this is a rotten way of approaching the history of thought. In the first place, all of these political thinkers and economic thinkers were involved in movements, almost all of them. When they say anything, they have certain intentions. They use the words in a certain way, have a certain author’s intention.

In order to understand their intention, you have to understand who they’re talking to, who their friends are, who their enemies are, who they’re reacting against. In other words, the historical context of what they’re saying."

That is why Rothbard wrote An Austrian Perspective on the History of Economic Thought, which I haven't read, but I have and it is a tremendous reference.

Anyway, I enjoyed the excerpts and look forward to reading Nasar's book.

See What Happens

2011-09-02T08:04:00.002-04:00

when the government "creates" jobs?

And the funny part is, even though taxpayers were soaked for $535 million bucks, this would be considered a "good" in Keynesian analysis. At least that $535 was injected into the system to boost "aggregate demand" instead of sitting idly in someone's bank account.

Three Myths About Capitalism

2011-08-25T21:42:00.001-04:00

If Only You Knew Better

2011-08-24T22:55:00.000-04:00

"if you just can’t believe I’m saying the things I say, at least consider the possibility that you’re the one who just doesn’t get it."

--Paul Krugman.

This Just In... part 2

2011-08-23T21:20:00.004-04:00

Joe Biden is still an ass.

On China's one child policy:

Your policy has been one which I fully understand — I’m not second-guessing — of one child per family. The result being that you’re in a position where one wage earner will be taking care of four retired people. Not sustainable.

Forcing families to limit themselves to one child? Forced abortions? He fully understands? But now they're in a pickle because the workforce isn't large enough to support a wealth-transfer Ponzi scam like our Social Security, that's the problem with the one-child policy?

This guy is giving chase to Dan Quayle's title as dumbest vice president in modern times.

Would That We Were Smarter

2011-08-06T20:17:00.002-04:00

In the grand tradition of the Smartest Man in the Universe, a fellow by the name of Jacob Weisberg bemoans the current state of politics because contemporary matters are complicated and people, especially those that don't agree with Mr. Weisberg, are stupid.

He starts his column thus, "It is hard to remember a more dismal moment in American politics," a fine example of historically ignorant pabulum. The article then proceeds to get worse.

"But for the federal government to spur growth or create jobs, it has to spend additional money. The antediluvian Republicans who control Congress do not think that demand can be expanded in this way." So not only are people foolish enough to disagree with Keynesian analysis ignorant, they are an anachronism as well. Unhip to the wicked smarts of our paralogical masters. Regardless of the fact that disagreement with Keynesianism is based on observed history and not pinned on some normative fantasy land.

"Some of the congressional Republicans who are preventing action to help the economy are simply intellectual primitives who reject modern economics on the same basis that they reject Darwin and climate science." I love this one because it doesn't even attempt to hide the author's smug condescension.

"Faced with Republican intransigence on taxes, Democrats are less likely than ever to give ground on Social Security or Medicare." Yes, we can all remember how willing the Democrats were to cut Social Security, Medicare and Medicaid but for the intransigent Republicans.

"At the level of political culture, we have learned some other sobering lessons: that compromise is dead and that there's no point trying to explain complicated matters to the American people." Another desperate plea for recognition of the Sisyphean efforts to reason and educate the poor simpletons in these demotic times.

William Voegeli does a far better job than me of addressing the intellectually void and frankly insulting lines of alleged reasoning employed by Mr. Weisberg.

Oh, and a little searching brought up this little doozy previously written by Mr. Weisberg in 2008 on The End of Libertarianism, just as lacking in any intellectual vigor as the present column, and nicely torn asunder by Cato's Brink Lindsey.

Aye, That's the Question

2011-08-02T21:05:00.002-04:00

Jason Linkins writes:

we ask ourselves difficult questions like, "What impact will removing trillions of dollars from the economy have on ordinary people?"

Do we? Because I ask where did the government get that trillions of dollars in the first place? And if it is being "removed," where is it going?

So the real question seems to be: is Mr. Linkins a sophist or simply an idiot?

Debt Deal

2011-08-02T12:39:00.006-04:00

If Paul Krugman and Keith Olbermann (remember him?) are so outraged, I should be ecstatic, no?

I am also willing to give one United States Dollar to anyone who can quantify how many straw men are constructed, lies told and false choices/analogies proffered by Olbermann. My patience and the battery on my calculator ran out.

Oh, and I doubt the "super congress" is a very good idea, the reason being that our current congress came up with it. But it is certainly constitutional. Now that Mr. Olbermann is such a fan of the constitution and knowing where it says what, I could point him to Article I, Section 5, clause 2, first sentence:

Each House may determine the rules of its proceedings

So if congress wanted to draft laws by pulling random words out of Joe Biden's ass, they can do that.

P.S.-I had forgotten how humorous Keith's phony outrage/faux populist act can be. I should joint the other three viewers and check him out more often.

Art is Dead

2011-08-01T22:11:00.002-04:00

I just saw the show the Green Room with Paul Provenza on Showtime. I love it when comics sit around talking about comedy. Actually, I love it whenever you can see or read experts in their field, people who care about what they do, discussing it amongst themselves (the move the Aristocrats is patently obscene, but a brilliant example of what I'm talking about).

In the first episode I saw there was Judd Apatow, Mark Maron, Ray Romano, Gary Shandling and a young comic named Bo Burnham who performed the song below. Good stuff.

It reminded me of the hours I used to spend watching Short Attention Span Theater with my brother back on the old Comedy Channel.

The impressive part was this kid was able to hold his own with the likes of Shandling and Provenza. Very talented.

This Just In...

2011-08-01T20:16:00.001-04:00

Joe Biden is still an ass.

So debating with people who don't want to take other people's money makes them terrorists?

Mr. Keynes, Meet Mr. Hazlitt

2011-08-01T19:02:00.003-04:00

Henry Hazlitt was not a "professional" economist. But that doesn't mean he couldn't teach a lot of alleged economists a thing or two about how the real world works when it comes to the "science" of economics. I can't remember where I first heard of Mr. Hazlitt, but the first thing I read by him was Economics in One Lesson, an excellent work that I can't recommend highly enough.

He has also written, among other things, The Failure of the New Economics, a chapter-by-chapter (and sometimes line-by-line) refutation of Keynes' General Theory.

Recently I came across Man vs the Welfare State (an allusion to Herbert Spencer's The Man vs the State). So far I am enjoying it as much as I have his other works. But the reason for this post is not merely to introduce Henry Hazlitt.

Regarding the recent debt-ceiling debates (if what happened is worthy of the word), some wags have posited that the deal reached will spell the end of Keynesian economics. Would that we should be so lucky. Keynesians and Keynesianism and, God rest his soul, Keynes aren't going anywhere. In a later post I will try to explain why the man and his foolishness won't just go away (if I can figure that bit out).

Anyway, below is Chapter 2 of Man vs the Welfare State in its entirety. It is a mere 1466 words, and with such an economy of words that includes no jargon whatsoever, Mr. Hazlitt lays bare all that is wrong with Keynesian economics.

Enjoy:

IN THE EARLY NINETEEN THIRTIES, IN THE DEPTH OF the Great Depression, the theory became fashionable that the cause of all depressions was Lack of Purchasing Power. The people just did not have enough money, and because of unwarranted pessimism they were refusing to spend enough even of what they had. The solution was therefore simple: at such a time the government should boldly increase its own spending, "prime the pump," and "get things moving again."

Naive advocates of this theory assumed that more government spending was the whole answer. The more sophisticated advocates saw that the increased spend- ing would not give people more purchasing power if the government kept the budget balanced and took it all away again in higher taxes. The thing to do was to spend more without taxing more. The trick, in other words, was deliberately to unbalance the budget—to run a deficit.

Most of the champions of deficits—including the eminent John Maynard Keynes himself, the theory's chief architect—at least publicly professed to believe that the required deficit could be financed by selling bonds directly to the public, to be paid for out of savings. But again, the more sophisticated deficiteers must have seen that a man who buys a $1,000 bond out of his savings surrenders that much purchasing power for the life of the bond. In short, he loses just as much buying power as the government gains. On net balance, no new buying power has been created.

How, then, can the government "create" new purchasing power? It can do so only if it does not increase taxes at all, but "sells" its bonds to the banking system, and if the banks "pay" for them by creating deposit credits on their books in favor of the government. This leads to an increase in "the money supply"—that is, an increase either in the amount of currency or of demand bank deposits.

If the government's new bonds are sold directly to member banks, there tends to be a dollar-for-dollar in- crease in the money supply compared with the amount of new bonds. But if the government's securities get into the hands of the Federal Reserve Banks, they are used to create what is called "high-powered" money. This can lead to the creation of about $6 of new money for every dollar of new government securities.

It is not easy to give a satisfactory but short explanation of the reason for this to readers without any previous knowledge of monetary theory. When member banks "buy" government bonds and "pay" for them by creating a deposit credit on their books against which the government can draw, they are adding to the nation's supply of purchasing media. They are creating money out of government promises, and some would say they are creating money out of thin air.

Now if a member bank that has bought such government bonds sells them to its regional Federal Reserve Bank, it can ask that Reserve bank to credit the proceeds to the member bank's reserves with that Reserve bank. But if the member bank is a "city bank," it is required to keep a reserve with the Federal Reserve Bank of only l61⁄2 per cent against its net demand deposits. This means that the member bank is entitled to lend, and so create demand deposits for, about six times the amount of its reserves with the Federal Re- serve Bank. That is why money created directly or in- directly by the Federal Reserve Banks is called "high-powered" money.

