Thursday, June 30, 2011

Everyone Has A Purpose

Mr. Krugman is a Nobel-winning trade-policy academic economist who, over the past couple of decades, has gone increasingly to the liberal dark side, as evidenced in his columns in The New York Times. What seems to have driven him completely over the edge is a combination of Bush Derangement Syndrome and an evangelical desire to prove that Reaganomics was a failure. He criticizes Barack Obama for not going far enough. He hates Republicans with a passion and is Keynesian to the core. Thus he can only interpret the failure of government stimulus as evidence of “cowardice” or “lack of political will.”

Krugman's raison d'etre:   making real economists look smart.

He doesn’t think consumers can be trusted to make the “right” choices any more, and has taken to the remarkably annoying habit of condemning free marketers as people who believe that people are always rational and markets perfect.
A remarkable compartmentalization is required to think that the people who can't make their own choices for themselves will instead choose wise, all knowing and all caring and uncorruptable politicians, who, out of the goodness of their hearts, will make far better choices for us than we would make for ourselves.

Nevermind that the supply of all knowing and all caring and uncorruptable politicians ran dry - about 10,000 years ago.

Really?  Humans are so flawed they cannot choose for themselves, so the Krugmanite elites will just choose for them?  Pull the other one ...

The Faux Drama,0,434589.column

Jerry Brown risks being the third failed governor in a row. If he doesn't find a budget solution, the consequences will be dire.
President Obama’s personal popularity remains high and the most recentRealClearPolitics poll average has him at a more than respectable 47.6 percent approval; while the President’s popularity is drifting lower, congressional Republicans have been losing ground to their Democratic rivals in recent polls, and the Republican primary field remains both uninspiring and polarized.  

Why we let ourselves become emotionally engaged in the fate of politicians is amazing to me.  These are people who serve, above all else, their own ambition.  We're all natural born fools to think their political fates matter at all.  I can't believe it ever became "normal" for the average citizen to think that these folks should be trusted with any amount of the coercive power of the State.

Wednesday, June 29, 2011

Harsanyi Gores Gore's Tired Old Ideas

Gore hasn't embraced any nefarious brand of population control. But President Barack Obama's "science czar," John Holdren, co-authored (with Paul Ehrlich of "Population Bomb" notoriety) a book in the 1970s that toyed with the idea of compulsory sterilization and coerced abortions -- to "de-develop the United States." (Boy, the tea party is so radical!)

They've been making these "people are a cancer"arguments for a long, long time, and eventually, they may be right.  What they over-estimate is their own understanding of how the world works, and what they under appreciate is the creative force of human life and how many undiscovered way of sustaining itself still lie before us.  They suffer from the fatal conceit.

Perhaps the same arguments could be made for my predictions that government as it has been practiced the last 80 years is unsustainable.  Nonetheless, I advocate more liberty, less government. 

Make Your Pick

So what's it going to be - welfare state or AGW?  If you believe in AGW, those are the choices.

Easy Come, Easy Go

Or should we call this post "It's Only (Our Children's) Money"
In fact, the government’s classification of obligations such as interest payments as official and others, such as Social Security payments, as unofficial is a labeling game with no basis whatsoever in economic theory. It’s a strategy politicians have used for decades to disguise the true nature of our country’s indebtedness.
How big is the fiscal gap? By my own calculations using the CBO data, it now stands at $211 trillion -- a huge sum equaling 14 times the country’s economic output. To arrive at that figure, I assumed that annual noninterest spending, as well as taxes, would grow indefinitely by 2 percent a year beyond 2075, the point at which the CBO’s estimates end.

Fatal Conceit, Hubris, What's In A Name?

So the Greeks pointed to the hubris required for a man to act as though he were a god as the ultimate sin.  How is this different from Hayek's "The Fatal Conceit"? 

This author has plenty of both.  First, he understands the "real" causes of the economic crisis.  How?  He possesses the special knowledge of which authorities to which he can appeal for a complete explanation. 
The report of the Financial Crisis Inquiry Commission detailed the recklessness of the financial industry and the abject failures of policymakers and regulators that brought our economy to its knees in 2008.

He can see inequality, and knows it for a sure sign of bad things to come.  He can tell that anyone wins, somebody had to be losing; and the winners surely played unfairly to win.  He trusts himself (and politicians he approves of) to carefully, and justly, untainted by human failings, balance out the inequality. 
prosecuting financial wrongdoing to deter future malfeasance; vigorously enforcing financial reforms to rein in excessive risk; and rooting out Wall Street’s conflicts of interests, abysmal governance and badly flawed compensation incentives.
With the help of the author and his chosen elected representatives and their regulatory appointees, we can legislate and regulate ourselves into financial nirvanna in which the "little guys and gals" who, under the current cruel system, are underemployed and trailing badly in the race to earn and keep the most money, would live in milk and honey forever. 

