Selling Deficits and other Snake Oil
Paul Hsieh has another great editorial out at PJM: Beware Dr. Galbraith’s Snake Oil.
Commentary from a pro-reason, pro-egoism, pro-capitalism perspective
Paul Hsieh has another great editorial out at PJM: Beware Dr. Galbraith’s Snake Oil.
Mark Steyn has a good piece out at Investors.com. From it:
Almost every problem we face today arises from the vanity of Big Government. Why has BP got oil wells 5,000 feet underwater in the middle of the Gulf of Mexico? Because government regulated them off-land, off-coast, and ever deeper into the briny.
True, BP went along. Its initials stand for "British Petroleum". You may not be aware of that if you've seen any of their commercials in recent years: "BP — Beyond Petroleum." They were an oil company ashamed of their product, and advertising only how anxious they were to get with the environmental program. And a fat lot of good that did them.
BP, not to mention its customers, would have been better to push back against government policies that drive energy suppliers into ever more unpredictable terrain in order to protect the Alaskan breeding grounds of the world's largest mosquito herd. Instead, we'll do the opposite. There'll be even more government protection of "the environment," and even more government regulation of the oil industry, and BP will be drilling for oil in that Icelandic volcano.
It's the same in Europe. Greece's problem isn't so very difficult to diagnose. Like many western nations, its government has spent tomorrow today. As in New York and California, public-sector unions have looted the future. This is the entirely foreseeable consequence of government policy.
So what's the solution? The international bailout (including a hefty contribution by U.S. taxpayers) is a massive subsidy to the Greeks to carry on doing all the stuff that's got 'em into their present mess. The European motive for doing this is to "save the euro" — a currency whose very existence is a monument to the unbounded narcissism of government.
From Harvard of all places, this study on pork-barrel spending. Here are a few excerpts from an interview with the study's authors:
Q: One of your findings was that the chairs of powerful congressional committees truly bring home the bacon to their states in the forms of earmark spending. Can you give a sense of how large this effect is?
A: Sure. The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three committees. In the House, the average is around 20 percent. For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.
Q: Perhaps the most intriguing finding, at least for me, was the degree and consistency to which federal spending at the state level seemed to be connected with a decrease in corporate spending and employment. Did you suspect this was the case when you started the study?
A: We began by examining how the average firm in a chairman's state was impacted by his ascension. The idea was that this would provide a lower bound on the benefits from being politically connected. It was an enormous surprise, at least to us, to learn that the average firm in the chairman's state did not benefit at all from the increase in spending. Indeed, the firms significantly cut physical and R&D spending, reduce employment, and experience lower sales.
The results show up throughout the past 40 years, in large and small states, in large and small firms, and are most pronounced in geographically concentrated firms and within the industries that are the target of the spending.
Q: Although you didn't intend to answer this question with the research, what does your team suspect are some of the causes that could explain why companies retrench when federal dollars come into their neighborhoods?
A: Some of the dollars directly supplant private-sector activity—they literally undertake projects the private sector was planning to do on its own. The Tennessee Valley Authority of 1933 is perhaps the most famous example of this.
Other dollars appear to indirectly crowd out private firms by hiring away employees and the like. For instance, our effects are strongest when unemployment is low and capacity utilization is high. But we suspect that a third and potentially quite strong effect is the uncertainty that is created by government involvement.
For anyone looking for a quick summary of the various problems besetting Europe, I found this article of value. (It's a look at current statistics and the like, not an intellectual examination of which ideas account for today's situation.)
Stories like this remind me that a morality of sacrifice not only needs sacrificial victims, it also needs recipients. Hence it manufactures the latter in order to further immolate the former.
Great news via Jason Crawford of OActivists:
In the 2nd District assembly, Stephen Bailey took 61 percent of the vote to Bob Brancato's 39 percent, ensuring them spots on the August ballot. The primary winner faces Democratic U.S. Rep. Jared Polis of Boulder.It's pretty amazing to have an Objectivist running for office, let alone being the front-runner to win the nomination. Let's hope he can not only win the nomination, but then beat the Democratic incumbent. (Stephen has a website for anyone who might wish to assist his campaign.)