Thus new "purchasing power" is brought into being. Thus people have more money to buy more goods, create more jobs, stimulate more output, and restore prosperity.

At least so it seems for the moment. But soon there are other consequences.

If there have been heavy unemployment and much "idle capacity," the new monetary purchasing power in the system, by increasing the demand for commodities, may indeed lead to an increase in production, and hence to an increase in employment. This has been hailed as the great Keynesian contribution to economic theory and policy. But there are fatal flaws in it.

Unless there were some serious lack of coordination among prices, costs, and wages, mass unemployment would not exist in the first place. When it does exist, the only appropriate cure is individual adjustment of prices, costs, and wages to each other—the return of coordination. But this can be brought about automatically only if the competitive forces of the market are given free play.

The reason the Keynesian medicine can work—un- der special conditions and for short periods—is that by increasing monetary demand and prices it may in- crease both sales and profit margins, and so restore production and employment. Yet this could be done even more effectively—and without the poisonous side- effects and after-effects—by restoring freedom of com- petition and individual coordination of prices and wages.

The Keynesians think in terms of aggregates. Their remedy is to increase the total money supply, and thereby to bring the price "level" sufficiently above the wage "level" to restore or maintain profit margins and so keep the wheels of industry spinning at full speed.

This remedy is defective in two respects. It tacitly assumes that there is a uniform discrepancy between prices and wages and a uniform percentage of "idle capacity" throughout industry. Neither is true. If "industry" is estimated to be operating at 80 per cent of capacity, we must remember that this figure is at best an average. It may cover a situation in which, say, industry A is operating at only 60 per cent, industry B at 63 per cent, and so on up to industry M at 97 per cent and industry N at 100 per cent. If we try to expand the money supply enough to return industries A and B to full capacity, we may completely "overheat" industries M and N and produce serious productive distortions and bottlenecks.

What is more, an increase in the stock of money, contrary to Keynesian theory, will begin to force an irregular increase in prices long before "full capacity" has been reached and the "slack" taken up—if only for the reason that the "slack" is never uniform throughout industry. In a very short time, also, with the increase in

prices and the increase in the demand for labor, wages will start climbing too. Then, if the previous trouble was that most wages were already too high in relation to most prices, there will again be discoordination between wages and prices; and the Keynesian prescription will call for still further doses of government spending, deficits, and new money.

So the Keynesian medicine must lead to chronic deficits and chronic inflating of the money supply. This is precisely what we have had. It is no accident that we have just run eight annual deficits in succession, and that we have had 32 deficits in the last 38 years. It is no accident that the U. S. money supply (currency plus demand deposits) has been increased more than five- fold—from $36 billion at the end of 1939 to $199 billion in September, 1969. And so it is no accident that, in spite of a tremendous increase in industrial production in this thirty-year period, consumer prices have in- creased (to June, 1969) by 164 per cent.

Today the Federal Government is spending in a single year 269 times as much as in the fiscal year before the outbreak of World War I. The recent increase in annual spending is being attributed by government spokesmen to the cost of the war in Vietnam. Yet though in 1970 scheduled national defense expenditures are $35.6 billion greater than in 1960, total expenditures are $103.1 billion greater. This means that non-defense expenditures alone have increased $67.5 billion in the same period. It is not the war, but the determination to impose the welfare state, that has led to this incredible squandering.

A central fallacy of Keynesianism, as of all inflationary nostrums, is that they chronically confuse "income" in terms of paper money with real income in goods and services. It is possible to increase paper-money income to any amount by debasing the currency. But real income can only be increased by working harder or more efficiently, saving more, investing more, and producing more.

So let us not be too impressed by politicians who constantly cite the increase in dollar incomes, in dollar "gross national product," to show that we never had it so good. In Italy today, as a result of past inflations, it takes 624 lire to buy an American dollar. So anyone in Italy with an annual income or even total property worth more than $1,600 American dollars is already a millionaire in his own currency.

Missing the Point

2011-07-20T21:41:00.005-04:00

Paul Krugman posts videos from time to time on his blog that he thinks...well, for some reason Paul Krugman will post a video on his blog and tonight he picked "Don't Give Up" by Peter Gabriel and Kate Bush.

I can't know this for sure, but there is a very good chance that I have listened to this song more than any other human being alive. I know it was written about a man facing economic uncertainty. But the message of the song is, quite obviously, that one shouldn't give up. It is a testament to the resiliency of the human spirit and an homage to the beauty of friendship.

Press on in the face of hardship...

don't give up
'cause you have friends
don't give up
you're not the only one
don't give up
no reason to be ashamed
don't give up
you still have us
don't give up now
we're proud of who you are
don't give up
you know it's never been easy
don't give up
'cause I believe there's the a place
there's a place where we belong

Pretty simple and yet powerful. And beautiful.

Which is why it is very weird that it is used by someone of the likes of Paul Krugman. You see, you don't need an indomitable spirit or friends and family to love and support you when you're down. In Krugman's universe, the government is just a giant insurance company with an army, not an institution created by men to insure their rights to life liberty and the pursuit of happiness (which includes the pain and learning brought by failure).

In his world, it is not the "us" who support you and your friends and family who know and love you and care about you. It is the collective "us", who support you because, well, if we don't buck-up when the hat comes around we're going to end up in jail.

It is the compassion and support that is done by the force of law that is so beautiful.

So don't give up...because there are some rich people out there who have too much of their own money. We're going to take it from them and make everything all right.

It's Not a "Liquidity Trap"

2011-07-19T10:11:00.003-04:00

It is government interference in the market. Very well put here by Steve Wynn:

Unrealistic Spending Limits

2011-07-18T22:23:00.003-04:00

So among the back and forth between the Republicans and Democrats of raising the debt limit, it appears the Republican led House will pass a bill this week that President Obama has promised to veto.

Why?

Because, according to the article "the legislation would 'lead to severe cuts in Medicare and Social Security' and impose unrealistic limits on education spending. (emphasis added)

The federal government is out of money. And $14,290,000,000,000 in debt. Which isn't enough debt, which is why we are having this discussion to begin with. So under the circumstances, there really should be no such thing as an unrealistic spending limit on anything. Much less education, which is a) the responsibility of the states and local governments if it is the concern of the state at all, and b) not the responsibility of nor an authority granted to the federal government.

And it shows how far we've come when the problem is that the president is concerned about spending too little.

Good grief.

Yet Another Reason to Hate Hitler

2011-07-18T20:56:00.003-04:00

Larry Summers on the Charlie Rose show (≈21:50):

Never forget, never forget, and I think it’s very important for Democrats especially to remember this, that if Hitler had not come along, Franklin Roosevelt would have left office in 1941 with an unemployment rate in excess of 15 percent and an economic recovery strategy that had basically failed.

So, yeah...Hitler was a douche.

Another hat tip to Greg Mankiw.

Stand Up Economist

2011-07-17T21:04:00.000-04:00

Hat tip to Greg Mankiw

War is Peace; Freedom is Slavery; Ignorance is Strength

2011-07-11T22:16:00.004-04:00

and....

Medicare Saves Money

I'm just going to cut to the chase on this one. Professor Krugman notes that Medicare "spending per beneficiary" has risen 400% from 1969 to 2009 adjusted for inflation. He counters this with the "inflation adjusted premiums" on private insurance which has increased 700% over the same time period.

Notice he conflates "spending per beneficiary" with "private insurance premiums." Apples to apples would be spending per beneficiary of a patient with Medicare compared to a patient with private insurance. That's not what he's comparing and it is, at best, deceptive.

He fails to mention that any costs for patients that will not be covered by Medicare are passed along to other patients. Not that this should ever be a problem because states are complicit with health care providers to defraud the federal government (that is, us) to keep the money flowing.

Most importantly, private health insurance premiums are paid for by the individual and the firm he works for, whereas Medicare spending per beneficiary is a wealth transfer scheme, paid for by other people with money taken by the federal government under pain of imprisonment.

Professor Krugman is a disingenuous snake.

Parsing Time

2011-07-11T20:12:00.004-04:00

President Obama is engaging the Republicans in a game of chicken over the debt ceiling, insisting that tax increases be part of any deal. Regardless of the fact that back in 2009 he said, “the last thing you want to do is raise taxes in the middle of a recession because that would just suck up – take more demand out of the economy and put business further in a hole.” Which is similar in reasoning to something I posted right before he said it.

Now, just to clarify where I stand on a few things: restoring the marginal tax rates to pre-W levels is, in fact, a tax increase (even if it is only on those rates paid by those bastards who just have too much damn money). Whether you wrap it in the language of "letting them expire" or whatever else. If the government takes 35% of the money you earn over $379,150 in 2011 and then the next year the government takes 39% of that money, you are paying higher taxes. The government has effected a tax increase. Period. Full stop.

But the Republicans are playing a little fast and loose with the definition of "tax increase" themselves. Some Republicans, apparently under the sway of a little gnome named Grover Norquist, have said that eliminating tax subsidies, specifically those enjoyed by oil and gas companies, is the same thing as a tax increase. No, it isn't. Any special cut away for any firm or industry for whatever reason creates market distortions and inefficiencies. Yes, it is more efficient for a firm to spend its own money the best way it sees fit, but it is inefficient (along with unfair and immoral and it rightly gives the impression of bribery) for any firm or industry to be given any special favors regarding taxation by the legislature. Even if everyone thinks it's a good idea. This goes for oil companies, agribusiness, sugar producers, colleges and universities, mortgage holders. Everyone.

Now these are not "loopholes," they are intentional favors enacted by congressmen of both parties. For a fuller, and better, exposition on this matter please see this post by Kevin Williamson.