With his and his peers' accumulated wisdom, we could get on with:
...the urgent task of putting people back to work and creating real wealth for America’s future. Over the past decade, we squandered trillions of dollars on rampant speculation rather than on making investments — in technology, infrastructure, clean energy and education — that increase our productivity and economic strength. The financial sector’s share of corporate profits climbed from 15 percent in 1980 to 33 percent by the early 2000s, while financial-sector debt soared from $3 trillion in 1978 to $36 trillion by 2007. With tens of millions still unemployed, isn’t it time to shift from an economy based on money making money to an economy based on money creating jobs and genuine prosperity? (emphasis mine-PFE)

Because surely it is within the reach of gods like the author, and heretofore all to human politicians, to simply legislate and regulate better so that we can right the wrongs and cure the ills and make everything work hunky dory ... like the Europeans have done so deftly lo these many years. 

Dang, why didn't I think of that.

Fight Fires With Fans. Really Big Ones.

The Arizona law’s fate actually was sealed in 1791, when the First Amendment was ratified; 220 years later, one wonders: When will people eager to empower government to regulate speech about itself abandon the fiction that political money can be regulated without regulating political speech?

Compare with this author's misguided take:

These types of laws are like trying to fight fires by using cooling fans. 

There's a reason people spend ooodles of money to win elections - governments have too much power, Federal, State and Local governments are not limited strongly enough to prevent the corruptions that result from excessive power. 

Therefore - people are willing to spend whatever it takes, in money and life energy, in order to gain control over that power.  POWER COMMANDS A POWER STRUGGLE.

It is oft said and still true - power corrupts, absolute power corrupts absolutely.

Limited government brings a reduced motive for gaining and keeping office.  If you can't use government to oppress your competitors (as is the purpose of unions), you won't give people money to run.  If you can use government to oppress your competitors (unions and any number of examples), you'll spend whatever you can to get a "favorably disposed" candidate in office. 

Those who dream of big government orchestrations of nirvanna either ignore or can't see this plain truth.

Tuesday, June 28, 2011

I Believe!

The Misconception: When your beliefs are challenged with facts, you alter your opinions and incorporate the new information into your thinking.
The Truth: When your deepest convictions are challenged by contradictory evidence, your beliefs get stronger.
Novelty Facebook pages, get-rich-quick websites and millions of emails, texts and instant messages related to the event preceded the official announcement on May 1, 2011. Stories went up, comments poured in, search engines burned white hot. Between 7:30 and 8:30 p.m. on the first day, Google searches for bin Laden saw a 1 million percent increase from the number the day before. Youtube videos of Toby Keith and Lee Greenwood started trending. Unprepared news sites sputtered and strained to deliver up page after page of updates to a ravenous public.
It was a dazzling display of how much the world of information exchange changed in the years since September of 2001 except in one predictable and probably immutable way. Within minutes of learning about Seal Team Six, the headshot tweeted around the world and the swift burial at sea, conspiracy theories began to bounce against the walls of our infinitely voluminous echo chamber. Days later, when the world learned they would be denied photographic proof, the conspiracy theories grew legs, left the ocean and evolved into self-sustaining undebunkable life forms.
Interesting concept, but clumsily delivered.  One example - "photographic proof?"  Who could consider photography proof of anything after all of the BS that has surrounded, for starters, the Kennedy assasination or the moon landing?  "Photographic proof" is an oxymoron.  Photos can be faked as easily as any other medium. 
I'm not sure this is anything we don't already "know."  Everyone knows they can be fooled, and that the fooler in chief is themselves.  Is this article just another way to say that?  Seems like it.
Nonetheless, the Fooler In Chief benefits from analysis of this topic.

Averting the Death Spiral

A new study co-authored by Joshua Rauh of Northwestern University and Robert Novy-Marx of the University of Rochester, both finance professors, has concluded that without a change in their pension systems, federal, state and local governments "will need to raise taxes by $1,398 per household every year for the next 30 years if they are to fully fund their pension systems." The study also found that New Jersey "will need to increase its revenue by the largest margin, requiring $2,475 more from each household per year." That's if the new law hadn't passed.
Read more at the Washington Examiner:

I'm surprised anyone's been able to tackle this.  The absurdity that is driving these changes - in which politicians approve monstrous pay and benefits for state employees in exchange for votes and funding - is one of several reasons there's an issue with "jobs" creation.  Government cannot "create" jobs, but it can easily and rapidly destroy piles of wealth, and with less wealth, there will be fewer jobs to be had.

