Wednesday, March 30, 2011

Classic Quotes, Spencer

"The ultimate result of shielding men from the effects of folly is to fill the world with fools."  Herbert Spencer 

Today is my birthday.  My prayer is that I learn the right lessons from the effects of my folly!

Monday, March 28, 2011

Friedman On the Value Of Human Life

This sort of understanding results from the mis-understanding of what money is.  Money IS human life.  It is created by, has value from, the amount of human productivity it represents.  Destruction of wealth and money equals a destruction of those things which allow us to live, to thrive.  Pretending that each life has an unlimited value ignores real choices we make each day - like deciding to drive to work.

Classic Quotes, Mencken

"Patriotism, though it is based upon the natural and indeed instinctive love of home, has been elevated in the modern world into an unparalleled congeries of imbecilities. What it demands of the individual citizen, as a practical matter, is that he yield not only his judgment but also his property and even his life to whatever gang of scheming politicians happen to be in power."  H.L. Mencken

Wednesday, March 23, 2011

Classic Quotes, Friedman

"The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a good measure of both."  Friedman

Monday, March 21, 2011

Samuelson on European Debt

Just last week, European leaders were putting the finishing touches on a plan to enlarge a bailout fund from an effective size of roughly 250 billion euros (about $350 billion) to 440 billion euros ($615 billion) and eventually to 500 billion euros ($700 billion). By lending to stricken debtor nations, the fund would aim to prevent them from defaulting on their government bonds, which could have ruinous repercussions. Banks could suffer huge losses in their bond portfolios; investors could panic and dump all European bonds; Europe and the world could relapse into recession. 
Unfortunately, the odds of success are no better than 50-50.
Europe must do something. Greece and Ireland are already in receivership. Private investors won't buy their bonds at reasonable rates. There are worries about Portugal and Spain; Moody's recently downgraded both, though Spain's rating is still high. The trouble is that the sponsors of the bailout fund are themselves big debtors. In 2010, Italy's debt burden (the ratio of its government debt to its economy, or gross domestic product) was 131 percent; that exceeded Spain's debt ratio of 72 percent. Debt ratios were high even for France (92 percent) and Germany (80 percent).

Create a Monster With Coercion, Blame It On Liberty

The ATF’s alleged malfeasance is all the more disturbing when considered in the context of the Mexican drug war. The problem, however, is not legal U.S. gun dealers.
The media — for example, Reuters — have widely reported that “nine out of ten guns” found at Mexican crime scenes came from U.S. gun dealers, but this claim has been debunked: The statistic takes into account only guns traced by the FBI. Such tracing is possible only if the Mexican authorities submit a weapon to the FBI, and they submit only weapons designed for the U.S. civilian market (the only kind of gun the FBI is equipped to trace). Once all guns retrieved in Mexico are included, only 17 percent come from U.S. gun dealers.
There are plenty of places for the cartels to buy guns other than the U.S. retail market. A goodly portion of weapons trotted out for the press cannot be legally purchased in the U.S. without the ATF’s say-so and approval from the local chief law-enforcement officer (short-barreled rifles, for example). Rocket-propelled grenades and newly manufactured machine guns are not available at gun shows. Further gun control imposed on typical American buyers would have no effect on the ability of the cartels to purchase these military-grade weapons.

Trust Me, I'm a Journalist, A Professional

But anyone who read the open-access academic paper in PLoS One, titled "Beaked whales respond to simulated and actual navy sonar", would see that the study looked at sonar and didn't mention wind farms at all. At our most generous, the Telegraph story was a spectacular and bizarre exaggeration of a brief contextual aside about general levels of manmade sound in the ocean by one author at the end of the press release (titled "Whales 'scared' by sonars"). Now, I have higher expectations of academic institutions than media ones, but this release didn't mention wind farms, certainly didn't say they were "one of the main reasons why whales strand themselves on beaches", and anyone reading the press release could see that the study was about naval sonar.

Conclusion:  Author offers a common sense suggestion - "cite sources or I don't trust you."

Lott on the O Admin Claims

The Washington Post’s E.J. Dionne seems to actually believe the Obama administration’s claim that he has helped gun rights (see here). Yet, it almost seems as if many on the left attack Obama simply to make him appear more moderate than he actually is. What set Dionne off was President Obama’s claim this past Sunday in an op-ed: “My administration has not curtailed the rights of gun owners, it has expanded them, including allowing people to carry their guns in national parks and wildlife refuges.” In fact, Obama allowed the change in regarding the guns in national parks, not because he supported the idea, but because it was a very popular amendment to a bill that he wanted, the “Cardholders’ Bill of Rights Act of 2009.”

Classic Quotes, Abbey

"The real work of men was hunting meat. The invention of agriculture was a giant step in the wrong direction, leading to serfdom, cities, and empire. From a race of hunters, artists, warriors, and tamers of horses, we degraded ourselves to what we are now: clerks, functionaries, laborers, entertainers, processors of information." Edward Abbey

Friday, March 18, 2011

Govt Growth in 1920s
Were it not for the Great Depression, government growth would have been slower in the 1930s than it was, because there would have been no call to respond to a national economic crisis. But government was expanding its programs, its powers, and its budget during the 1920s in the relatively passive presidential administration of Calvin Coolidge, as a part of the trend of government growth that had begun with the Progressive era around the turn of the century. If the trends of the 1920s had continued, federal government growth would have been substantial with or without the Great Depression and with or without the New Deal. For Coolidge, being pro-business did not mean being anti-government (or anti-labor, or anti-agriculture), and Coolidge supported the expansion of government in almost every area, although not to the degree desired by some of his critics.
The point of this paper is to try to shed some light on the remarkable phenomenon of government growth in the 20th century that is illustrated in Figure 1. By looking at the decade before the New Deal, this paper shows that it was not the New Deal or the nation's response to the Great Depression that triggered the growth of the federal government. The seeds were sown in the Progressive era prior to World War I, and the 1920s served to reinforce those principles of government established during the Progressive era by continuing to expand the government's reach. The 1920s did not represent a plateau in government activity that was reversed by the New Deal; rather, the foundations for the New Deal were established by the increasing scope of federal government activity during the 1920s.