I really don't care how this is settled, because it will be a deal between and among politicians and the only ones who will end up getting screwed will be the rest of us.

This post was to be a lot longer, but I'm tired.

And Joe Biden is still an ass.

No Kidding?

2011-07-04T21:12:00.000-04:00

National Education Association, Major Teachers Union, Endorses Obama's Re-Election

On Not Knowing What You're Talking About

2011-06-26T22:45:00.008-04:00

Mr. Richard Stengel wrote a 5,000 word piece for Time magazine on the Constitution. I might be going out on a limb here, but this could well be the finest demonstration of what happens when a person writes so much about a topic that he knows absolutely nothing about.

Just for fun I will annotate the first four paragraphs of this specious exegesis. The original text is as is with my notes in bold:

Here are a few things the framers did not know about: World War II. DNA. Sexting. Airplanes. The atom. Television. Medicare. Collateralized debt obligations. The germ theory of disease. Miniskirts. The internal combustion engine. Computers. Antibiotics. Lady Gaga. This is the hook. Effective so far as it goes, but rife with foreboding about the juvenile line of reasoning that the author will employ. While doing research on a paper about obscenity in high school I remember reading a great line that went "asking what the founders would think about Deep Throat is like asking what they would think about helicopters." It would be an interesting conversation, to be sure, but utterly meaningless. None of the examples the author leads with give rise to any sort of constitutional question. But the founders were aware of the concepts of both technological innovation and, I'm sure, bad music.

People on the right and left constantly ask what the framers would say about some event that is happening today. What would the framers say about whether the drones over Libya constitute a violation of Article I, Section 8, which gives Congress the power to declare war? (I may be splitting hairs here, but using military means for policy ends is something the founders might have been able to wrap their heads around. The question becomes does the president have the authority to use the military without congressional approval. The answer is that the congress has the power of the purse strings and if the president were to misappropriate funds to carry out a military exercise that the congress has forbidden, the president has then committed an impeachable offense. Whether congress carries out the act of impeaching and removing the president is entirely up to the discretion of the congress.) Well, since George Washington didn't even dream that man could fly (The myth of Icarus predates Washington by about 17 centuries. Washington admired Seneca, but even Stoics can dream, no?), much less use a global-positioning satellite to aim a missile, it's hard to say what he would think (Nor does it matter, but a tiptoe through the Pacificus-Helvidius debates could give anyone with the time and desire to know what one is talking about an idea). What would the framers say about whether a tax on people who did not buy health insurance is an abuse of Congress's authority under the commerce clause? (The Commerce Clause was intended to allow the free flow of commerce between the states. Our modern understanding of our federated republic is ignorant of the parochialism that plagued the young nation. But why let the plain meaning of the words used (and a lack of anything added to the constitution to the contrary) get in the way. It is, very simply put, beyond the constitutional authority of congress to require a citizen to buy anything, even if it is for his own good.) Well, since James Madison did not know what health insurance was and doctors back then still used leeches (Still do, dumbass. This falls under the fallacious reasoning of the Whig Theory of History (& here) something done a long time ago must be foolish, and we are necessarily smarter today than we were in the past. It is also a false analogy, just because there have been advancements in our understanding of medicine doesn't mean that we haven't lost an appreciation for what our constitution says and does.), it's difficult to know what he would say. And what would Thomas Jefferson, a man who owned slaves and is believed to have fathered children with at least one of them (prurient and irrelevant), think about a half-white, half-black American President born in Hawaii (a state that did not exist)? Again, hard to say (Er, no it isn't. If we were to reanimate old TJ, give him a quick primer on the events from his death through the Civil War and to today and then show him the election returns from the 2008 election, he would probably say "congratulations." But again, it doesn't matter because history happened and Mr. Obama won the election. There is no constitutional controversy here.).

The framers were not gods and were not infallible (Textbook sophistry, no one has ever argued thus. Ever. To belabor this further would lend credence that this level of asininity does not deserve). Yes, they gave us, and the world, a blueprint for the protection of democratic freedoms — freedom of speech, assembly, religion (no, they didn't)— but they also gave us the idea that a black person was three-fifths of a human being (no, they didn't. The 3/5s compromise did not mean a black person was "3/5s" of a human being and this argument is as lazy as it is wrong. Here the actual words that were written will be helpful, "Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons." So saying that this clause makes slaves (n.b., not "blacks") 3/5s of a person is akin to saying that the constitution made the Indians unpersons. This was a hedge against Southern hegemony specifically on the notion of slavery and was done to hasten the day that slavery would be abolished, not to forestall it), that women were not allowed to vote (neither the founders (in convention) nor the constitution said any such thing) and that South Dakota should have the same number of Senators as California, which is kind of crazy (Why? Does the author not understand bicameral republicanism? Or simply not like the fact that those rubes in South Dakota are entitled to the same representation as those enlightened superhumans who live in California? And I should point out that neither South Dakota nor California existed at the time; both joined the union knowing full well what the rules of the game were, and the Connecticut Compromise is one of the finest examples of political compromise on the history of mankind. Crazy indeed.). And I'm not even going to mention the Electoral College (Why not? I'm going to go out on a limb and posit that it might be because the author doesn't understand how it works or why the founders thought it important (though hardly essential).). They did not give us income taxes (Thankfully). Or Prohibition (See, they were smart after all). Those came later (Perhaps, in the case of the former, they realized that the fruits of one's labor were rightly that person's property and in the latter that attempts to regulate individual behavior were a fool's errand. Regardless, at least it was realized at some point that increases in the authority of the government did require amending the constitution according to the established protocols.).

Americans have debated the Constitution since the day it was signed, but seldom have so many disagreed so fiercely about so much (First clause is indubitably correct, the latter is ahistorical stupidity). Would it be unconstitutional to default on our debt? (No.) Should we have a balanced-budget amendment? (Academic and moot, if enough people want to do it, the mechanism is there to do it. The founders did not find it necessary, for whatever reason, to include such a requirement. Though it is doubtful that they would be comfortable with deficits quite like we have today.) Is it constitutional to ask illegal immigrants to carry documents? (Maybe, maybe not, but it certainly is constitutional to control migration, so far as it is practicable, into sovereign borders.) The past decade, beginning with the disputed election of 2000, has been a long national civics class about what the Constitution means — and how much it still matters. For eight years under George W. Bush, the nation wrestled with the balance between privacy and security (an issue the framers contended with) while the left portrayed the country as moving toward tyranny (an argument conspicuously dropped even though the Obama administration has carried on virtually all of Bush's policies and even gone far beyond anything Bush or his henchmen ever considered.). For the past three years under President Obama, we have weighed issues of individual freedom vs. government control while the right has portrayed the country as moving toward a socialist welfare state (Here the author provides a link to tea-party protesters carrying signs; no reasoned examination of the incontrovertible argument that the government has increased the public provision of non-public goods (what socialism is), just an assertion supported by a link to eight pictures taken during a protest march. Smell that? That's modern American journalism).

I could go on, but really, what's the point? I encourage you to read the whole thing. The only thing any honest reading of the article will present you with is the knowledge that the author doesn't know what he's talking about.

The Wonderfulness of Always Being Right

2011-06-22T21:10:00.002-04:00

I'm always interested in books that other people like. I don't think it gives any significant insight into someone's soul or anything like that. Perhaps it does a little. But I just like to see what other people are reading, and a little blurb as to why or what they got out of it is always interesting. To me anyway.
And I don't limit this interest only to those with whom I agree. Which brings us to the crux of the post...
Our good friend Krugman had an interview where he was to name his five favorite books. I already knew about his affinity for Asimov's Foundation books. But it still creeps me out, his rationale. He admires the psychohistorians in the story, which is fine so far as it goes. But then he admits "I was probably 16 when I read it and I thought, 'I want to be one of those guys!' Unfortunately we don’t have anything like that and economics is the closest I could get."

The study and application of economics can save civilization. Especially if you're Paul Krugman.

But other parts of the interview stood out to me also.

"The purpose is actually to make a better world. So yes, I do feel that I am trying to do something that goes beyond just the analysis." Sorry, bud, but I can't think of anything you have done that has made the world a better place. Your work on international trade was great good stuff. But it hasn't changed the world in any significant way. And considering your articles trade mostly in half-truths, sanctimonious pablum and argumentum ad hominem, how exactly would this make the world a better place?

"Then I read Hume’s Enquiry, this wonderful, humane book saying that nobody has all the answers. What we know is what we have evidence for. We do the best we can, but anybody who claims to be able to deduce or have revelation about The Truth – with both Ts capitalised – is wrong. It doesn’t work that way. The only reasonable way to approach life is with an attitude of humane skepticism." Unless, of course, you are skeptical about Keynesian economics, progressive taxation, government intervention in the market or of the concept that the government is just a big insurance company with an army. Because if you don't agree with any of those things, then you're an idiot or you hate other people or both.

But the best is:

Wouldn’t some people accuse you of having an extremely strong belief system? Isn’t there a sense among liberals that, “We’re in the right so we don’t have to pay too much attention to conservative or Republican arguments”?

In my experience with these things – which I find both within economics and more broadly – is that if you ask a liberal or a saltwater economist, “What would somebody on the other side of this divide say here? What would their version of it be?” A liberal can do that. A liberal can talk coherently about what the conservative view is because people like me actually do listen. We don’t think it’s right, but we pay enough attention to see what the other person is trying to get at. The reverse is not true. You try to get someone who is fiercely anti-Keynesian to even explain what a Keynesian economic argument is, they can’t do it. They can’t get it remotely right. Or if you ask a conservative, “What do liberals want?” You get this bizarre stuff – for example, that liberals want everybody to ride trains, because it makes people more susceptible to collectivism. You just have to look at the realities of the way each side talks and what they know. One side of the picture is open-minded and skeptical. We have views that are different, but they’re arrived at through paying attention. The other side has dogmatic views.