Biofuel Illusion Lifting

First, a broad consensus has now thrown its weight behind the environmentalists’ view that using home-grown ethanol—as a replacement for imported oil—squanders far too much energy and water in the process, and is not a particularly good way or reducing greenhouse gases anyway. Indeed, given the intensive use of energy in agribusiness, it is debatable whether replacing petrol with ethanol breaks even in terms of the “wells-to-wheels” energy consumed, or even produces a net reduction in carbon emission.

Besides, even if America’s entire corn crop were to be devoted to ethanol production, it would still only supply 4% of the country’s oil consumption. So much for the argument that home-grown ethanol offers an answer to America’s dependence on foreign oil.

Second, the food industry has gone noisily public about the way the federal government’s corn subsidies—which have encouraged American farmers to devote more and more of their corn crops to ethanol production—have driven up food prices. Last year, 40% of the corn grown in the United States (some five billion bushels) was used for making ethanol. This summer, corn supplies for animal feed are heading for a 15-year low. As a consequence, corn futures have soared to almost $8 a bushel—twice their price a year ago. Consumers counting the cost at the supermarket checkout now know who to blame.

This last is kind of a shame.  The higher the price of feed corn, the more likely folks are to choose grass finished beef, which is a win for all involved; the cows, the consumer, the farmers, and the environmental impact.

Free Trade - It's The Right Thing To Do
This is the blinding flash of the obvious.  What did more to alleviate poverty - freed up markets in India or all those years of "government assistance" to Africa?  We who suffer from the fatal conceit think we can take money from the dupes (aka citizens) and give it to those in need (aka, the cronies who run 3rd world nations) and get sunbeams from cucumbers. 

What the human condition benefits most from is property rights and the rule of law to make them matter. 

Monday, June 27, 2011

Don't Just Do Something ... Stand There

Present needs to sustain recovery seem to collide with future needs to curb debt. Our public debate is confusing and our policy paralyzed because no one -- most obviously, Obama -- has disarmed the contradiction.

Apparently, There's Nothing 'Left' Worth Saying

'"America, it is time to focus on nation building here at home," Obama said, speaking from the White House East Room.

I'm stunned by the degree to which the President is left with nothing to say.  Most frequently when I hear him speak, I feel embarrassed for him.  His speeches must be written for an entirely different audience - one that hears what it wants to hear.  I largely felt this way during the campaign as well.  "Can anyone really take that sort of talk seriously?" 

The thing that strikes me most often is the disconnect between what he's doing and why he says he's doing it.  What does "nation building here at home" have to do with troops in Afghanistan?  Aren't we spending billions to supply and equip them and get them to and fro and isn't that just an easily defensible "stimulus"?  Is national defense spending quantifiably different than other forms of "stimulus"? 

Who knows what is meant by "nation building at home" but in the sense he's meant it so far, there's no evidence it can be done by government.

Absurdly Warned

"30 of the world's most absurd warnings and disclaimers"

Algore and the Chickenlittles

Sunday, June 26, 2011

Classic Quotes, Thoreau

"I was not born to be forced. I will breathe after my own fashion. Let us see who is the strongest."
 -- Henry David Thoreau


Thursday, June 23, 2011

God In The Details?

They just need to take a hard look at this, and I'm sure they'll nail down all those nasty details, and catch all of the unintended consequences, and have this Obamacare thing running like a top.  What could go wrong ...
Back in March 2010, then-House Speaker Nancy Pelosi, D-Calif,, uttered the now-famous words, "We have to pass the bill so that you can find out what is in it, away from the fog of the controversy." Pelosi was talking about the health care law, and it appears she was right about the fact that it was full of unknowns.
It turns out that, due to a glitch in the law, roughly three million middle-income Americans could wind up on Medicaid - which was designed to assist the country's poorest citizens.
"It's gonna cost about $450 billion over 10 years," Senator John Barrasso. R-Wyo., who is also a surgeon, warns. Barrasso says it's yet another burden for average Americans. "Who's gonna pay for that - the taxpayers, people who are paying their bills every day," he says.

Read more:

Classic Quote, Bergson

"The eye sees only what the mind is prepared to comprehend."
-- Henri Bergson

Tuesday, June 21, 2011

Memories of the Way We Were

The first takeaway message from the early 1980s is that creeping inflation gallops before experts catch it. The second takeaway is that postponing the commitment to tighten hard ensures yet higher interest rates later.
A monetary recession lurks ahead. How high will the rates be? Higher than you think.

I remember when all of this was taking place, but I didn't understand much of it back then.  I remember hearing the term stagflation on the nightly news.  I don't have a lot of confidence that we or anyone understands what's happening in the economy, largely because there are a number of levers that serve to move economic activity one way or the other, and no one's smart enough to sort out which ones work best or worst right now. 

If it were possible to simply remove the oppressive hand of government, I'm sure that would allow for rapidly accelerating economic growth ... but politicians have demonstrated no talent for undoing all the messes they've made.