Get Ready For the Chorus of Exceptions
Zinni's article [on why it's absolutely necessary to keep government funding of the U.S. Institute of Peace] is a good example of a genre of literature we'll be seeing a lot of as the president and Congress grapple with the federal deficit (and each other): the special pleading. Whether it takes the form of an op-ed piece, a speech, a press release or an open letter to the president, there are certain familiar elements.

And those elements are well documented in this article about why everyone will ask for special treatment as budgets are cut, and not surprisingly, folks come up with reasons why they should keep the 'rent' they 'sought.'  AKA, "hands off of my rent seeking success, I got it fair and square."

Stand Up You Fools

Social Security "Nuts"

Kratthammer on Social Security:
Last week, President Obama's budget chief, Jack Lew, took to his White House blog to repeat his claim that the Social Security trust fund is solvent through 2037; and to chide me for suggesting otherwise. I had argued in my last column that the trust fund is empty, indeed fictional.
If Lew's claim were just wrong, that would be one thing. But it provides the intellectual justification for precisely the kind of debt denial and entitlement complacency that his boss is now engaged in. Therefore, once more unto the breach. 
Lew acknowledges that the Social Security surpluses of the last decades were siphoned off to the Treasury Department and spent. He also agrees that Treasury then deposited corresponding IOUs – called "special issue" bonds – in the Social Security trust fund. These have real value, claims Lew. After all, "these Treasury bonds are backed by the full faith and credit of the U.S. government in the same way that all other U.S. Treasury bonds are."
Really? If these trust fund bonds represent anything real, why is it that in calculating national indebtedness they are not even included?

That's why publicly held bonds are so radically different from intragovernmental bonds. If we default on Chinese-held debt, decades of AAA creditworthiness is destroyed, the world stops lending to us, the dollar collapses, the economy goes into a spiral and we become Argentina. That's why such a default is inconceivable.
On the other hand, what would happen to financial markets if the Treasury stopped honoring the "special issue" bonds in the Social Security trust fund? A lot of angry grumbling at home for sure. But externally? Nothing.

Cafe Hayek amplifies:
The question is whether or not Uncle Sam will have enough assets in the future to pay all of his obligations under Social Security.  When sensible people such as Charles Krauthammer and Robert Samuelson note that these obligations are so massive that honoring them in full will require drastic tax hikes or spending reductions, accounting-challenged defenders of the status quo exclaim “Not to worry!  The Social Security trust fund holds lots of U.S. Treasury bonds.  Those bonds are assets.  So Social Security’s obligations are covered!”
But those bonds are held by the same party that issued them, namely, Uncle Sam; the creditor here is one with the debtor.

Now We Know

What's the big deal?  Sure it'll be another 20 years until this kind of car makes ANY sense, but at least this development will shut up all the loonies that want to know "who killed the electric car?"

The chilling answer to the mystery?  Consumers who don't want to buy a worthless, expensive auto, the value of which will negative when the battery can no longer be charged and which doesn't save either money, gas or carbon emissions.  That's who.  SCANDALOUS!

....this is one reason that Volt sales are anemic: 326 in December, 321 in January, and 281 in February. GM announced a production run of 100,000 in the first two years. Who is going to buy all these cars?
Recently, President Obama selected General Electric ( GE - news - people ) CEO Jeffrey Immelt to chair his Economic Advisory Board. GE is awash in windmills waiting to be subsidized so they can provide unreliable, expensive power.
Consequently, and soon after his appointment, Immelt announced that GE will buy 50,000 Volts in the next two years, or half the total produced. Assuming the corporation qualifies for the same tax credit, we (you and me) just shelled out $375,000,000 to a company to buy cars that no one else wants so that GM will not tank and produce even more cars that no one wants. And this guy is the chair of Obama's Economic Advisory Board?
It really is enough to get you to say Atlas Shrugged. For those who do not know, or who are only vaguely familiar with, the Ayn Rand classic, it is a story of a society in decay, where politically favored technologies and jobs are foisted on the nation, where innovations that might threaten existing corporatist cartels are financially or physically sabotaged as unemployment mounts and the nation spirals into a malaise that makes the Carter years look like Mr. Rogers' Neighborhood.
Atlas Shrugged is about to come out as a surprisingly good and entertaining movie (which will be destroyed by Hollywood and New York Critics) on--you guessed it--April 15. Maybe the government could put in an ad before the show with Immelt exhorting Americans to care about "the environment and green jobs." All must buy Volts.

The Unknown Becomes Known

The real and imagined Tokyo earthquakes are different events: The real earthquake, though more severe than the imagined one, dealt Tokyo only a glancing blow; the financial losses caused by the real quake so far don’t appear to be anything like $1 trillion; and back in 1988 no one considered the possibility of nuclear disaster.
The immediate financial-market response to the actual event is also, at best, a first cousin to the scenario imagined back in 1988. In the fictional catastrophe, the yen rose dramatically as the Japanese government and private insurers sold all sorts of non-yen assets to buy yen, and it is rising now, for instance.
But in the imagined scenario, the Japanese stock market rose in anticipation of a massive stimulus and a glorious economic future. Just now it is collapsing, spectacularly.
There’s a reason for the difference: The market has a lot less faith now than it did in 1988 in Japan’s economic future. The single biggest financial question to arise from the imagined scenario was: Just how screwed will the U.S. be when Japan asks for its money back? It now has been joined by another: just how screwed will Japan be when it reveals that it not only wants but needs its money back?
That is what leaps out at you from the comparison of the real catastrophe with the imagined one: how different the context has become. Back in 1988, it was hard to imagine Japan working from anything but a position of strength: high savings rates, massive trade surpluses, a booming economy and stock market. There was no question then that Japan would bounce back. Today, Japan feels almost doomed.