So the people, those presumptuous fools, who don't agree with Krugman and the like, those are the ones who are closed-minded. Progressives, Keynesians, et al. are the reasonable ones. They have perused all of the evidence and know the arguments coming and going, weighing everything carefully and judiciously and come to their convictions honestly. The people that don't agree with us? It is obvious that they haven't done all of the same things that we have because they don't agree with us. You see, we're right. We know we're right because we know what we think and what the others think (or at least have been told to think...dogmatically). We came to our conclusions after thinking.

I can't believe that I can still be surprised by the man's obnoxiousness, but there you have it.

Same as He Ever Was

2011-06-20T07:09:00.001-04:00

In case you thought being relieved of his congressional duties would have restored Arlen Specter to sanity...well, it hasn't.

Class Act

2011-06-18T09:29:00.001-04:00

I saw this link on reason.

Those union guys are a class act.

What the Media Cares About

2011-06-17T08:11:00.002-04:00

Jason Linkins at the Huffington Post wants to give "the media" a hard time about not giving Nancy Pelosi due respect and taking her seriously. She wanted to talk about "jobs" and the media wanted to talk about a congressman from her caucus that took pictures of his penis and sent them to young women to whom he wasn't married. Oh, and then he lied about it to everyone, including the president, for a week and is now getting therapy. Weiner of course resigned later in the day, but that is after Pelosi's press conference.

Based on her performance as Speaker of the House, I would think that we were all on the same page and for that reason alone no one would pay any respect to Ms. Pelosi or take her seriously from here on out, but I guess I was wrong.

Regardless, during her speech Pelosi says, "It is day 163, 163 days since the Republicans have taken over the majority of the House of Representatives--almost 6 months, and still no jobs bill on the floor."

Who knew that reducing unemployment was as simple as passing a bill that says "we make new jobs" and voila!

I know who didn't know that, Speaker of the House Pelosi. You see, she was in charge of the House of Representatives from January 2007 to January 2011 and in that time the unemployment rate went from 4.6% to 9.6%. Four years is 1460 days. She must have shepherded though a whole bunch of "jobless" bills in that time, no?

But she did help pass a $750 billion "stimulus" package that failed to stimulate the economy (worsened the situation, actually) and drove unemployment higher.

Mr. Linkins doesn't want any of this brought up, mind you. He wants to upbraid the media for being voyeuristic and targeting the lowest common denominator.

So he is surprised people don't take Pelosi seriously and at the baseness of the media.

This says more to the foolishness of Mr. Linkins than it does about the sorry state of society.

Klavan on Ryan v Obama

2011-06-17T07:56:00.002-04:00

I thought this was pretty good, especially his descriptions of Keynesian thoughts. I'm not necessarily 100% sold on Ryan's plan (it's growth estimations are complete fiction, but then, so are all estimations in politics), but it is certainly preferable to anything the Democrats have come up with.

How Big is Big Enough?

2011-06-06T22:53:00.004-04:00

The great thing about Keynesian economics is that it purports to treat the thoroughly social science of economics as if it were a "hard" science like physics. Every problem can be expressed as an equation. The individual actions of millions of people can be expressed with self-fulfilling identities and oh-so-elegant graphs.

The funny part is that the economists come up with equations after the fact in order to explained what just happened, none of which is, ceteris paribus, repeatable. This is like scientists getting thrilled about predicting a solar eclipse after it happened. And then showing, in no uncertain terms, when it will happen again.

And being completely wrong.

Except, just like their brethren who pretend to predict the weather, economists never seem to be held accountable for all of the times that they are not just wrong, but fabulously wrong.

For illustration, we will take as a case in point the Smartest Man in the Universe, Professor Paul Krugman, Nobel laureate and professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University.

Dr. Krugman has said time and again that the reason that the stimulus passed by President Obama and the Democratic congress in 2009 didn't work was because it was too darn small. To refresh your memories, the administration advocated for and received a "stimulus" package that totaled $787 billion. This was less than 12 months after the Bush administration asked for and received a stimulus package of $152 billion. For those of you at home, that is $939 billion in spending and tax "stimulus" and does not include the two rounds of quantitative easing and other monetary tricks and levers that have been pulled by the Fed, nor does it include the bailouts of the auto industry or the TARP bailouts. Remember also that we were told (by very smart people) that absent this second stimulus package, the unemployment rate would climb up to 9% through the first three quarters of 2010 before edging down slightly and moving toward the "natural" unemployment rate of about 5%. If the stimulus were passed, though, unemployment would top out at about 7.9% in the 3rd quarter of 2009 and then drop slowly towards the natural rate.

I don't think I'm being too out of line to note that we are tip-toeing toward the end of the 2nd quarter of 2011 and unemployment is at 9.1%. So that would mean, not to put too fine a point on it, that they were astoundingly wrong in their projections.

Sherman, set the WABAC machine for November 2008. Our friend Krugman said the stimulus needed to be...how big, Dr. Krugman? "My own back-of-the-envelope calculations say that the package should be huge, on the order of $600 billion." This was right after President Hope & Change was elected. And, as noted, the stimulus was significantly larger than what the Nobel laureate said it would need to be. Which was already "huge."

But 55 days later, it was too small. And this time, after the basic amount of the stimulus was hashed out, he had some math to show that it just wasn't going to cut it. Where was the math in November? Who knows?

But I do know this...Keynesian economics has been proven wrong. Again. For what would appear to be the thousandth time. Government spending does not "boost" demand. It takes it from elsewhere. What does Dr. Krugman say we should do now? Cut government interference in the market and let prices settle and clear?

Nope. Spend more money. Because even though deficit spending has all sorts of negative consequences, "the United States is able to borrow as of today at 3% interest rates for ten years." He wants to have another round of stimulus, equal to the first round. A total of $1.5 trillion of spending. What should the money that must taken from future generations be spent on? WPA style programs. "Hire a lot of people to people fill potholes." Please see here from about 16:00 to 17:30. The whole thing is a train wreck, and if these gentlemen are really influencing policy (they are), we are doomed. It should be noted that the US economy did rather poorly between Summer 1935 and early winter 1941.

The notion that the "stimulus wasn't big enough" is non-falsifiable. It is, in my opinion, wrong and no government intervention can mitigate or cure an economic bust. But I will readily admit that this is an opinion. So is Krugman's logic. But he doesn't see it that way. None of the Keynesians (and a lot of the monetarists, too) see it that way. Something that is non-falsifiable is not testable. If something can't be tested under controlled circumstances, it can't be proven true or false. That means it isn't science. And I don't care how many equations you come up with after the fact.

Sean Penn is Still an Idiot

2011-06-06T22:03:00.003-04:00

I saw this by would-be diplomat Sean Penn. Some highlights:

There has been a systemic barrage of misreporting and context-shifting within the U.S. media and espoused by many U.S. Representatives relative to Venezuela and its democratically elected President Hugo Chavez.
The American people have grown accustomed to hearing the Venezuelan president referred to as a dictator, not only by media representatives but by members of the leadership in both parties. This is a defamation, not only to President Chavez, but also to the majority of Venezuelan people, poor people who have elected him president time and time again.
a president elected by the impoverished and at the service of the Venezuelan constitution, a document not unlike our own.
He is a flamboyant, passionate leader. And while our own cultural and constitutional conditioning would lead us to serious concerns in the powers of his office, there must be an informed adjustment to give our analyses a context that may extend beyond our borders.

(All emphasis added by me)

I am fortunate to know some people that live in Venezuela. People that are subject to the dictator, Hugo Chavez. There is no other title that he is worthy of. He is not democratically elected, and he is certainly not returned to office out of the love of his imprisoned subjects. He is, second to the Brothers Castro, the embodiment of what happens to a vibrant, diverse and hard-working people, economy and nation when subject to socialism and Marxian ideals (apparently the kind that Thomas Friedman finds so appealing).

The contest between who is more repulsive is a tight one. Obviously Chavez himself is a despicable person who maintains an iron grip on control of his country while its people suffer at the hand of his idiotic policies borne of his megalomania. Critical members of the media and any nascent political opposition frequently disappear. He is re-elected because there is no choice. It's pretty easy to win a race when you're the only one running, you write the rules and officiate the match all in one. A nuance perhaps lost on Mr. Penn.

Is Mr. Penn more repulsive than Mr. Chavez? Which is worse, the bloodthirsty dictator or his allegedly educated and enlightened actor apologist?

Chavez has the actual blood on his hands, so he is obviously worse. But Penn fights the good fight. And if he keeps writing as poorly as in this piece and this other golden oldie, he might start to nudge his good buddy Hugo off the pedestal.

Eh, Canada?

2011-06-04T23:00:00.003-04:00

Not to pile on, but our friend Professor Krugman also says that Medicare in the United States is "sustainable" because Medicare in Canada is sustainable. Let's get one thing out of the way quickly and agree with the premise that if you increase taxes and restrict consumer choices ("less open-ended and more serious about cost control" is how the Super Genius euphemistically presents it in his piece), then the program can be shown to be sustainable. On paper. I will glide by the fact that Canada has no need for any significant defense spending because she happens to enjoy the rather extraordinary free rider benefit of being attached to America.

I will instead focus on this line: "Now, Canadian health care isn’t perfect — but it’s not bad, and Canadians are happier with their system than we are with ours."