Monday, June 20, 2011

Unintended Consequences? What Could Go Wrong?

The theory for ACOs, as they're known, is that hospitals, primary-care doctors and specialists will work more efficiently in teams, like at the Mayo Clinic and other top U.S. hospitals. ACOs are meant to fix health care's too-many-cooks predicament. The average senior on Medicare sees two physicians and five specialists, 13 on average for those with chronic illnesses. Most likely, those doctors aren't coordinating patient care.
This fragmentation is largely an artifact of Medicare's price control regime: The classic case study is Duke University Hospital, which cut the costs of treating congestive heart failure by 40% but then dumped the integration program because it lost money under Medicare's fee schedule.

The smartest person in the world couldn't figure this out.  But that won't stop those who think they are the smartest, most progressive, most compassionate, from trying, due to the fatal conceit and the instinct to tyranny.  Next historical reference - the goose that lays the golden egg is slowing being murdered by these absurd interventions by the State into the affairs of would be, should be, free folk.

Friday, June 17, 2011

Example of the Road To Hell Being Paved

This is a beautiful example of the folly of good intentions.  Analysis is still required.  I don't know why we as a culture accept these "great ideas" and great terrors ("The Sky Is Falling!" by Algore and the Chicken Littles) so uncritically.  One bit of certainty I have is that the folks trying to hard to convince us about the magnificence of the electric car pocketed millions that Congress diverted from our pockets to the electric auto industry over the last 20 years. 

Britain's Department for Transport is spending $66 million over the next year giving up to 8,600 buyers of electric cars a grant of $7700 towards the purchase price. Ministers are considering extending the scheme.
The study was commissioned by the Low Carbon Vehicle Partnership, which is jointly funded by the British government and the car industry. It found that a mid-size electric car would produce 23.1 tonnes of CO2 over its lifetime, compared with 24 tonnes for a similar petrol car. Emissions from manufacturing electric cars are at least 50 per cent higher because batteries are made from materials such as lithium, copper and refined silicon, which require much energy to be processed.
Many electric cars are expected to need a replacement battery after a few years. Once the emissions from producing the second battery are added in, the total CO2 from producing an electric car rises to 12.6 tonnes, compared with 5.6 tonnes for a petrol car. Disposal also produces double the emissions because of the energy consumed in recovering and recycling metals in the battery. The study also took into account carbon emitted to generate the grid electricity consumed.

Because carbon emissions are a surrogate for energy, it's reasonable to assume that, even if you are smart enough not to be worried about CO2 as a greenhouse gas, these things are not saving any energy, either.  But at least they are small, expensive and dangerous.

It's difficult not to give in to anger about the stupidity of the "electric car mania" but it also would not help anything or anyone, and it wouldn't 'unspend' all the wealth that's been destroyed by those in Congress, who, presumably, should have figured these kinds of things out before throwing our money at this dreamy eyed project. But of course - they don't actually care about whether or not the moeny they spend will result in a net benefit to the nation, they spend money based on political calculus.  That's why we're screwed.

Monday, June 13, 2011

Wish I Didn't Know This

Weiner has also complained to friends that he wasn’t sure how he would make a living if he were to leave Congress and its $174,000 annual salary.  ‘He’s worried about money and how to pay his bills,’ said a Democratic insider.  ‘He’s very concerned about that’” (“Weiner shows no signs of quitting,” June 9).
Overlook the fact that, by admitting this reason for clinging to political office, any professions that Mr. Weiner has made in the past or will make in the future about his ‘devotion to public service,’ his ‘love of country,’ or his ‘loyalty to the Democratic party’ should be seen as the self-serving lies that they are.

I'll admit to just enjoying the fact that politicians frequently make complete buffoons of themselves, as it makes the point for me that perhaps they are not as trustworthy or noble hearted as they claim to be, and that perhaps we should view their protestations otherwise with a jaundiced eye.  But this one is so pathetic it just makes me angry, and that I didn't know about it.

Classic Quotes, Paine

"Those who want to reap the benefits of this great nation must bear the fatigue of supporting it."
                ~ Thomas Paine

Fabulous quote, although it lends itself too much to the "shared sacrifice" crowd; that's the bunch that gets to decide who will sacrifice and how much, and who are all too happy to let you share in the sacrifice.  Most of them are not up at night worrying about how much they will have to sacrifice.

Friday, June 10, 2011

Incompetence or Truly Sinister?

Even as yet another federal court ponders the constitutionality of Obamacare, the bad news about its impact just keeps on coming.
This week a report by the respected McKinsey & Co. found that at least 30 percent of employers are likely to stop offering their workers health insurance as a routine benefit once the federal law kicks in.
As many as half of those 1,300 companies surveyed said they would “definitely” or “probably” drop such coverage even with a government imposed penalty of as much as $2,000 per worker for companies with more than 50 employees.