I'm way behind here, but I wanted to belatedly post Paul Hsieh's excellent piece published at the American Thinker. He details an example of what is all too typical of businessmen today; in this case medical insurance companies selling their souls for an ephemeral gain. Until they start to think in principles, I fear this won't be the last time we see such suicidal behavior coming from the business sector.
A good article comparing Greece and California's debt situations. More and more I think the best course to advocate is for CA to declare bankruptcy sooner rather than later. That way, at least some of the damage might be put on the guilty (i.e. on the over-paid public unions, bond holders and current electorate). Of course even in bankruptcy it's currently impossible to renegotiate public pension liabilities, but that too will have to change.
Last September the state of California sold $8.8 billion of prime rated short term debt to investors at an interest cost of 3%, similar to rates Greece was paying before the threat of default sent the rate to 24%. The Governor Schwarzenegger’s new budget projections indicate that California will need to borrow $12-15 billion just to get through the fall. Given that state’s economy is five times larger than Greece, if California is downgraded to sub-prime this fall and the crisis spreads to municipalities and other states, it might take up to a $5 trillion bailout to stabilize the situation.
The world would expect the U.S. Government to provide an American solution for a California debt crisis. But unlike Germany and France, who as the largest member states in the European Union were politically forced to shoulder the majority of the $1 trillion bailout of little Greece, expecting the America’s smaller states to have the political will and the financial wherewithal to bailout giant California is much more problematic.
I was very pleased to read that my (by far) favorite TV series has been picked up for 3 more seasons (actually season 4 was confirmed earlier this year)! Congrats to the producers, writers and cast!
This Forbes article has a good overview, and refutation, of some of the provisions in the new laws being proposed. I particularly like these sections of the article:
Such political gamesmanship will wreak havoc in financial markets for those who invest in long-term securities or bonds. The risk of bank failure in normal market cycles is priced into bonds based on the knowledge that creditors are protected through an orderly bankruptcy process. Higher interest goes to those whose debt is subjugated to that of others whose claims come first. Under the new FDIC rule, you cannot price the risk because you don't know the ideology of the FDIC commissioner, his staff, the board or the administration in Washington. Politics adds a new layer of uncertainty that will force a re-pricing of bonds, securities and underwriting, while exposing small investors to a new level of risk.
But the problem with Lehman wasn't its bankruptcy, per se. The problem was that administrations and Congresses, going back to the 1980s, had removed derivatives contracts from being dealt with through the orderly bankruptcy process. This meant that, unlike other creditors, those with derivatives contracts could break them and demand immediate payment. This prevented them being unwound in an orderly manner, and thus helped put downward pressure on asset prices.
The answer is to have the rules of bankruptcy apply to derivatives, thus making those contracts priced accordingly, not create new uncertainties that can't be fairly priced for all other creditors and the economy.
I thought I’d point out that the captions for yesterday’s cartoon were chosen because they’re a small illustration of a much wider family of absurdities common to all the monotheistic mythologies.
The historical pattern is clear and consistent. For twenty five plus years, Islamists have isolated and targeted Western citizens around the world with impunity, and have succeeded in fostering fear in most citizens. They have effectively used a divide and conquer strategy, with little or no opposition. The pattern must be broken immediately.
To see how, imagine a neo-Nazi state arising and declaring to Western nations: “We have no quarrel with you, we just want to exterminate the Jews who reside within your borders.” The proper response would of course be: “if you want to harm our law-abiding citizens, you DO have a quarrel with us, in fact you have a war, for no one may threaten our citizens without threatening our nation as a whole.” Similar reasoning extends from a segment of the population to a single individual citizen. If a nation threatens one citizen, it threatens the nation, and we must do everything in our power, including going to war if necessary, to eradicate the threat. Otherwise there is no point for individuals to delegate their use of force to the state, and every enemy will employ a “divide and conquer” tactic to eliminate us one citizen at a time.