Thursday, March 17, 2011

Classic Quotes, Elliot

"I never understood why sports people are not the most humble people in the world, because in sport, which involves physical activity, what you are trying to do is squeeze the last drop of physical power and performance out of yourself - without dying. And if you are gonna do that, the only way you can do that is confronting your weaknesses and you discover, when you really set the test for yourself and you apply yourself against the test day after day after day, you discover that, the thing that is stopping you winning
isn't your competitor, it's yourself, it's your own weaknesses. And so you start to work on that. You try to build strength where there are weaknesses. So in my view, top athletes should have a much more conscious view of their own weaknesses than the normal population. And that should bring humility."
Herb Elliot, 1500m Olympian

Wednesday, March 16, 2011

Truth or Dare with the State Pension Fund Death Spiral

Don't Panic
According to Joshua Rauh, professor of finance at Northwestern University, under the best case scenario, New Jersey’s pension funds (there are 5 of them) are scheduled to run out as soon as 2017. Once those state pension plans run out of money, pension payments will have to come out of the state’s general fund revenues—that is, out of the pockets of state taxpayers.
Furthermore, there is reason to believe these estimates are too conservative. When private-sector accounting methods are used to show the true market value of state pension liabilities, the situation becomes even more critical than it initially appears.  

What Could Go Wrong?

Lessons from the long tail of improbable disaster

Indeed, it seems that when we conclude that the chance of something really bad happening is very small, we wind up taking actions that either increase the probability of the disaster or the damage that it will cause.
Once the rocket scientists on Wall Street, for example, concluded that it was virtually impossible for investors in so-called “mezzanine” tranches of mortgage-backed securities to lose money, it set off a chain of events that made the prediction untrue. The heavy demand for the securities led to dramatically lower lending standards and a sharp increase in housing prices, creating a bubble so large that when it burst, it caused heavy losses for those same mezzanine investors. The declaration that a particular investment was riskless became a self-negating prophecy.
Similarly, when the government builds a levee, it may reduce the frequency of damaging floods but may also encourage even more people to build homes and businesses behind the barrier. When the Big One finally arrives, the total damage will be even greater than if no levee had been built.

Enought is Enough!

Latest Undercover Sting
As the 2008 campaign wore on, O'Keefe said, insiders grew worried Obama might actually win. They began dropping hints that the candidate was just a parody. They had him complain about the price of arugula to Iowa farmers. When that didn't work, Obama went bowling, scored a 37, and then joked that the almost impossibly poor performance "was like the Special Olympics or something."

Pull Up a Chair, Let's Watch the Titanic

We Will Need Honesty to Solve Debt Problem

These financial shenanigans were no mystery to Mr. Lew when he was director of the Office of Management and the budget under President Bill Clinton. In OMB's official commentary on President Clinton's budget for Fiscal Year 2000, he wrote on page 337 of Analytical Perspectives,
"These [trust fund] balances are available to finance future benefit payments and other trust fund expenditures--but only in a bookkeeping sense. These funds are not set up to be pension funds, like the funds of private pension plans. They do not consist of real economic assets that can be drawn down in the future to fund benefits. Instead, they are claims on the Treasury that, when redeemed, will have to be financed by raising taxes, borrowing from the public, or reducing benefits or other expenditures. The existence of large trust fund balances, therefore, does not, by itself, have any impact on the Government's ability to pay benefits."
Lew was right in 1999, but not today. Social Security is not self-financing. In 2010, the government borrowed $37 billion to fund the program. Over the next decade we will borrow $547 billion to pay benefits.

It's fascinating, it's like watching two ships collide, or the Titanic (in the movie), unable to turn fast enough to avoid the iceberg.  There's medicare and SS, both on a disaster course, and the president is talking about throwing pennies at "clean energy" and setting arbitrary goals for how much of it we have to have by some future date.  In a sense, I can't wait to see what the heck finally happens, and which generation is going to have paid 15% of their working lives to these programs, only to see the benefits evaporating as they near retirement.  It will be an echo of the Delta pilots, and Enron employees, and perhaps other epic big corporation bankruptcies, employees of which lost their retirements - the main difference being, the pilots at least chose who they were entrusting their futures to, and could perhaps have seen it was absurd to both expect the company to be solvent and take an adversarial relationship to the company at the same time (the miracle of millionaire pilots with a union).

I have this unrealisitic sense that if any of them had a conscience, they would all refuse to do anything until they could choose a plan for solvency in the "entitlement" programs.  Realistically, the nation's insolvency is not the primary problem for anyone currently in office, getting re-elected in the aftermath of a recession is.  Which is why it was madness to have allowed politicians to have the power to create such destructive spending programs in the first place.

Tuesday, March 15, 2011

Mirror Mirror, Who Is Ugliest Of All?

A college professor provides his expertise on what we should or shouldn't spend on defense, but happily ignores the other side of the ugly government contest - absurd expenditures for failing social programs. 

These are two equal and inevitable halves of the reality of government spending.  Both waste absurd amounts of money, and both are virtually unaccountable for any level of corruption, incompetence, and injury to the taxpayer.  One of the prime virtues of these aspects of government is that they so flawlessly demonstrate the folly of the 'fatal conceit.' 

I'm a little more sympathetic to the F-35 because there's a better chance that it will work - deter wars - than the social programs will.  I'm also slightly more sympathetic the F-35 because national defense is a legitimate, constitutionally authorized use of the coercive monopoly of the government.  If the government weren't stuck on being all things to all people, if it were still constrained by the intended constitutional constraints, it is remotely possible that politicians would get serious about a cohesive national defense strategy that could lead turn geopoltical change - nah, just kidding, that's absurd I know.  But seriously, Americans apparently expect people who are good at the art of politics - at being all things to all people whilst representing themselves to be selfless servants of the public good even though we the (gullible) people pretend not to know that the only folks who would chase political success are those with monstrous ego, ambition and desire for recognition - to also understand national defense AND health care public policy (such as it is) and other complex economic issues, nevermind the constitution? 

I heard today the US may eclipse a 14 trillion dollar nation deficit - and even that number must be qualified because there are many ways to count the deficit depending upon what your agenda is - and the author wants outrage over a trillion dollars in defense spending spread over the probably 25 year lifespan of the F-35, which is THE future plane for Air Force, Navy and Marines (replacing F-16s, F-15s, AV-8Bs and F-18s).  If he wants to convince me, he'd better come up with an alternative because it won't be much cheaper to just keep flying the remains of the existing force.  Those of us in the military have been looking for years at the projections for growth of entitlement programs and could see this clash coming, as they say, a mile away.  The irony of using a failed government system of entitlements as justification for cancelling the F-35 won't be lost on everyone.