There are a few problems with this position. First, how exactly can we measure this? I'm sure there are polls out there, but seriously think about how this can be compared in any meaningful sense. To be able to have a preference, one needs to be rather familiar with both options. Just showing data that says x% of Americans are "somewhat dissatisfied" with healthcare compared to y% of Canadians is useless as far as comparison goes. I may not like my broadband provider. But that doesn't mean I necessarily prefer another broadband provider with which I have absolutely no familiarity, right?

Also, there also this:

No, It isn't

2011-06-04T21:44:00.003-04:00

I've noticed a little meme on the liberal/progressive/socialist end of the spectrum that is being used as a cudgel in the debate about the proper size and scope of government. I first noticed this with Professor Krugman (see here and here) and saw it somewhere along the line repeated by the captain of the JV squad, Ezra Klein. That the federal government "is an insurance company with an army."

No it isn't. At least the United States of America isn't. It is extremely important to remember that I am not a professional historian, political scientist, lawyer or genius polemicist writing for the New York Times. But I can read. And I have read this, the constitution of the United States. I've read a couple books about the constitution. I've even sloughed through a couple Supreme Court decisions. I've given more than a passing glance at Hobbes, Locke and even Rousseau, along with some other works on political science and political economy. I've read some of the Federalist Papers and even a few of the Anti-Federalist Papers. I even have a copy of Madison's notes on the Convention. I'm not listing this stuff to make it look like I'm smart. Because you don't have to be smart to have read these things (and truth be told, I've forgotten most of what I've read, but I think I still have the gist of most of it and I also still have most of the texts). Thanks to Google Books I can state categorically that the word "insurance" does not appear in The Social Contract, Leviathan or Two Treatises on Government. The word "insurance" does not appear in the constitution and the matter was not broached during the convention. It is not mentioned in any of the amendments passed since ratification.

The point being that the government is not an insurance company. It isn't supposed to be one, anyway. And if it were to try and be one, it would carry out that function rather poorly and it has). But none of that matters to the epic minds that embrace the notion of state control of just about everything. Not when the government can inflate the currency, increase taxes, bastardize the interest rates and deny that long-run expectations of catastrophic outcomes are not rational considerations in economic decisions today*.

But merely stating as if it is a given fact that the government is a huge insurance company with an army, then anyone who disagrees with the basic premise is immediately marginalized.

"What do you mean the government isn't an insurance company? What would you do with Medicare, Medicaid and Social Security? Who would provide health insurance for the indigent, infirm and elderly? Who would provide retirement funds for retirees?"

Are we that far gone as a society that we don't realize that a human being's first responsibility is to himself? That this isn't some Randian/Objectivist homage to selfishness but simple common sense? Is it that much of an anathema to speculate that people would be able to make arrangements on their own, voluntarily, to take care of themselves?

Because they can't afford it? Ummm, guess what? Neither can the government. Because when you give someone something for nothing, they tend to want more of it. That is not greed, that is normal. When people don't have to apply marginal utility preferences, when scarcity is removed from the equation by the deus ex machina of government, costs will explode.

Here's another meme that has the added benefit of being true: the government doesn't produce anything, it merely moves resources from one area of the market to another. Anything "given" to one must first be taken from another. When this is done under penalty of law, this is not compassion or charity, it is bullying and theft.

When legislators and bureaucrats (or New York Times columnists) presume to know how to direct resources to more efficient (or humanitarian) outcomes, it can be difficult to prove to them that they are wrong.

But they are wrong. And closing your eyes and repeating silly, and untrue, mantras over and over again won't change that.

*Banks, firms and individuals are not hoarding (i.e. "not not spending") money due to uncertainty and concerns over long-run considerations, both of which are usually (but not always) created by government interference in the market. It's a "liquidity trap" that can only be countered by, yep, more government spending. If this seems like an idiotic concept, then congratulations are in order. You fully understand Keynesian economics and why it doesn't work.

Vonnegut Graphs Fiction

2011-05-26T12:27:00.002-04:00

from Robert Krulwich on NPR.

More Funny Math

2011-05-23T19:03:00.004-04:00

I'll skip the humorous tut-tutting Professor Krugman does in this post about another person's lack of civility. I'll disregard his almost pathological need to misrepresent facts and insult the intelligence and good faith of those not smart enough to agree with him. Par for the course.

I'll focus on one tidbit, Krugman writing: "He repeats the idea that nobody collected benefits in the beginning because life expectancy at birth was only 63 (life expectancy at age 65, which is what matters, was almost 80 for women and 78 for men)." emphasis added.

Retirement was set at 65 when Social Security was started because you were expected to die by then. Yes, it was well known that if you lived to 65, which you weren't expected to do, then the actuaries did account for the fact that you would live a few years longer. Good genes, non-risky behavior, diet and, again, good genes all played a roll in deciding how long after 65 you would live had you made it. But, and here's a very important point that Professor Super Genius* not only knows but purposely and maliciously misrepresents, you were not expected to live to see the age of 65. A majority of people would live (to 63), working usually 2/3 of that time and having a percentage of their wages taken from them and given to those lucky enough to keep going past the median mortality rate. This number has gone up significantly over the decades since it was instituted while we have only nibbled around the "retirement" age.

Why? Because it is politically risky to mess with a program where you take a little bit of money from a whole lot of people (via the payroll tax) and give it to others, but under the guise of the federal government "saving" it for you. An idea that was known all to well by the man we have to thank for this poorly run Ponzi scheme, Franklin Delano Roosevelt:

"I guess you’re right on the economics, but those taxes were never a problem of economics. They were politics all the way through. We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my Social Security program."**

Krugman knows he is full of blarney (trying to keep it clean). And FDR knew he was creating a system that would be impossible, politically, to fix. It was established to create a political class of citizens who would then be beholden to and dependent upon, the federal government. The workers will feel trapped into continued support because of the money already taken from them and "invested" into the system.

**Arthur M. Schlesinger, Jr., The Age of Roosevelt, vol. 2, The Coming of the New Deal (Boston: Houghton Mifflin, 1958), p. 308-309

New Flash...

2011-05-23T14:19:00.002-04:00

Teachers Unions work for the benefit of the teachers and not the children. No kidding.

More on Teaching

2011-05-06T06:26:00.004-04:00

An old friend posted a link to this article published by the New York Times. I take exception to some of the arguments made by the authors, specifically that simply paying teachers more would increase performance. A similar idea was floated by the mayor of Newark, NJ last fall, (link and comments here).

Wages are set by the market, and they are already distorted by the teachers' unions. Arbitrarily and artificially inflating wages would no more lead to better results in the classroom than increased wages for soldiers would have won Vietnam (to use the authors' analogy to the military).

The 20% of teachers who leave urban school districts (no source for the data is provided) are replaced by others willing and able to do the job at the wage provided.

The authors cite the old trope of equivalency between other jobs for which "degrees are required." Since when and why are bachelor's degrees required to teach elementary education? When was a primary or secondary teaching job ever considered a sole breadwinner job?

They also conflate aggregates and apply them to specifics (The average starting salary is $39,000; the average ending salary — after 25 years in the profession — is $67,000. This prices teachers out of home ownership in 32 metropolitan areas, and makes raising a family on one salary near impossible.) First, which salary prices the teacher out of home ownership, the beginning or the final? Teachers in small, rural communities, of which this country has thousands, probably don't make enough to purchase an average home in LA or New York City where the supply of housing is limited. But then, most of the people who also live and work in those communities probably can't afford to buy a home in those 32 metropolitan areas (again, this is tough to tell though, because the authors don't cite a source for the data).

Further, I can only say that in my school district (not affluent) teachers with more than 25 years make more than $100k. This doesn't include the fact that, yes, they do get summers off and have a pension that is nonexistent in the private working world, guaranteed by current and future taxpayers. They also went on strike a few years ago because the district wanted them to contribute 7% to their healthcare costs, up from 2%. This, according to the union and therefore the teachers that refused to work, amounted to an unacceptable "wage cut" because the automatic wage increases in the proposed contract wouldn't be a bottom line increase in wages.

Oh, and they are about to go on strike again.

I am not "anti-teacher." There is an obvious advantage to having personnel around who have experience and wisdom and who know how to do a specific job better than someone with identical training and desire but no experience. There is also the added benefit of the mentoring that takes place. But there is also a limit on that cost, and the wage structure in many school districts exceeds that cost.

To go back to the authors contention that we don't blame the soldiers for failure during war, I would agree. We blame the government. Schools are not performing well. Performance has declined (in aggregate) while costs have increased at a pace far ahead of inflation. So, let's blame the government for getting involved in education. I know a lot of public school teachers, and they all argue that tenure (dismissed as "worthy of debate" in the piece) is necessary because of the political, and thus capricious, nature of school boards. This also is an argument for eliminating government as the provider for this particular service.

Let's allow parents to decide where to send their children. Allow them to decide where they feel they would get the best return on their investment. This would allow for many more schools. Allowing more people who want to teach to do so. Teaching is a noble profession; this would lead to more people teaching. This is good, no? It would also lead to reduced costs for taxpayers.

Teachers' unions are against this because they know that even if teachers decide to unionize at a private institution, they will not be able to get the wages and benefits they can from a purely public-run institution because, by necessity, privately held firms are budgeted and run more efficiently. Or they disappear. This doesn't mean public school have to disappear, but the unions don't want the option of sending a child to another school because they know which option most parents would take.

Competition and choice will improve the American education system. Merely throwing more money at the problem will not fix it. The logic employed by the authors is fatally flawed.

Who's Afraid of Wal-Mart?