As a reminder of this, let us resurrect Dumas’ famous Musketeers’ rallying call: “One for All and All for One” emphasizing the latter phrase. For only by standing together to defend each individual can a peaceful society exist. Thus we must stand together and protect the lonely author who dares question a religion and who is sentenced to death because of it. We must stand together to defend his publishers who are firebombed for printing the book. We must stand together to defend the individual film-maker and political dissident who criticize Islam and are sentenced to death because of it. We must stand together to defend the benign cartoonist, who pens a simple cartoon, and is then forced into hiding by death threats and bounties.
To stand together means to assert our rights with our government as our agent. To those who threaten us with force, asserting our rights means responding with force, in fact, with overwhelming force. We must say to Iran (which on February 14 just reconfirmed the Rushdie fatwa) “oust and turn over the regime which sees fit to condemn a single citizen of ours to death, or face all out war.” And if they refuse, give them the war they started, but be sure to win it decisively, not protecting their mosques and infrastructure, but instead doing everything necessary to ensure they have no capacity to ever threaten us again. To Pakistan and India, which host clerics bold enough to put bounties on the heads of our citizens, demand that they turn over the men and their supporters, and if they refuse, go in and take them by force.
You don't often get this type of insight into the nature of evil. And I agree with Diana's comments and Adam's observations (as well as with most of the other comments following the post).
Pajamas Media has published my latest editorial: The Nonsensical Notion of ‘Unearned Income’. Its basic theme is to show how the flawed notion of “Unearned” Income is the result of more fundamental Marxist ideas.
Though President Obama, Speaker Pelosi and the rest of our leaders may not be explicit Marxists, unfortunately they still fall sway to Marx’s guiding ideas. If we’re to rescue the country from the damage they’re doing, it’s this deeper ideology we must challenge.In any case, please feel free to stop by and leave comments, as these encourage editors to publish future submissions.
To do so, I can recommend no better starting point than Ayn Rand’s magnum opus, Atlas Shrugged. Her novel stirringly demonstrates the critical importance of man's mind in production. It uncompromisingly defends the justice of treating the products of thought as earned. And it provides a poignant glimpse of what life could be like were we win the battle of ideas.In this regard, Atlas Shrugged is not just an antidote to today’s politics; it’s also fuel for the mind--and for the soul.
Because of the deadlift event (do as many heavy reps as possible in 90s) my man Chris Spealler may not make it through regionals to the worldwide Crossfit Games, but his performance in the first event illustrates why he's my favorite crossfit athlete. (Today's events play to his strengths too, so I'm still hopeful he can crack the top three and make it to the games.) And for comparison, here's how other top athletes did in the OHS/DU workout.
Congrats to Joseph Kellard for getting his excellent open letter to Dan Marino included in a textbook. In addition to being a great letter, this example shows that when you're active you never know how far down the road or in what manner your efforts may pay off. (In other words, activists should have an eye on the long term, because it can take time for good arguments to find the right ears.)
Though I'm not sure how many people who didn't already agree would be swayed by this article, I enjoyed its tone and message. Not only pointing out the contrast between the freeloaders in Athens with the energetic and productive in Istanbul, but also the exhortation to just let Greece fail so that we can all learn a lesson. Sadly however, that doesn't yet seem to be in the cards.
Blogger Galileo Blogs has put up a couple nice pieces recently. The first is a blog post on how government regulation of the finance industry is tantamount to attacking the "brains" of capitalism. The second is a lengthy comment he left regarding the mechanisms by which free markets regulate themselves given the rights necessary to do so. From the latter:
The second mistaken premise is actually a failure to recognize a very important context. That context is laissez-faire, specifically a society where all property is privately owned. This includes all the roads and even bodies of water. That means that when someone transports dynamite, for example, it is not just his judgment that is applicable. It is the judgment of all relevant members of the manufacturer of dynamite, the transportation company, and the user of the dynamite. Importantly, it is also the judgment of the owners of the means of transportation, whether that includes roads, rails, ships, or planes. They set the terms for those who can use their facilities, and that means standards of safety. Moreover, it includes the *insurance companies* of all these entities who will set terms of behavior if they are to insure all of these parties. In that regard, which of these parties would be willing to transport something as dangerous as dynamite without insurance liability protection? And to be provide such risky coverage, imagine what strict terms for the safe handling of that dynamite that will be required by the insurance company.