Government procurement of anything is plenty ugly, at least there's a reason to make ugly defense purchases.

Riding the Rails to Economic Confusion

Sometimes, Ms. McArdle is very good.  In this piece, she delivers a mixed bag.  First the good:
So basically, the feds wanted to spend $2.6 billion, plus any cost overruns or operating costs, to put in a train for which there was no evident demand.  Why?  Because they didn't have any better options, and they wanted to build a train.  The California High Speed Rail project, following similarly sound reasoning, is going to start out in California's not-very-populous Central Valley, because . . . it's easier to get the right of way.  Never mind that there aren't any, like, passengers.

Building trains is an immensely costly enterprise--not just financially costly, but environmentally and personally costly, as people and habitats are uprooted, and metal is tortured into rails and switches and cars.  If you are going to install one, you should be reasonably certain that there will be people around with an interest in riding your train.  After all, a train running mostly empty emits a lot of carbon.
I am a fan of train projects when those projects start with a problem that might be solved by a train, and then work forward to the train.  The problem is that in America, those routes are difficult to build, because they're places where there's already a lot of stuff.  Rights of way are expensive and time-consuming to obtain, and the project is bound to be blocked by well-organized NIMBYs.
And so the idea seems to have become to build trains where it's possible to build trains, and hope that development follows.  But trains succeed where they are better than some alternative form of transportation.  In the case of Tampa to Orlando, they're worse than a car, and there isn't even any air travel to replace; in the case of Fresno-to-Bakersfield, it may be better than a car for a few passengers, but there are too few passengers to make the trains better than cars for the environment.
Illustrating that coercive Federal train projects are ridiculous is child's play, thought this was nicely put.  But look at all the assumptions of coercion that are inherent in her writing -
The problem is that in America, those routes are difficult to build, because they're places where there's already a lot of stuff.  Rights of way are expensive and time-consuming to obtain, and the project is bound to be blocked by well-organized NIMBYs
In other words, they are expensive because the crazy people who own the property that the Fed will take by force don't want their stuff taken from them.  Of course, the Fed already took their taxes to pay for the salaries of all the nincompoops who sit around and dream up these sorts of boondoggles (this is the kind of boondoggle that gives boondoggles a bad name, as they say), and to pay for the lawyers that will no doubt be involved when the recalcitrant must be removed from their land by government force.  I for one don't begrudge the NIMBYs their resentment of that abuse of Federal authority.  I would oppose it even if there were some sort of guarantee that the project would work as intended, and all the moreso since there's a virtual guarantee that these projects will not work as intended. 
That the rail projects are immoral is beyond question.  That they will waste untold money is also nearly unquestionable.  Speculating on why they are such a darling of certain political circles provides an interesting distraction for some.  It seems to me, as Will wrote, the only logic of high speed rail is to create a symbollic instrument of government orchestration - which will advance the progressive agenda of making the US more like Europe.  Why not strive to match that defenseless, economically weak, and "upward mobility deficient" bastion of 'equality' that it is.  May as well set your sights high, eh.

Classic Quotes, Rogers

"On account of being a democracy and run by the people, we are the only nation in the world that has to keep a government four years, no matter what it does."

Will Rogers

Classic Quotes, Emerson

"Do not go where the path may lead, go instead where there is no path and
leave a trail."
~ Ralph Waldo Emerson

Monday, March 14, 2011

Classic Quotes, Mises

A society that chooses between capitalism and socialism does not choose
between two social systems; it chooses between social cooperation and the disintegration of society. Socialism: is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings.
Ludwig von Mises

Saturday, March 12, 2011

Classic Quotes, Adams

"I must study politics and war, that my sons may have the liberty to study mathematics and philosophy, natural history and naval architecture, in order to give their children a right to study painting, poetry, music, architecture, tapestry, and porcelain."
      ~John Adams

Thursday, March 10, 2011

Classic Quotes, Mises

True, governments can reduce the rate of interest in the short run. They can
issue additional paper money. They can open the way to credit expansion by
the banks. They can thus create an artificial boom and the appearance of
prosperity. But such a boom is bound to collapse soon or late and to bring
about a depression.  Ludwig von Mises

Tuesday, March 8, 2011

Classic Quotes, Friedman

"What kind of society isn't structured on greed? The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system."
-- Milton Friedman

All The Ingredients

Krugman’s column is part of a much broader trend: the intellectual and economic underpinnings of the blue social model are in a process of accelerating and serial collapse.  I posted last week that the truly deadly threats to the public sector unions, the threats that doom them to long term decline, aren’t coming from people like Wisconsin governor Scott Walker; they are coming from blue state governors in places like New York and Vermont who recognize that their states simply cannot afford to give public unions anything like what they want.  The New York Times editorial board, one of the bluest groups in the United States, published an editorial the day before Krugman’s piece appeared that argued for deep changes in the way state workers are rewarded and managed.  Sez the Times:
"At a time when public school students are being forced into ever more crowded classrooms, and poor families will lose state medical benefits, New York State is paying 10 times more for state employees’ pensions than it did just a decade ago."
And why is this?  Well, continues the Gray Lady, there are several reasons, including this:
"[M]ost state employees pay only 3 percent of their salaries to their pensions, half the level of most state employees elsewhere. Their health insurance payments are about half those in the private sector."
And where does this leave us?
"In all, the salaries and benefits of state employees add up to $18.5 billion, or a fifth of New York’s operating budget. Unless those costs are reined in, New York will find itself unable to provide even essential services."

Sounds like the makings of a death spiral to me ... for either the capacity of the state to provide any meaningful service, or for the ability of public sector unions to continue to extract compensation packages that are clearly unsustainable, and place the short term interestes of the public sector unionists above the long term interests of anyone, including those same public sector employees.

Krugman and the Times editorial board are both examples of something important in American life today: left-liberal intellectuals are increasingly able to understand that individual supports of the blue social model are crumbling.  But they are still so captivated by the blue model, so profoundly convinced that the Progressive movement’s solutions to America’s social ills in 1910 are still valid today, that they cannot yet look beyond the blue model to imagine a different and brighter future for the United States.

In the Long Run ...