2011-04-29T23:21:00.001-04:00

Keynes v Hayek, Round Two

2011-04-28T06:02:00.002-04:00

This is a follow-up to their previous epic battle:

word, Freddy.

Maybe I am as Think as you Dumb I am.

2011-04-27T11:27:00.004-04:00

According to Dana Milbank of the Washington Post, President Obama is just too smart and honest to do his job well. This is probably one of the most nauseating examples of suckling toadyism that I can ever recall seeing.

Milbank seeks "a template to understand the enigmatic president." It is pretty clear from the outset that Milbank is seeking no such thing, he has a template to describe the president. And I don't know were "enigmatic" is coming from. Obama may or may not be any number of things, but he sure as hell isn't an enigma.

We are treated to phrases like:

“He is a brilliant social and political analyst, which makes it harder for him to play hardball or to bluff.” (quoting a professor of psychology who, I think it can be safely assumed, never met much less treated analyzed the brilliant social and political analyst-in-chief).

Obama’s strengths and weaknesses come from his high degree of “integrative complexity”

Though Tetlock hasn’t applied his methodology to Obama, the 44th president would seem to be the very model of the complex thinker. (Tetlock is another of the experts who at least is honest enough to admit he hasn't actually, you know, studied this or anything, but that Obama is still the "very model" of this example).

Obama’s capacity for complex thought can become a liability, so, too, can his cool rationality. (So not only is he more intelligent than people dumb enough to disagree with him, he is more sane, also).

We also learn in the article that Winston Churchill was simple-minded (who knew!).

Debates about impartiality or bias in the media are tiresome. Yes, there is bias and no, it isn't as bad as anyone thinks. But this sycophantic slobbering is a bridge too far and whoever edits Milbank and the Washington Post really should be ashamed that this was allowed even to run.

Jonah Goldberg chimes in on this as well.

Funny Math

2011-04-25T11:28:00.005-04:00

Glutton for punishment that I am, I was looking over The Universe's Smartest Man's blog and stumbled upon this little gem, titled Zombie Tax Lies (the idea being that the concept should be dead, but it keeps coming back, get it?).

His ire was gotten up, or rekindled anyway, by this post by someone named Jonathan Chait and this little ditty put out by an organization known as Citizens for Tax Justice.

Here's the re-cap: usually about tax time every year, people point out that the "wealthy" pay more in taxes; other people point out that, 1) that's only fair, because the wealthy steal their wealth from the surplus value of the laborers that they exploit and, 2) the wealthy really don't pay any taxes and really should be paying much much more, and the lying cheating bastards really should feel honored to do so.

The Smartest Man in the Universe, Mr. Chait and the Citizens for Tax Justice all fall into the "other people" category, and all throw out the same tortured logic to prove their point.

They do not contest that the top 1% of earners pay 38% of the take on federal income taxes, though none of them repeat the exact statistic because it would rightly disgust anyone of sound mind that 1% of the population would pay more than a third of the income tax collected. They all use the dodge that the federal income tax isn't the only tax paid. That state taxes and the "contributions" made to social security and medicare are regressive and therefore spread the tax burden more equitably...which of course justifies their belief that the rich aren't paying enough and should pay more.

On this, two points. First, the way progressives, liberal, communists, socialists, Marxists and Leninists use the word "regressive" when it come to taxation is fatuous. The thinking that someone making $20,000/year and pays 12.5% in social security taxes pays a higher burden than someone making $100,000/year and pays 12.5% in social security tax is regressive completely disregards what regressive taxes are: a decreasing rate as the base increases. Flat taxes are not regressive. Now, if in the above example the person making $20,000/year pays a $1,000 tax and the person making $100,000 pays a $1,000 tax, that would be regressive. People making more than $109,000 don't have to pay social security and medicare taxes, er, sorry, contributions because the benefits paid out are also capped.

Second, the federal budget is bigger than state and local budgets. Paying 38% of $1,366,241,000,000, which is $519,171,580,000*, is a whole lot more than whatever is paid in state taxes by the two lowest quintiles of income distribution. In the chart (above) that accompanies the three articles by the three "make them pay more" group, the top three quintiles still pay more as a percentage of all tax collected than they collect in total income, even with them gerrymandering the numbers in favor of their own argument.

No kidding. This is the evidence used to rebut the argument that the rich don't pay too much in taxes. This is the zombie that the Smartest Man in the Universe, for all of his intelligence, just can't slay. Why? Because you, you dolt, just aren't as smart as he and his friends are.

*numbers are from 2007, via wikipedia here.

Keynes on Keynesianism

2011-04-22T07:18:00.001-04:00

‎"The theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire. This is one of the reasons that justifies the fact that I call my theory a general theory."

--John Maynard Keynes, from the forward to the 1936 German Edition of his General Theory of Employment, Interest and Money

n.b.-this was written in 1936 when some little totalitarian dick named Hitler was running things in Germany. Giving proof that Keynesianism, properly understood, works best in a totalitarian system; where government is the master and the people are the servants.

When WE do it, it's OK

2011-04-21T08:22:00.001-04:00

Imagine a company were publicly to express confidence in its future earnings and ability to meet its debt obligations while privately pressuring one of the major ratings agencies not to downgrade its bond rating. We would have a term for that, and it would be securities fraud. But nary an eye is blinked when Uncle Sam does it.

15 April

2011-04-15T11:44:00.006-04:00

I don't like taxes. Any of them. And I'm put off by people who are either ambivalent about them or think they are a good idea. A necessary evil, perhaps, but the operative word would be evil over necessary. I know government needs revenue in order to function, and though I admire and respect Murray Rothbard, I am not an anarchist. Anarchy may be a fine aspiration (mankind living harmoniously, with respect to human, civil and property rights without the need for government), but I don't think it realistic.

The establishment of government means that we all have to give up some liberty in exchange for order. But since some liberty must be sacrificed, and since liberty is something held dear, we should keep the amount we must sacrifice to the absolute minimum. And this requires keeping government to an absolute minimum. Which would keep the amount of revenue needed for the government to function as low as possible. Which would have the happy consequence of keeping taxes as low as possible.

People who say "I would gladly pay more in taxes" are, to put it mildly, idiots. That means that they quite obviously receive too much compensation for the work they do. Secondly, anyone who wishes to pay more in taxes can. Have your employer withhold the maximum amount from your pay and don't claim any deductions. And don't cash your refund check. It is obvious that anyone who would do these things is not a rational actor. And I don't want irrational people telling me what to do with my money.

Then we have those who say the "rich" should pay their "fair share." I have said it before and I will say it again: the easiest thing in the world to do is to spend someone else's money. Milton Friedman devotes a chapter to this in his book Free to Choose (Chapter 4, From Cradle to Grave, please see the video that accompanies the chapter here). Not only is it easy to spend someone else's money, it is just as easy to waste someone else's money. And government, every single government that has ever existed, proves exceptionally good at this.

So when you couple this almost genetic compulsion to waste money, even when the task at hand is a legitimate function of government and works to the best interest of all participants with no negative externalities, with the propensity to spend more money than taken in, you have what is known as a problem. And folks, we got a big problem. And the problem has gotten as big as it is because government, and people's expectations of government, has become unchained from what its legitimate function is.

In his speech on Wednesday, 13 April 2011, President Obama pointed out that he doesn't care for the spending plan for the 2012 budget laid out by the Republicans because "their vision is less about reducing the deficit than it is about changing the basic social compact in America."

Really?

Social Security was started in 1935 and Medicare and Medicaid were started in 1965, 76 and 46 years respectively. The country is 235 years old and the constitution is 222 years old. I don't think a transfer program that is one-month younger than my step-father can be considered a more important social compact than the constitution of the United States.

Realizing that people not only are responsible for themselves, but actually can be responsible for themselves in an anathema to most politicians, because what then would the politician be good for if not taking from the many to give to the few in order to remain in office?

Another point. Obama also said in his speech: "Part of this American belief that we are all connected also expresses itself in a conviction that each one of us deserves some basic measure of security. We recognize that no matter how responsibly we live our lives, hard times or bad luck, a crippling illness or a layoff, may strike any one of us. 'There but for the grace of God go I,' we say to ourselves, and so we contribute to programs like Medicare and Social Security[.]" Pleasing rhetoric, no doubt, but utter nonsense.

No one I know "contributes" anything to Social Security, Medicare or Medicaid. It is taken from your pay by your employer and remitted to the government quarterly, along with the employer's matching "contribution" under penalty of law. Things tight this quarter? Need to pass on making that "contribution"? Guess what happens? You won't be discussing the virtues of government mandated compassion with the fellow with the pleasing rhetoric. You will be faced with fines and penalties and liens on any real estate you own. Decide to keep too much of your own money and you're looking at accommodations at some other federally run resorts.

We don't "give" to Social Security, Medicare and Medicaid because we are compassionate towards our fellow citizens. We give to churches, the Red Cross, food pantries. We give our time and effort and money to others. That is charity. That is compassion. Because it is voluntary, it is not good, it is great. It is a very small step towards that Utopia of Anarchy. It is also something people have done since people have been around. It even precedes people. Evidence of altruistic behavior can be seen throughout the animal kingdom. But we "give" to these government entities, the ones that will spend the money foolishly while increasing the soul-deadening bureaucracy, because if we don't we will lose more money, lose our homes, go to jail or all three.

These programs throw the government-liberty balance completely out of whack.