Unintended consequences are the name of the game as regards federal legislation - and generally they unintended consequences are bad, horrible or worse.

In this case, it does beg the question - did they not foresee these kinds of systemic hits, or did they?  And plunge ahead anyway, knowing that if they wrecked the current Frankenstein monster of high priced care driven by government incentives gone afoul, they would have a defacto single payer system as all that was left? 

It'll take a miracle for this to end well.

Thursday, June 9, 2011

Links, Thursday 9 June 11

The Amerithrax investigation is one of the most embarrassing chapters in the history of the storied agency. But why did it happen?

The answer to that question is unraveled, in a meticulous and authoritative fashion, in "The Mirage Man," arriving in bookstores this week. Author David Willman is one of the most accomplished investigative journalists of our time, and his book will make many prominent people in his profession uncomfortable, as it should. There are few heroes in the story, and some villains, too. But mostly there are lessons -- lessons are about the danger of jumping to conclusions, lessons about sensationalizing the news, and lessons about the dangers of politicizing science or the criminal justice system.

Because government is inherently dangerous and often mischievous, the Constitution’s framers provided, and congressional rules have multiplied, mechanisms for blocking government action. These mechanisms can, however, also be used to force action. One is being so used in a dispute that has two remarkable facets.

On May 4, the administration announced that, at last, it was ready to proceed with congressional ratification of the agreements. On May 16, however, it announced it would not send them until Congress expands an entitlement program favored by unions.

Since 1974, Trade Adjustment Assistance (TAA) has provided 104, and then 156, weeks of myriad financial aid, partly concurrent with the 99 weeks of unemployment compensation, to people, including farmers and government workers, and firms, even whole communities, that can more or less plausibly claim to have lost their jobs or been otherwise injured because of foreign competition. Even if the injury is just the loss of unfair advantages conferred, at the expense of other Americans, by government protectionism. And even if the injury results not from imports but from outsourcing jobs. TAA benefited 50,000 people at a cost of $500 million in 2002. In 2010, it cost $975 million for 234,000 people. Its purpose is to purchase support for free-trade policies that allow Americans to benefit from foreign goods and services, and from domestic goods and services with lower prices because of competition from imports.

A government borrowing $58,000 a second cannot afford Obama’s policy of Stimulus Forever, and there is this problem with TAA at any level: It is unjust to treat some workers as more entitled than others to protection from the vicissitudes of economic competition.
Most Democrats oppose such agreements but lack the courage to express their controlling conviction, which is: Organized labor, which represents just 6.9 percent of the private-sector workforce, must be appeased, even if doing so injures other American workers or Americans who would be workers if policies such as TAA did not impede economic dynamism.

Central planners love the resulting state-subsidized, high-density European apartment living without garages, back yards or third bedrooms. Yet the recent Japanese tsunami and accompanying nuclear contamination have reminded European governments that their similarly fragile models of highly urbanized, highly concentrated living make them equally vulnerable to such disasters.

Popular culture may praise the use of the subway and train. But about every minute or two, some government grandee in a motorized entourage rushes through traffic as an escort of horn-blaring police forces traffic off to the side. A European technocratic class in limousines that runs government bureaus and international organizations -- for example, disgraced former International Monetary Fund chief Dominique Strauss-Kahn -- lives like 18th-century aristocrats at Versailles as they mouth socialist platitudes.

Throughout Western Europe, a subordinate class of unassimilated North African, sub-Saharan African and Pakistani immigrants hawk wares and do menial labor -- and are increasingly despised by Europeans as times get rougher. A growing number of the working classes here are getting fed up that the welfare state means sky-high fuel and food costs for the masses, small and expensive apartments, limited disposable income -- and lots of aristocratic perks for the technocrats who oversee the redistributive mess. The notion of a large and esteemed class of self-made, independent-thinking business people and empowered upper-middle-class entrepreneurs is a concept that seems foreign, if not subversive.

Whether Gov. Pawlenty's prescriptions—dramatically lower individual and corporate taxes, zero taxes on capital gains and dividends, sunset provisions for federal regulations and a growth-rate target of 5%—are provable as solutions is politically beside the point at this moment. As substantive brand differentiation, the Pawlenty speech was a success.

Less famous than its warm-water climate sibling El Niño, this year's La Niña has been "near record-breaking" in its intensity, says climate scientist Michelle L'Heureux of the Climate Prediction Center in Camp Springs, Md.

La Niña is defined as cooler-than-normal sea-surface temperatures in the central and eastern tropical Pacific Ocean, which affect weather patterns around the world, according to the prediction center. La Niña conditions occur every few years and can persist for as long as two years.