James M. Buchanan, a Nobel laureate in economics — and my former colleague and now professor emeritus at George Mason University — argued that deficit spending would evolve into a permanent disconnect between spending and revenue, precisely because it brings short-term gains. We end up institutionalizing irresponsibility in the federal government, the largest and most central institution in our society. As we fail to make progress on entitlement reform with each passing year, Professor Buchanan’s essentially moral critique of deficit spending looks more prophetic.
We are fooling ourselves most of all. United States government debt in public hands is now more than $9 trillion, but most people still don’t realize what it will take to pay that off.

When will the tipping point come - will we reach a "stop the madness, stop borrowing tipping point" in the population before we find the point at we recognize we're in the death spiral - a la Greece?

Recognizing a True Believer

That the FDA allows the industry to infuse it with so many evident poisons stands as an epic failure of public oversight.

The linked article was written by a TB.  You can tell because they think that the problem with the FDA is it just isn't living up the ideals of a centralized government - more protection for those that need it.  In this case, he's worried about all us poor uninformed consumers who aren't being protected from the potential evils in a can of diet soda. 

In the article, the author laments the FDA's inability to stand up to the food industry.  But he's got it all backwards - it would be a massive surprise if the FDA WAS standing up to the food industry.  We've allowed the federal government to take control over massive sections of our economy and therefore our personal activities.  Businesses MUST struggle for influence in a system which is politicially, and therefore irrationally, controlled - or they will die. 

In short - political meddling by federal agencies with too much power isn't a surprise unless one is either:
1 - ignorant and naive
2 - a true believer in government, in which the facts will never be an obstacle to the faith

Let's face it, this is the least of the FDA's shortcomings.  It has yet to pronounce sugar a threat to health, despite a massive wave of diabetes in this country.  It has been the agent of perpetuating the statin scam, allowing even young, healthy women to be prescribed a drug which has never been shown to benefit women, and has only been shown to benefit men under age 65 with previously diagnosed heart disease.  It never asserted it's authority and has allowed the DoA to establish the food guidelines, not challenging them even thought their basis in science is tenuous at best. 

The entire concept is a joke.  The FDA serves predictable masters, politicians and monied interests, and there's no rational basis to believe it will ever do otherwise.

Monday, March 7, 2011

Social Security Truth or Dare

Let's start with its $2.6 trillion trust fund. Doesn't this prove that people's payroll taxes were saved to pay for future benefits, disconnecting them from our larger budget problems? Well, no. Since the 1940s, Social Security has been a pay-as-you-go program. Most benefits are paid by payroll taxes on today's workers; in 2010, those taxes covered 91 percent of benefits. The trust fund's $2.6 trillion would provide only 3.5 years of benefits, which totaled about $700 billion in 2010.
The trust fund serves mainly to funnel taxes to recipients, and today's big surplus is an accident, as Charles Blahous shows in his book "Social Security: The Unfinished Work." In 1983, when the trust fund was nearly exhausted, a presidential commission proposed fixes but underestimated their effects. The large surplus "just developed. It wasn't planned," the commission's executive director said later. Even so, the surplus will disappear as the number of retirees rises.
Similarly, Congress has repeatedly altered benefits. From 1950 to 1972, it increased them nine times, including a doubling in the early 1950s. In 1972, it indexed benefits to inflation. People didn't complain when benefits rose, but possible cuts now trigger howls that a "contract" is being broken. Not so. In a 1960 decision (Flemming v. Nestor), the Supreme Court expressly rejected the argument that people have a contractual right to Social Security. It cited the 1935 Social Security Act: "The right to alter, amend, or repeal any provision of this Act is hereby reserved to Congress." Congress can change the program whenever it wants.
All this makes Social Security "welfare." Benefits shift; they're not strictly proportionate to wages but are skewed to favor low-wage earners -- a value judgment reflecting who most deserves help; and they aren't paid from workers' own "contributions." But we ignored these realities and encouraged people to think they "earned" benefits and that Social Security is distinct from the larger budget. Politicians, pundits, think-tank experts and journalists engaged in this charade to spare Social Security's 54 million recipients the discomfort of understanding they're on welfare.

I'm of the opinion that SS was an unconstitutional program from the start - but it's a great example of what happens when you have a compliant supreme court, a leftist president, and good intentions.  Whatever the original intents of the program - that it be voluntary, that it only cover the 50% who would have lived long enough to receive it, that it smooth over the transition from agrarian to industrial population bases - since it was originally approved, it's just been another tool whereby politicians have spent taxpayer money to further their political aspirations.  Shame on all of them.

How Bad Is It?

Independent experts have shown that the cost of health insurance will rise faster than it would have without the law. The Congressional Budget Office expects the price of a family policy in the individual market to be $2,100 higher by 2016 than it would have been had the law not passed. In at least 20 states, it's now impossible to buy child-only health insurance because of Ms. Sebelius's onerous new rules.
• Seniors are at risk of losing access to physicians and medical care. Medicare actuaries say that the cuts built into the law will force as many as 40% of providers to eventually stop seeing Medicare patients or go bankrupt.
• Many thousands of people are already losing the health insurance they have now as companies are exiting markets for individual, small group and Medicare Advantage coverage.

So far so good, eh?

With Which of These Do You Agree?

  1. A ceiling on rents reduces the quantity and quality of housing available. (93%)
  2. Tariffs and import quotas usually reduce general economic welfare. (93%)
  3. Flexible and floating exchange rates offer an effective international monetary arrangement. (90%)
  4. Fiscal policy (e.g., tax cut and/or government expenditure increase) has a significant stimulative impact on a less than fully employed economy. (90%)
  5. The United States should not restrict employers from outsourcing work to foreign countries. (90%)
  6. The United States should eliminate agricultural subsidies. (85%)
  7. Local and state governments should eliminate subsidies to professional sports franchises. (85%)
  8. If the federal budget is to be balanced, it should be done over the business cycle rather than yearly. (85%)
  9. The gap between Social Security funds and expenditures will become unsustainably large within the next fifty years if current policies remain unchanged. (85%)
  10. Cash payments increase the welfare of recipients to a greater degree than do transfers-in-kind of equal cash value. (84%)
  11. A large federal budget deficit has an adverse effect on the economy. (83%)
  12. A minimum wage increases unemployment among young and unskilled workers. (79%)
  13. The government should restructure the welfare system along the lines of a “negative income tax.” (79%)
  14. Effluent taxes and marketable pollution permits represent a better approach to pollution control than imposition of pollution ceilings. (78%)
The big fights are in the areas of most marginal agreement.