More Fallacies

2011-04-09T07:25:00.002-04:00

This interview with Robert Reich, for Labor Secretary for President Clinton, encapsulates nicely what liberals and Keynesians continue to get wrong about economics. First, the 12 year old host of the program states that we were "brought to the brink" over what amounts to 1% of federal spending. I am becoming more and more amused by this argument, which boils down to "we can't cut this program because it costs too little to make a difference." Well, if it costs so little, then they won't miss the money, right? If what Planned Parenthood or NPR does is so significant, then as private organizations they are responsible for covering their own nut. The conservatives and Republicans use this fatuous line of reasoning when it comes to international aid, pointing out how little it is in the grand scheme of the budget (which if you only count the money distributed through the State Department is true, but what they don't mention is the aid funneled through the Defense Department generally and the CIA specifically, which raises that number significantly). The point for both sides remains that if the amount being cut is so small, then why should we fight it? Not why should we make the cut, no?

Next, we come to the argument made by Reich that attempts to balance the budget are what exacerbated the Great Depression in 1937. This silly notion has been disproved time and again. If deficit spending worked and was actually able to boost "aggregate demand", balancing the budget eight years after the depression started wouldn't have been an issue because there had been nothing but federal intervention and deficit spending since the crash in 1929 (I am surprised that no one brought up Hoover and his alleged do-nothingness for good measure). Government spending can not "make up" for slouching consumer demand. It merely crowds out private investment in less efficient production. Any would-be gain is lost in diminished efficiency and higher borrowing costs, not to mention higher taxes.

Then there is the argument that now is not the time to cut spending. Ostensibly because government is needed to boost demand. This assumes that liberals and democrats would be enthusiastic supporters of spending cuts when things are going well. But of course, the argument then is either "well, we have the money, why not spend it" and "if we don't spend this money on these programs, aggregate demand will sag thus causing a recession." This would appear to be having it both ways, no?

What it boils down to is that congress was given authority to handle a few things. And bribing foreign governments and making sure the folks in some remote corner of Wyoming can hear Morning Edition aren't among them. The responsibility of congress should be to keep spending and taxes as low as possible (and please stop comparing our tax rates to other countries, I don't care if people in Norway are just ducky with an effective 70% tax rate, that doesn't mean I have to). The burden for any new proposed spending measure should be if it falls clearly within congress' authority.

Visit msnbc.com for breaking news, world news, and news about the economy

Why Shouldn't You Be Able to Drink on the Job?

2011-03-15T11:29:00.003-04:00

My wife and I saw this a few weeks age and got a nice chuckle.

Fox 29 Investigates: Drinking Postmen : MyFoxPHILLY.com

Unsurprisingly, their union is fighting their dismissal.

Whatever Would We Do Without Cowboy Poetry

2011-03-08T15:01:00.003-05:00

Why shouldn't we slash federal spending? Because necessary federal programs would be cut. How necessary? Well, I'll let senate majority leader Harry Reid explain (italics added):

“The mean-spirited bill, H.R. 1 … eliminates the National Endowment of the Humanities, National Endowment of the Arts,” said Reid. “These programs create jobs. The National Endowment of the Humanities is the reason we have in northern Nevada every January a cowboy poetry festival. Had that program not been around, the tens of thousands of people who come there every year would not exist.”

That's right, not only would the world have to struggle along without Nevada's world-renown cowboy poetry festival, but the existence of any would be attendees would be snuffed out. Tens of thousands of people!

Malapropism of simply hyperbole? Who knows? But if cutting the budget means that the country would be without tens of thousands of people who would flock to Nevada for a cowboy poetry festival (and not just the cowboy poetry festival), then I say let's start cutting.

Sigh

2011-03-07T20:05:00.001-05:00

I knew Marxism and Marxist were still around. But I was pretty sure Marx was dead. I was wrong.

Nucking Futs

2011-03-07T10:43:00.004-05:00

After hearing the news reports about Charlie Sheen, I thought he was deeply. After CBS canceled his show, I thought he was crazy. After seeing and hearing a few interviews with him, especially his interview on the Howard Stern Show, I thought he may not exactly be crazy, just manic--perhaps from detoxing--and that a lot of points he was making were pretty valid. Especially the points that he didn't miss work (at least often) and never breached his contract. So was he crazy or just weird, or perhaps bordering on genius.

Then I saw this.

Video streaming by Ustream

The dude may be talented. He may be intelligent. He's also batshit crazy.

More on State Employees

2011-03-03T18:53:00.001-05:00

Of course unions are building their campaign. Because, like teaching, selling liquor can only be done properly by unionized state employees.

More Rhetoric on Unions

2011-03-03T10:55:00.004-05:00

Another predictably tendentious piece, this time from Hendrik Hertzberg of the New Yorker.

Mr. Hertzberg bemoans the fate of labor since its hay day on the middle of the previous century, completely disregarding the fact that corporations, big businesses, fat cats and the rest of the usual suspects don't sit around drinking cognac, smoking cigars and burning dollar bills they've stolen from the surplus value of the labor they've exploited. They've paid market wages for the labor required for production. Any so-called surplus value is typically reinvested, either directly or indirectly. This leads to increasing productivity and innovation. This leads to many goods and services increasing in relative quality will becoming relatively cheaper.

Think of computers. It was almost the stuff of fiction to think that people would have computers in their homes in 1970. It was expensive but feasible in 1980. Slightly cheaper and better and more common in 1990. Almost ubiquitous in 2000. In 2010most people carry around with them phones that have more computing power than anything imaginable by the gentlemen who turned ENIAC on in 1955. And it's a phone. And a camera. And a radio. And, in real terms, much cheaper than anything you could have bought in 1980.

Life has gotten better because companies can pay market wages for the services provided by employees and not occur dead-weight losses due to union wages.

As we produce more, we all benefit. Increasing "income inequality" is a social fiction. Saying rich people make more than they did in 1970 is a fool's argument. And one, not surprisingly, embraced by Mr. Hertzberg. First of all, GDP growth has outpaced population growth. So while the "top earners" may have more, percentage wise, of the "take," everyone is earning more money. And with all due respect to P.J. Proudhon, property is not theft. The CEO of WeWantToRuinTheEarthAndPoisonYourChildren Oil Co. making $150 million dollars does not mean that you or me or anyone else earns less money. Just as the Yankees presumably paying Albert Pujols $300 million over the next ten years doesn't mean there's any less money out there for you or me. A capitalist system is not a closed system. Capital can increase, especially as the factors of production become more efficient, cheaper, better &c.

My absolutely favorite line of the whole piece by Hertzberg is this one describing the new "anti-union" movement in Wisconsin: "The bill, dictated by the new Republican governor, Scott Walker..." Classy move. The verb in the dependent clause is brilliant. Denotatively, Hertzberg is covered in that the wording of the bill was probably crafted by the governor. But he is also able to present the man as a dictator. Never mind that the bill was introduced to the state senate for a vote and it is the Democrats who fled the state, making a vote on the measure impossible.

The rhetoric is that the bill came out of nowhere and the Democrats wanted time for what was in the bill to become public. Well, it's public. It has been for two weeks. If you don't like a bill, vote against it. If it becomes law that you don't like, introduce a bill that will change it. But running out on your job? Because your "side" might lose? And the governor is dictatorial?

Cost v Performance

2011-03-03T10:52:00.002-05:00

Another fine piece from the folks at Reason.

Moore On Wealthy People's Money: "That's Not Theirs, That's A National Resource, It's Ours"

2011-03-02T16:34:00.001-05:00

RealClearPolitics - Video - Moore On Wealthy People's Money: "That's Not Theirs, That's A National Resource, It's Ours"

Just watch the video. Priceless. There is no individual, only the collective. Anything you earn belongs to everyone.

Suing John Ashcroft

2011-03-02T10:22:00.003-05:00

I heard this on NPR this morning. I won't recap the whole thing, it's not that long a story, but the gist of it is that an American citizen is suing the former attorney general, personally, for violating the citizen's constitutional rights by misusing the "material witness" statute. The Material Witness Statute has been around for a long time and it basically means that the feds have the authority to arrest someone whose testimony is material in a criminal case, and that a subpoena might not be enough to compel his testimony. I find this repugnant on so many levels, but since government agents and legislators seem not to care about the fact that individual rights are mere nuisances to the effective administration of the state, it should not be surprising that both major political parties seem to adore such authority (the Obama administration is appealing a decision by the federal appeals court that would have allowed the case against Ashcroft to go to trial*).
Anyway, the statute has been around for centuries, but the abuse of the authority was kicked up a bit after the attacks on 11 September 2001 and the Justice Department was headed by John Ashcroft.
Again, I don't want to rehash the whole story, but this little tidbit really struck me:

Former Attorney General Mukasey says it's important for the attorney general to be able to use the material witness law in this way "without having to worry about individual liability and saying, 'You know, maybe I better not do this. Maybe we better just let these folks slip through our fingers because one of these individuals might sue.' " (emphasis added)

This was my major complaint with the Bush administration and it is being carried on with great gusto by the Obama administration. Lost in their zeal to protect everyone is the essence of what this country was founded on. A public official granted wide authority by statute, and not by the constitution, is not to be held personally liable in a situation clearly showing disregard not only of basic (fundamental) human rights (life, liberty, property) but of the actual text of the statute itself. Mukasey worries about officials being scared into inaction by threat of lawsuit, when they should be considering, first, foremost and every time, whether the rights of the individual in question are being violated. If the answer is yes, and it clearly is in this case, then no action is to be taken against that individual. Who cares if the guy was going to Saudi Arabia? Whether his ticket was round-trip in coach or one way in first-class, he was not a criminal; not charged with any crime, not suspected of having committed any crime.
And even if he is to be detained merely for providing testimony in a potential criminal case against someone else...three maximum security facilities and frequent strip searches? Not holding the individuals responsible for these atrocities personally liable for their actions merely pushes the burden onto the taxpayer. Yes, the plaintiff will get his payday, but he, and we, will be denied justice. At least he'll get some money, we'll get the bill.
I hope (but doubt) that the Supreme Court will stand on the side of the individual. If not, we will take another step down the Road to Serfdom, accepting more the notion that the government is the master and the people the servants.