This legal process is not an academic exercise to map the precise contours of the Commerce Clause or Necessary and Proper Clause — or even to vindicate our commitment to federalism or judicial review. No, all of these worthy endeavors are just means to achieve the goal of maximizing human freedom and flourishing. Indeed, that is the very reason the government exists in the first place.

Tuesday, June 7, 2011

Classic Quote, Chesterfield

The pleasure is momentary, the position ridiculous, and the expense damnable.
-Lord Chesterfield


The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.
This gap between spending commitments and revenue last year equals more than one-third of the nation's gross domestic product.
Medicare alone took on $1.8 trillion in new liabilities, more than the record deficit prompting heated debate between Congress and the White House over lifting the debt ceiling.
No, we're not insolvent yet.  The question is - who will we stiff, how, and when and how weak will we become before we act in desperation to solve a problem that was foreseen many years ago?  When begins the death spiral? 

The $61.6 trillion in unfunded obligations amounts to $534,000 per household. That's more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises

More Unions, Fewer Employed

But two other factors are omitted from this narrative. The first is the price of labor. The Wagner Act, the great modern labor statute, became law in 1935. It made possible the closed shop, under which only unionized workers were allowed into a unit. In 1937, after Roosevelt was safely elected, labor leader John L. Lewis and his Congress of Industrial Organizations began using their new power to its full extent. Labor's tour de force in this period is memorialized in the photos we still recognize today of sit-down strikes at the General Motors Co. plant in Flint, Michigan. Strike days in 1937 totaled 28 million, up from 14 million during the election year.
Such labor stoppages, and the threat of more, led companies to raise wages more than they could afford to. Harold Cole of the University of Pennsylvania and Lee Ohanian of the University of California, Los Angeles, have demonstrated that wages in the latter half of the 1930s were well above trend for the entire century. Employers also hired less: Even as unionization increased, nonfarm unemployment did as well.

This is nothing but common sense.  Anything that makes it more expensive to employ workers makes it less likely they will be hired.  If I could get my lawn mowed for $1, I'd never mow it again - but right now, my son won't even mow for the price I'm willing to pay so he's unemployed and I burn up an hour of my week on a mower. 

This is the effect of unions - fewer workers making more money, for a while; and "after a while" those higher paid union workers get pushed out of the marketplace by workers who provide more productivity than do their union competitors.  Exception - government employees, who rarely have to compete and those from places like Boeing and the big, old automakers who are protected from the folly of their abusurd contracts by their ability to buy off politicians.

Slower Than Slow

What was the secret to the outsized growth of the 19th century, particularly its latter portion, the Gilded Age? There were great technological innovations and large population increases, to be sure – but these things came in the 20th century as well. What was different back then was the absence of macroeconomic institutions.
There was no Federal Reserve, and there was no income tax – both would be created in 1913. Therefore, there were no instruments through which the government could conduct monetary or fiscal policy. Government’s role in shaping the economy was confined to regulating trade and enforcing contracts.

What?  You mean government might not be a help to economic growth?  And economic stalls were SMALLER before 1913?  So what is it that the Fed does to "help" things? 

What is to be done? As it happens, now on offer are serious suggestions in exactly this direction. Reps. Cantor and Ryan are both talking about capping the income tax at 25%, and there’s a new fascination globally with returning to the 19th-century monetary system of the gold standard.
Dismissing these solutions, as the cognoscenti are prone to do, as reactionary, unrealistic, and not-quite-Ivy-League is to betray ignorance about the immense statics of American economic history. It’s in our sinews to grow at 5-6% per year. If we’re doing less, it’s because we’ve arrogated power to institutions that blunder around in the name of the public good.

Monday, June 6, 2011

Classic Quotes, Mamet

"We are a democracy, and as such do not generally elect our best people to office. How could we? They weren’t running." 
-David Mamet

From Left To "Liberal"

Readers on both sides of Mamet’s current political stance can take issue with his social conservatism. He is, among other things, an unbending proponent of traditional gender arrangements; and yet who even on the left can deny the miseries that have attended the decline of the two-parent family? Nevertheless, it is exhilarating to hear so much common sense expressed with such forceful eloquence: “The honest man might observe…that no one gets something for nothing; that politicians go in poor and go out rich; that the Government screws up everything it touches; and that the Will to Believe is best confined to the Religious Venue, as to practice it elsewhere is just too damned expensive.”
Mamet is not a man with a plan. Neither the right nor the left is to be entirely trusted, and a complete national salvation may remain forever beyond our grasp. “We are a democracy,” he writes, “and as such do not generally elect our best people to office. How could we? They weren’t running.”

Liberal as in the classic liberalism in which government is limited the People retain the responsibility to govern themselves.