In regards to the title, my apologies to PM Churchill who said:  "This is the type of English up with which I will not put!"

Sunshine Out Of Cucumbers

His advocacy had a messianic tinge. In one e-mail to his advisors, he described his renewable-energy agenda as "what the world needs now. No one else is doing it. We can and will."

The trustees encouraged Eisenberg's push for green energy, even as his plan grew steadily more ambitious. They liked the idea of freeing the colleges from dependence on fossil fuels and were content to leave the practical details to him.

But Eisenberg's enthusiasm obscured an inconvenient reality: With the technology now available, the cost of renewable power exceeds that of energy derived from burning coal and natural gas.,0,4909175.story?page=2

So easy to be passionate about the good things you can do with other peoples' money ...

Friday, March 4, 2011

The Judge Says: "I Wasn't Joking, Knock It Off"

On Thursday, Judge Vinson issued his ruling on the “motion to clarify,” and it’s a doozy. The press is reporting that Judge Vinson stayed his original ruling overturning the law, allowing implementation of Obamacare to continue. That’s true — but it’s only a fraction of the story.

Vinson’s new ruling can justly be described as a smack-down of the administration. Quoting an appellate ruling, he notes, “A declaratory judgment is a real judgment, not just a bit of friendly advice.”

Should congress have to power to regulate your mental activity, or order you to buy and eat broccoli?  Silly as it sounds, that's what one has to argue to support the constitutionality of the individual mandate within "Obamacare."

I'd be happy if they could self-regulate their own mental activity, which, manifestly, they cannot.

Bailey Notes Chait's Blinding Partisan Blinders

The following is posted in it's entirity for a glimpse of an interesting tale.  It's a great read for a numbers angles, but most significant to me is how wrong someone could get it in support of their partisan angle whilst sustaining credibility on the partisan stage.  I thought perhaps only Krugman could be so wrong for so long and still have an audience.

I was amused yesterday to find out that Matthew Yglesias over at the left-leaning Center for American Progress has stumbled across my 2004 article "Mandatory Health Insurance Now!" and sent out this tweet to his fans:
"Excellent defense of the individual health care mandate from @Reason:"
Excellent defense? Well, not really a "defense" but an alternative to really bad ideas like a single payer plan. But thanks, I guess.
Not suprisingly, The New Republic's chief left-wing ideologue Jonathan Chait picked up the ball tossed by Yglesias and ran with it. He quotes a bit of it and then writes:
The article proposes a plan centered around an individual mandate as a private insurance alternative to the "creeping socialism" proposed by John Kerry, who was then running for president. Now, of course, Reason considers an individual mandate a massive imposition upon freedom and even unconstitutional. (Indeed, Roger Vinson's ruling that the individual mandate was unconstitutional cites a segment on Reason TV.) Now, the plan as a whole is far from identical to the Affordable Care Act. But its defense of the individual mandate is virtually identical to the case liberals have been making, and which conservatives and libertarians have been angrily dismissing.
Far from identical to ObamaCare? Well, yes.
ObamaCare involves a massive expansion of Medicaid; does not promote health savings accounts as a way encourage consumers put price pressure on health care providers; continues to link health insurance to employers; punishes companies for not covering employees; enforces the mandate by means of levying tax penalties on citizens; and will eventually attempt to restrain spending by turning insurance companies into utilities by bureaucratically setting their rates.
BaileyCare would enable all Americans to purchase health insurance in a national competitive private market. It would completely eliminate Medicaid and S-CHIP (and possibly even Medicare) and use those funds to provide vouchers to poor Americans helping them to buy private insurance in a competitive market. It also would completely delink insurance from employment; it is a consumer-driven plan that combines high-deductible catastrophic insurance with health savings accounts with the aim of using market competition to rein in health care expenses. Vouchers also mean that there would be no need for tax penalties to force people to buy insurance.
So why did I offer BaileyCare as an alternative to what eventually evolved into the economically and medically absurd mishmash that is Obama's Affordable Care Act? As I wrote:
I want to stress that mandatory health insurance is a second-best proposal. A totally free market system would be preferable; it's just not likely politically. Mandatory health insurance is a way to stop creeping socialization and preserve private medicine.
In any case, the intellectually blinkered Chait goes on to declare:
In any event, watching the right decide a policy it once advocated is not only unwise but a threat to freedom itself is a fascinating episode of ideological hysteria.
Right? Advocate? Never mind that political and intellectual subtleties are lost on uber-partisan Chait. Clearly, what I did not attempt to do in my 2004 article was offer any sort of analysis of the constitutional or legal status of a national health insurance mandate. Fortunately, Chait links to just such analysis done by my colleagues at For excellent analyses of the flaws in ObamaCare I heartily recommend the work of my colleague Peter Suderman. For further analyses of the legal and constitutional aspects of ObamaCare please see numerous articles by my Reason colleagues here.
In the meantime, as we wait to see how the federal courts rule on the constitutionality of a health insurance mandate, I hope that I can count on the Center for American Progress and The New Republic to advocate the repeal of ObamaCare and support the adoption of the BaileyCare private health insurance plan.

Did You Mean More Storms or Less Storms?

Algore and the Chicken Littles were wrong on just this one small detail ...