*the Obama administration talked a good game before coming to office about how bad the Bush administration was in areas of presidential authority and civil rights. In practice, it has embraced most of the policies and broadened some others. But for the life of me, I can't seem to recall the nasty articles from the New Republic condemning the practices under Obama.

Why Don't We Just Spend Three Times More

2011-03-01T22:30:00.002-05:00

Senator Jeff Sessions (R, Alabama) gets in some good lines while hearing testimony from Education Secretary Arne Duncan.

It reminded me of some points made by yours truly (and bolstered by comments) here.

FDR on State Unions

2011-02-22T10:45:00.002-05:00

From here, reprinted in its entirety:

My dear Mr. Steward:

As I am unable to accept your kind invitation to be present on the occasion of the Twentieth Jubilee Convention of the National Federation of Federal Employees, I am taking this method of sending greetings and a message.

Reading your letter of July 14, 1937, I was especially interested in the timeliness of your remark that the manner in which the activities of your organization have been carried on during the past two decades "has been in complete consonance with the best traditions of public employee relationships." Organizations of Government employees have a logical place in Government affairs.

The desire of Government employees for fair and adequate pay, reasonable hours of work, safe and suitable working conditions, development of opportunities for advancement, facilities for fair and impartial consideration and review of grievances, and other objectives of a proper employee relations policy, is basically no different from that of employees in private industry. Organization on their part to present their views on such matters is both natural and logical, but meticulous attention should be paid to the special relationships and obligations of public servants to the public itself and to the Government.

All Government employees should realize that the process of collective bargaining, as usually understood, cannot be transplanted into the public service. It has its distinct and insurmountable limitations when applied to public personnel management. The very nature and purposes of Government make it impossible for administrative officials to represent fully or to bind the employer in mutual discussions with Government employee organizations. The employer is the whole people, who speak by means of laws enacted by their representatives in Congress. Accordingly, administrative officials and employees alike are governed and guided, and in many instances restricted, by laws which establish policies, procedures, or rules in personnel matters.

Particularly, I want to emphasize my conviction that militant tactics have no place in the functions of any organization of Government employees. Upon employees in the Federal service rests the obligation to serve the whole people, whose interests and welfare require orderliness and continuity in the conduct of Government activities. This obligation is paramount. Since their own services have to do with the functioning of the Government, a strike of public employees manifests nothing less than an intent on their part to prevent or obstruct the operations of Government until their demands are satisfied. Such action, looking toward the paralysis of Government by those who have sworn to support it, is unthinkable and intolerable. It is, therefore, with a feeling of gratification that I have noted in the constitution of the National Federation of Federal Employees the provision that "under no circumstances shall this Federation engage in or support strikes against the United States Government."

I congratulate the National Federation of Federal Employees the twentieth anniversary of its founding and trust that the convention will, in every way, be successful.

Very sincerely yours,

Mr. Luther C. Steward,
President, National Federation of Federal Employees,
10 Independence Avenue, S.W., Washington, D.C.

APP Note: Although this letter appears to be signed, "Very sincerely yours, Mr. Luther C. Steward, President, National Federation of Federal Employees, 10 Independence Avenue, S.W., Washington, D.C.," the letter is from Roosevelt to Steward. The placement of the addressee's name and address at the bottom of the document was an editorial decision in the original "Public Papers and Addresses of Franklin D. Roosevelt." The American Presidency Project's policy is to reproduce documents in their original form.

Wisconsin logic

2011-02-21T17:50:00.002-05:00

I saw this on NPR's website and loved this paragraph:

Jacob Cedillotootalian, a 27-year-old University of Wisconsin-Madison graduate student and teaching assistant, said Sunday was the third night that he slept in the Capitol as part of a union representing teaching assistants and he didn't see an end coming anytime soon. He said he was worried about paying more for his health insurance and tuition, but what kept him protesting was the possibility of losing the union.

Why should Mr. Cedillotootalian have to pay more for HIS insurance or HIS tuition. It is much better, after all, to have other people pay for it.

Government and Home Ownership

2011-02-15T23:07:00.003-05:00

I am reading Meltdown by Thomas Woods, an economist of the Austrian school. It is his take on the housing crisis. I am sympathetic to his line of argument.

By chance, I happened upon this piece by David Coates (professor of something called Anglo-American studies at Wake Forest) at the Huffington Post.

Mr. Coates uses the recently published ("long awaited") Treasury Department report on reforming America's housing finance market to lambaste both republicans for having the chutzpah to disagree with the reports main finding (that more rigorous regulations and enforcement are needed in the market) and also the Obama administration for doing nothing to, well, further interfere in the market.

Mr. Coates gives short shrift to the notion that agencies such as Fannie Mae and Freddie Mac and government policies had much to do with causing the "crisis." Apparently the report does so as well, I haven't had a chance to read it yet. Perhaps these intervention exacerbated the situation, but the government certainly didn't cause anything.

Let's go over a few points:

The Federal Reserve...as pointed out in this editorial in the Wall Street Journal, written as President W was leaving office, the Federal Reserve kept interest rates too low for too long. The created distortions in the market place, signaling to investors that money should be spent on long-range capital investments. Interest rates, when allowed to operate according to market rules, will be lower as more people save money. This increases the market for loanable funds. People are saving for future consumption. Lower interest rates tell industry that since people are saving for future consumption, they should borrow cheaper money to invest in longer-range investments to be able to provide more goods and services in the future.
Fannie Mae and Freddie Mac...forget, for a moment, collateralized debt obligations, credit-default swaps and "carving up mortgages" you may have heard about. The federal government set up ostensibly private institutions whose sole purpose was to purchase mortgage "debt" from banks in order to free up more money to lend. The age-old accounting equation states that assets must equal liabilities plus owner equity. So mortgages are not debt or liabilities to banks. They are assets. But so is cash. So the banks "trade" one asset for another with these GSEs, "freeing up" more money to lend. A simple supply and demand curve will show that the best way to drive the price of something up is to increase the amount of buyers out there. Buying the mortgages from banks with the explicit goal (mandate) of getting them to lend more money to more people to buy houses pushes up, artificially, the price of houses.

Now things are a bit more complicated than this and I'm certainly not saying that banks have no responsibility in the matter. But as one wag put it, blaming the crisis on greed is like blaming gravity for a plane crash. Too many people were given too much money to buy too many houses. Short- and long-term investment strategies were jumbled up with mixed messages from the deus ex machina of the federal government, spiced up with a dash of moral hazard, because everyone except elected officials and the talking heads at CNBC seemed to know that if (when) the poop hit the oscillator, the government was going to come in and pay the bad actors off.

So it boils down to this: where did the money come from? Bank of America can't print money. Washington Mutual had no control over where interest rates were set. No bank can force another bank to hold a note to free up more cash.

Sorry, Mr. Coates. Federal government policies were responsible for the genesis of the crisis. And as someone who works in the mortgage/real estate business, I can assure you or anyone else there is no problem from lack of regulation. The problem is that there are far too many. Too many, in fact, to make any kind of responsible enforcement completely impractical. Never mind the sticky issues of no regulators going into any of the big banks in certain congressional or senate bishoprics and ruffling any potential donors' feathers (calling Mr. Dodd, Mr. Chris Dodd!).

Stick to "Anglo-American studies," because you don't know jack about markets.

Mergers and Acquisitions

2011-02-07T15:19:00.002-05:00

I see that AOL has just bought the Huffington Post.

First, I didn't even know AOL still existed. But when I saw the terms of the deal ($300 million in cash, $15 million in stock) I got a little curious.

I wanted to see how investors were greeting the information and...not well. AOL closed on Friday at $21.94/share and opened today (after the announcement) at $21.64 (1.3% drop) and it looks like it is going to close with about a 3% drop for the day. Not terrible, mind you, but also not exactly an endorsement, either.

AOL has lost 23% of its subscribers from 2009 to 2010 and really doesn't have the cash on hand to be sending $300 million out in an acquisition, especially in acquiring an entity that doesn't really earn anything (AOL had $800 million cash and equivalent at the end of 2010 (unaudited), but ad revenues were down 29% from 2009 to 2010 and their net loss for 2010 was $782.5 million (again, unaudited, see here)).

I'll grant that a lot of the red ink may be a result of the cleansing of the books from the Time/Warner debacle, but facts are facts. Your company is hemorrhaging money and customers, neither your company or the company your acquiring actually produces anything of substance and you're one-half of one of the worst mergers in the history of finance, does this seem like a good idea?

Listen, I like reading idiot celebrities writing about dead dyspeptically tendentious historians just as much as the next guy and, of course, Sean Penn, but is there any money in it?

This has nothing to do with politics, mind you. I may think most of the content at the Huffington Post is rubbish, but a sound investment is a sound investment. I'm reminded of Rupert Murdoch saying that if he were to buy the New York Times, he wouldn't change the political leanings of the editorial board at all, unless it meant that he would make more money. But zero substance, from either player, no cash in one hand and rapidly evaporating cash in the other seems, to me anyway, to add up to a bad idea.

Keynesian Predictions

2011-02-03T11:08:00.003-05:00

Great lecture by Thomas Woods. I had read somewhere before about Samuelson's predictions on Soviet GDP surpassing America's based on highly complicated formulae. Economics is not calculus or physics. It is a social science.