Dr. Brook is giving a talk today entitled ""You Are Not Your Brother's Health Care Provider"
Doug Reich transcribed an excellent speech he gave at a political fund raiser. Lots of good ideas for those wishing to engage in this type of activism...
Beth Haynes started the black ribbon project to, as she says:
raise awareness of the recent damage our government has caused to health care freedom and the integrity of the doctor-patient relationship. Under the new law (PPACA), physicians will be compelled to base their advice and treatment on politically determined goals, even when in conflict with the best interest of their individual patients.Giving the pins to physicians and others in the medical field is a nice way to show support and to perhaps start a more philosophical conversation.
Following yesterday's post, this editorial outlines a long term danger to California -- namely making it impossible to renegotiate union contracts even in the event of local, county or state bankruptcy. If it becomes law, I predict that eventually the only people who will be left in CA will be former state employees (because I think they'll make it a condition of receiving pensions that you live and pay taxes in the state).
I was stunned – pleasantly so – by a recent "Saturday Night Live" sketch lampooning public employees. In the "2010 Public Employee of the Year Award" skit, the host of the "event" was on disability after being paralyzed from the neck down, even though he clearly had no signs of paralysis. The contestants included the surliest Department of Motor Vehicles employee, a double-dipping employee disabled because of a fear of cats and an employee who was taking a smoke break when he was supposed to be performing.
As someone who has written about public employee disability scams, I can attest that this bit of comedy wasn't as far-fetched as one might suspect. The best line: "In these times of anti-tax hysteria and threats of government budget cuts, it's important to remember that people with government jobs are just like workers everywhere," said the awards host. "Except for the lifetime job security, guaranteed annual raises, early retirement on generous pensions, and full medical coverage of no deductibles, office visit fees or co-payments."
As much as I hate the high taxes, regulations and politics in California, I'm still pretty happy living here. But if eventually I'm forced to move, I think the state's unfunded liabilities (and what they will mean for taxes, services, infrastructure, etc.) will be the cause. IBD summarizes some of the key data:
"Unfunded pension and health care liabilities for state workers top $500 billion and the annual pension contribution has climbed from $320 million to $7.3 billion in less than a decade."(There's more in the editorial if you want to see a list of California's self-inflicted woes).
But if California's private companies are suffering, its public sector sure isn't. From 2001 to 2009, California lost 235,000 net private-sector jobs, but gained 163,700 government jobs. Those cushy union jobs also pay more than comparable private jobs and provide gold-plated benefits.
Doug Reich has yet another great post on the topic. The whole thing is worth reading, but here's my favorite part:
So, what would happen if the government were to provide free pizza or health insurance to all?
To answer, one could integrate fundamental principles in economics, politics, and morality with observations from history and contemporary society and draw an obvious generalization:
Private enterprise, driven by the profit motive and competition, will tend to produce the highest quality goods and services in abundant quantities at the cheapest possible price. On the other hand, government, which has no competition and has little or no incentive to control costs or enhance quality, will naturally tend to produce the poorest quality goods and services in the smallest possible quantity at the highest possible price.
However, modern intellectuals, paralyzed by pragmatism, would not proffer such a generalization. They would answer something like the following:
"I don't know, and no one can know. However, the idea of free pizza and health care feels good to me, so let's try something. When we observe the results of our actions, we will get back to you, and if it doesn't 'work', we will try something else to get free pizza and health care."
If you think that is ridiculous, consider the following report:
Facing a public still wary of his massive health care overhaul, President Obama urged Americans not to judge the nearly $1 trillion legislation he signed into law last week until the reforms take hold.
He continued: "It's been a week, folks. So, before we find out if people like health care reform, we should wait to see what happens when we put it into place. Just a thought." [emphasis mine]
Another good post on immigration. It's a topic that interests me, but I haven't had time to really research the data and arguments. I hope I'll be able to take a stab at commenting on the topic this summer.
I like the idea of re-dedicating "May Day". (HT Instapundit)
Via Paul Hsieh, a very interesting video featuring a doctor who has gone to a cash-only practice.