Frankie Five Angles Would Be Proud

"...the larger importance of the UCS press conference is not whether global warming causes – in effect – more winter, but what the press conference illustrated about the alarmists’ oft-repeated assertions that “the science is settled” and “the debate is over.”
The IPCC Third Assessment Report was as straightforward as one can get asserting that global warming would cause a decline in heavy snow events. As the Senate chairman would say, while waving the IPCC report, “We have it….” But now that real-world evidence has proven IPCC wrong, the alarmists have pulled an about-face and are claiming global warming is causing more frequent heavy snow events.
Regardless of whether global warming is causing more heavy snow events, the alarmists’ about-face on snowfall calls to mind other alarmist global warming assertions that were supposedly “settled science”, but that were subsequently refuted by real-world climate conditions. The alarmists used to claim global warming was causing more hurricanes, but real-world data show hurricanes have fallen to historically lows levels.
The alarmists used to claim global warming was causing the retreat of Kilimanjaro’s mountain snowcap, but scientists now understand that local deforestation is the culprit. IPCC claimed in its 2007 assessment that global warming would likely melt the Himalayan glaciers by 2035, but IPCC now admits there is no scientific basis for such an assertion. IPCC claimed in its 1990 assessment that global temperatures should rise 0.6 degrees Celsius between 1990 and 2010, yet NASA satellite data show global temperatures warmed by merely half that amount, at most.
For years, alarmists have claimed “the science is settled” and “the debate is over.” Well, when was the science settled? When global warming would allegedly cause Himalayan glaciers to melt by 2035, or now that it won’t? When global warming would allegedly cause fewer heavy snow events, or now that it will allegedly cause more frequent heavy snow events?
We could ask Frank Pentangeli, but Frankie Five Angles is no longer talking.

Classic Quotes, Heinlein

"A human being should be able to change a diaper, plan an invasion, butcher a hog, conn a ship, design a building, write a sonnet, balance accounts, build a wall, set a bone, comfort the dying, take orders, give orders, cooperate, act alone..., solve equations, analyze a new problem, pitch manure, program a computer, cook a tasty meal, fight efficiently, die gallantly.”Robert Heinlein

HT:  Jack Allen

Thursday, March 3, 2011

Trump's Ignorance On Display

“Donald, am I correct in guessing that one reason you want to be a politician is that you’re fond of making grand pronouncements on matters that you know absolutely nothing about?”

Does The Don have insight?  Does he know why he would try to tackle, again, something to frivolous and vain as being The President?  Or is it just a calculated play on celebrity, using the celebrity he has to gain the stage to further accelerate or sustain his celebrity curve?  Either way, it does not take long to figure out he's not a serious candidate, but then, that's also true of virtually every other one.
Democrats are relying heavily on the claim by Moody's Analytics' chief economist that 400,000 fewer jobs would be created (and saved?) by the end of 2011 -- and 700,000 fewer jobs by the end of 2012 -- if Congress were to cut $61 billion. Now, the Moody's forecast has been battered by a number of economists, and Federal Reserve Chairman Ben Bernanke, a fan of stimulative efforts, dismissed those numbers, as well.
Who knows? Laymen like me can only rely on one scientific truth when it comes to economic forecasts: They're always wrong, except when by some fluke they're right.

My favorite economists never make predictions like this anyway because they know what Harsanyi says - no ones knows what the future holds.  Why?  Because no human has enough knowledge to make a prediction.  No human CAN have enough knowledge for accurately forecast.  It's almost like we were not designed to understand, control and run economic processes on a world wide scale .... (yes, that's sarcasm)

This is what Hayek meant when he summed it up so beautifully: 
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
F.A. Hayek, The Fatal Conceit
This doesn't mean that folks don't make lucky guesses.  However, the fact that no one has ever made all the right guesses, or even the majority of right guesses, is the proof of Hayek's pudding.

Wednesday, March 2, 2011

Political Darwinism

I always enjoy when Dr. Walter E. Williams guest hosts for Rush.  He often refers to a discussion he had with a former senator.  The discussion went like this:
Dr. Williams:  "Senator, you know as well as I do that farm subsidies are wrong in that they distort farm markets and prices, and end up being a hand out that in many ways hurts farmers in the long run, AND essentially destroy tax payer money by incentivising unproductive behavior in farmers."
Senator Survivor:  "Of course you are correct, but what do you expect me to do?  If I don't support these subsidies, I'll be dead meat next election and I'll be replaced by someone who's worse than I am.  If I don't compromise by supporting these subsidies, I won't be able to do any good at all."

Dr. Williams' point is:  we can't expect politicians to behave in ways that will result in loss of their elected position.  Thus, if we want government to no longer be the agent by which politicians take our tax dollars and auction them off to various constituencies in exchange for votes, we have to structurally reduce the power they hold.  If they don't have the power to give our tax dollars (and the loans made against our future tax dollars) away, they won't; but if they can, we know they will.  The caveat is - it is conceivable that we the people may become so suspect of politicians and their choices in government, that a generation of polticians might be created who believe they may only be re-elected if they are fiscally responsible and turn their backs on earmarks, the Department of Education, the Department of Agriculture, etc.  It is possible in theory ...

Ultimately, politicians survive only when they behave according to the Darwinian observation summed up as "survival of the fittest."  Those who can't stand what they become, Dick Armey for example, will get out of the game.

Tuesday, March 1, 2011

Koch on Econ 101

Years of tremendous overspending by federal, state and local governments have brought us face-to-face with an economic crisis. Federal spending will total at least $3.8 trillion this year—double what it was 10 years ago. And unlike in 2001, when there was a small federal surplus, this year's projected budget deficit is more than $1.6 trillion.
Several trillions more in debt have been accumulated by state and local governments. States are looking at a combined total of more than $130 billion in budget shortfalls this year. Next year, they will be in even worse shape as most so-called stimulus payments end.
For many years, I, my family and our company have contributed to a variety of intellectual and political causes working to solve these problems. Because of our activism, we've been vilified by various groups. Despite this criticism, we're determined to keep contributing and standing up for those politicians, like Wisconsin Gov. Scott Walker, who are taking these challenges seriously.
Both Democrats and Republicans have done a poor job of managing our finances. They've raised debt ceilings, floated bond issues, and delayed tough decisions.
In spite of looming bankruptcy, President Obama and many in Congress have tiptoed around the issue of overspending by suggesting relatively minor cuts in mostly discretionary items. There have been few serious proposals for necessary cuts in military and entitlement programs, even though these account for about three-fourths of all federal spending.
Yes, some House leaders have suggested cutting spending to 2008 levels. But getting back to a balanced budget would mean a return to at least 2003 spending levels—and would still leave us with the problem of paying off our enormous debts.
Federal data indicate how urgently we need reform: The unfunded liabilities of Social Security, Medicare and Medicaid already exceed $106 trillion. That's well over $300,000 for every man, woman and child in America (and exceeds the combined value of every U.S. bank account, stock certificate, building and piece of personal or public property).
The Congressional Budget Office has warned that the interest on our federal debt is "poised to skyrocket." Even Federal Reserve Chairman Ben Bernanke is sounding alarms. Yet the White House insists that substantial spending cuts would hurt the economy and increase unemployment.
Plenty of compelling examples indicate just the opposite. When Canada recently reduced its federal spending to 11.3% of GDP from 17.5% eight years earlier, the economy rebounded and unemployment dropped. By comparison, our federal spending is 25% of GDP.
Government spending on business only aggravates the problem. Too many businesses have successfully lobbied for special favors and treatment by seeking mandates for their products, subsidies (in the form of cash payments from the government), and regulations or tariffs to keep more efficient competitors at bay.
Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.
The purpose of business is to efficiently convert resources into products and services that make people's lives better. Businesses that fail to do so should be allowed to go bankrupt rather than be bailed out.
But what about jobs that are lost when businesses go under? It's important to remember that not all jobs are the same. In business, real jobs profitably produce goods and services that people value more highly than their alternatives. Subsidizing inefficient jobs is costly, wastes resources, and weakens our economy.