Friday, June 3, 2011

McArdle's Summary of the Greek Default Dominos

After she summarizes another author's post, she summarizes her thoughts:
The most compelling argument against my belief that the euro can't last is simply that it's so . . . damn . . . hard to get out.  The country that does it will suffer immensely.

On the other hand, people do snap their currency pegs when they're already suffering a great deal.  And while the PIIGS are suffering now, that's nothing compared to what will happen if their economies stay in the slough of despond, and the governments and central banks of more solvent countries run out of money and/or patience to continue the subsidies they're now receiving.  

I've only been writing about finance for seven years, and I've already watched a bunch of "unthinkable' and "impossible" actions, from Argentina's devaluation and serial defaults, to my own government nationalizing GM.  The unthinkable gets thunk surprisingly often.

This is the logical end of government control of an economy, as manifested through unions.  Guess who will be harmed the most?  Not the rich, they got out or covered their bets long ago.

China A Literal Paper Dragon

So too with the military. China's military spending is rising very fast, as we always hear. But the starting point is much lower than accounts in the U.S. generally mention. That's the virtue of this Danger Room article. Yes, the PLA Navy is about to launch its very first aircraft carrier. It will hit the seas some 90 years after the U.S. launched its first aircraft carrier -- the USS Langley, which was commissioned in 1922. As anyone in any navy will tell you, simply having a ship is only the beginning to effective carrier operations.

So read the article, please. And don't read it as belittling China's progress but rather in giving a realistic perspective toward the golden mean of taking China seriously without being afraid of it.

Truth In Advertising - For Politicians

After reading the following, it strikes me that we need an additional truth in advertising law that punishes politicians for doing things they say they won't or for not doing things they say they will.  If the indepently elected "Truth in Govt Advertising" agency finds that legislation is used contrary to the way it was "sold", the agency gets to stick a figurative finger in the respective politicians' eyes.  Because right now, it's imminently clear they'll do anything they want to do and there's little or nothing we can do to stop how they spend our money.
The administration is now loosening the requirements (you just need a note from a doctor or nurse saying you've been sick in the last year) and lowering premiums.  But this doesn't mean that they're finally covering more "uninsurables"; it just means they've decided to use the money allocated for those people to cover someone else.  They're changing the "high-risk pools" to something that looks a lot more like simply subsidizing insurance.  But the goal wasn't to spend the $5 billion that HHS got in its budget; the goal was to provide insurance for people who want to buy insurance, but can't find a company willing to write it.  

Since we don't seem to be able to find many of those people, HHS is using the money to cover anyone who lacks insurance and can get a doctor to attest that they've been sick in the last year.  They will eventually no doubt claim that the high-risk pools were a success, relaxing the conditions until they can say they've covered 200,000 or so people.  But the mystery will not have gone away.  Where are the unsinsurables?  And why didn't they want to buy insurance?

If We Could Just Elect People Who Do What I Say

Here's Krugman's explanation of what went wrong with the administration's leadership of the economy, and how it could be fixed. 

The short version?  "If they would just do what I say, we could run this economy thing no problem." 

In other words, the perfectly predictable outcome that political leaders using political calculus won't choose the right actions to manage the unfathomably complicated beast known as the economy is boiled down to "I told you so."  Mr. Krugman chooses to ignore reality - politicians always choose wrong, for two reasons.  One, they don't know enough to "choose right."  Krugman thinks he knows enought to run the economy, but that's because he's a typical human who doesn't know the limits of his ability; nothing unusual about that.  Since no human's ever demonstrated the ability to run an economy, there's simply no basis in logic for believing that Krugman - or anyone else - knows either.  In other words, Krugman suffers from the fatal conceit like most politicians.  Two, politicians never do what's right.  They do what's right for their political viability, IOW, they understand and practice Poltical Darwinism.  If they did not, they would have another job.  Knowing beyond a reasonable doubt that politicians will not choose right is why they should not have the power to make these choices in the first place.  That's why the Constitution was written to ensure a limited government.  Sadly, the Constitution, although a thing of beauty, wasn't "bullet proof."

Sowell: Seductive Beliefs

What could be more emotionally satisfying than seeing others who have done better in the world as the villains responsible for your not having done as well? It is the ideal political explanation, from the standpoint of mass appeal, whether or not it makes any sense otherwise.
That has been the politically preferred explanation for economic differences between the Malay majority and the more prosperous Chinese minority in Malaysia, or between the Gentile majority and the Jewish minority in various countries in Europe between the two World Wars.
At various other times and places, it has been the preferred explanation for the economic differences between the Sinhalese and the Tamil minority in Sri Lanka, the Africans and the Lebanese in Sierra Leone, the Czechs and the Germans in Bohemia and numerous other groups in countries around the world.