Because every other company in a given industry is accepting market-distorting programs, Koch companies have had little option but to do so as well, simply to remain competitive and help sustain our 50,000 U.S.-based jobs. However, even when such policies benefit us, we only support the policies that enhance true economic freedom.
For example, because of government mandates, our refining business is essentially obligated to be in the ethanol business. We believe that ethanol—and every other product in the marketplace—should be required to compete on its own merits, without mandates, subsidies or protective tariffs. Such policies only increase the prices of those products, taxes and the cost of many other goods and services.
Our elected officials would do well to remember that the most prosperous countries are those that allow consumers—not governments—to direct the use of resources. Allowing the government to pick winners and losers hurts almost everyone, especially our poorest citizens.
Recent studies show that the poorest 10% of the population living in countries with the greatest economic freedom have 10 times the per capita income of the poorest citizens in countries with the least economic freedom. In other words, society as a whole benefits from greater economic freedom.
Even though it affects our business, as a matter of principle our company has been outspoken in defense of economic freedom. This country would be much better off if every company would do the same. Instead, we see far too many businesses that paint their tails white and run with the antelope.
I am confident that businesses like ours will hire more people and invest in more equipment when our country's financial future looks more promising. Laying the groundwork for smaller, smarter government, especially at the federal level, is going to be tough. But it is essential for getting us back on the path to long-term prosperity.
Mr. Koch is chairman and CEO of Koch Industries, Inc. He's the author of "The Science of Success: How Market-Based Management Built the World's Largest Private Company" (Wiley, 2007).
Reprinted in its entirity with apologies to the owner.

It is sad and frustrating to me that a letter like this, were the average US citizen to read it enought to digest it, would in effect be a 100% increase in their understanding of basic economics?

"All (Peasants) Aboard!"

Generations hence, when the river of time has worn this presidency’s importance to a small, smooth pebble in the stream of history, people will still marvel that its defining trait was a mania for high-speed rail projects. This disorder illuminates the progressive mind.
Remarkably widespread derision has greeted the Obama administration’s damn-the-arithmetic-full-speed-ahead proposal to spend $53 billion more (after the $8 billion in stimulus money and $2.4 billion in enticements to 23 states) in the next six years pursuant to the president’s loopy goal of giving “80 percent of Americans access to high-speed rail.” “Access” and “high-speed” to be defined later.
Criticism of this optional and irrational spending—meaning: borrowing —during a deficit crisis has been withering. Only an administration blinkered by ideology would persist.
Washington, disdaining the decisions of Ohio and Wisconsin voters, replied that it will find states that will waste the money. California will. Although prostrate from its own profligacy, it will sink tens of billions of its own taxpayers’ money in the 616-mile San Francisco–to–San Diego line. Supposedly 39 million people will eagerly pay much more than an airfare in order to travel slower. Between 2008 and 2009, the projected cost increased from $33 billion to $42.6 billion.

“The average intercity auto trip today uses less energy per passenger mile than the average Amtrak train.” And high speed will not displace enough cars to measurably reduce congestion. The Washington Post says China’s fast trains are priced beyond ordinary workers’ budgets, and that France, like Japan, has only one profitable line.
So why is America’s “win the future” administration so fixated on railroads, a technology that was the future two centuries ago? Because progressivism’s aim is the modification of (other people’s) behavior.

The length of the list of reasons, and the flimsiness of each, points to this conclusion: the real reason for progressives’ passion for trains is their goal of diminishing Americans’ individualism in order to make them more amenable to collectivism.  To progressives, the best thing about railroads is that people riding them are not in automobiles, which are subversive of the deference on which progressivism depends. Automobiles go hither and yon, wherever and whenever the driver desires, without timetables. Automobiles encourage people to think they—unsupervised, untutored, and unscripted—are masters of their fates. The automobile encourages people in delusions of adequacy, which make them resistant to government by experts who know what choices people should make.

In this fun post, Will digresses to a Type M argument (speculating on the motives behind another's decision), and so should not be taken as more than an opinion of one person.  Nonetheless, aside from helping to exacerbate the significance of government via the elevation of government projects to world changing status, it hard to understand why people are so in love with high speed rail, and other mass transit projects, which have proven to be failures wherever add hoc'ed into an existing transportation market.

Examples:  America’s highest-profile monorail project, the expansion of Seattle’s line, was plagued by cost overruns and funding gaps, and was finally dissolved in 2005 (costing taxpayers $125 million). The Las Vegas monorail has filed for bankruptcy.

Of course, if mass transportation were really a priority, perhaps the President could have skipped health care, payoffs to states to keep them solvent, and other parts of the spending spree of the last two years so that the money to pay for this incredible mass transit upgrade that's going to win the war for the future could be paid for.  And that is of course exactly why all that money was not spend on high speed rail two years ago - it isn't really a priority, it's some fluff to throw to the government-spending-porn-freaks who can be bought off with the equivalent of a peep show.  As we approach the absolute limit of what our government will borrow in our names, we can see which politicians are willing to inch right up to the cliff in order to get just that last little bit of money in order to be able to spend it and claim they did something for posterity.  Nothing like using other peoples' money to burnish one's humanitarian resume!