Finding the Good In the BS

Equally salutary is the air of crisis that will be generated by the fear of default. We shall have a preview of what happens when we hit the real debt ceiling several years from now, i.e., face real default. That’s our current fiscal trajectory. Under President Obama’s budgets, debt service, now $214 billion a year, climbs to $931 billion in a decade.
The current debt-ceiling showdown, therefore, is an instructive dry run of an actual Greek-like default, which awaits if we don’t solve our debt problem.
With one difference, of course. During today’s debt-ceiling fight, if the markets start to get jittery, interest rates on U.S. debt spike, and the economy begins to teeter, the whole thing can be called off with a push of a button — an act of Congress hiking the debt ceiling. When the real crisis comes, however, there is no button. There is no flight-simulator reset. We default and the economy really does crash.
Which is why the current debt-ceiling showdown is to be welcomed. It creates leverage to force fiscal sanity.

So, facing in a few years what the Greeks face now, will US politicians be able to choose more wisely? 

Loser Pays Equals Prosperity for Texas

No wonder the nation’s CEOs list Texas as the best state for business.
The success of ‘loser pays’ is destined to be viewed as a key victory for the Republican legislature over a group that once enjoyed almost limitless influence in the state: the Texas Trial Lawyers Association, which lobbied aggressively against the law. Prior to the reforms instituted in 2003 and 2005, Texas was an ambulance chaser’s paradise. Nowadays, even the $13 million the trial lawyers spent to defeat Perry and other pro-tort-reform Republicans in the 2010 election had little impact. In a stunning rebuke, Lt. Gov. David Dewhurst stared down the trial lawyer lobby and shepherded the measure through to a 31–0 vote in the Senate.

This will be a fascinating social experiment, and I hope it works out just as they think it will.

Commerce Clause Equals Unlimited Government?

That’s why Obamacare isn’t just a threat to the private health care system. It strikes at the very foundation of our nation. In our earliest days, Chief Justice John Marshall warned that if Congress can exercise powers that are in practice unlimited, then “written constitutions are absurd attempts, on the part of the people, to limit a power in its own nature illimitable.” It is “a proposition too plain to be contested” that the Constitution cannot be used to justify an act that destroys the very limits on which constitutional government is founded, he wrote. The courts should move expeditiously to throw out the president’s unconstitutional power grab.

Wednesday, June 1, 2011

A Couple of Links

It's most unsettling to the cluckers of climate change when one of their own leading adherents, who formerly toed the line, becomes skeptical and drop-kicks the "science."
Meet David Evans.
A scientist with six university degrees, Mr. Evans consulted for the Australian Greenhouse Office (today's Department of Climate Change) from 1999 to 2005. He studied carbon in plants, debris, forestry and agricultural products.
But while aboard the global-warming train, he found that the wheels got increasingly wobbly.
"The debate about global warming has reached ridiculous proportions and is full of micro-thin half-truths and misunderstandings," he says. "I am a scientist who was on the carbon gravy train, understands the evidence, was once an alarmist, but am now a skeptic."

Read more: Off the 'gravy train' - Pittsburgh Tribune-Review
Williams elaborates in a new book, "Race and Economics." A chief culprit, he insists, is the minimum wage.
"Let's not look at the intentions behind minimum wage," he said. "We have to ask, what are the effects? Put yourself in the place of an employer who must pay $7.25 no matter whom you hire. Will that employer hire a person who can only add $3 or $4 of value per hour?"
Buy American! A conventional, well-intentioned, patriotically affirming sentiment. We've heard it all our lives. But unless you crave less competition, fewer choices and higher prices, it's also a completely irrational one.
Naturally, then, as we kick off "Recovery Summer! Part Deux," the chairwoman of the Democratic National Committee says that buying homemade cars is a matter of national importance. "If it were up to the candidates for president on the Republican side, we would be driving foreign cars," Rep. Debbie Wasserman Schultz explained while defending the protectionist auto/union bailout. "They would have let the auto industry in America go down the tubes." (And by "we," Wasserman Schultz, proud American, is talking about herself and her sweet Japanese-made Infiniti FX35.)
**I have to say, could there be anything worse than an ignorant, pandering politicians clothing themselves in the robes of good intentions while they use your money and mine to further their political careers?  Contemptible.
He will not. And so fewer young people get hired and "get their feet on the bottom rung of the economic ladder." This hurts all young people, but black teens most, he says, because "many of them get a fraudulent education in the public school system. So a law that discriminates against low-skill people has a doubly negative effect on black teenagers. The unemployment rate among black teens today is unprecedented in U.S. history. In the '40s, black teenage unemployment was less than white teenage unemployment."
And yet a Pew survey says 83 percent of Americans support raising the minimum wage.
"People have the misguided notion that the minimum wage is an antipoverty tool."