Thrutch

Bernanke Explains Central Banking

2012-01-28T16:19:00.000-08:00

For those of you wishing to gain some insight into our genius overlords' thinking, these four classes by Ben Bernanke (Central Planner in Chief) might be of interest.

Shipping Industry as Example of the Business Cycle

2012-01-26T19:42:00.000-08:00

I'm a proponent of monetary policy having the potential to create boom - bust cycles (which I guess makes me a "bubble head" in some people's estimation). This article on the boom and bust in container shipping (created in large part by artificial Chinese demand) is an interesting case study.

The Harms of Welfare

2012-01-17T08:07:00.000-08:00

More and more I'm coming to accept the conclusion that not only does welfare harm those who are robbed to support others, but it also harms the recipients of those stolen goods. This is true both at the individual level and when one looks at groups of individuals. This story on the failures of massive subsidies to the city of Buffalo is a good example of the latter.

Buffalo may be the paradigmatic example of why expensive government revitalization efforts often fail. Back in 2004, the Buffalo News estimated that the city had garnered more federal redevelopment aid per capita than any other city in the country, a total of more than half a billion dollars since the 1970s. Yet, the paper noted, the city had virtually nothing to show for the money.

Officials squandered millions granting loans and subsidies to projects that went bust. There was a proposed trade center near the famed Peace Bridge that was never completed even after the city granted it federally backed loans; a failed shopping plaza on William Street; and several hotels that defaulted on their government loans. Among the past three decades' failures have been a dozen or so businesses in the theater district—"one of Western New York's most heavily subsidized stretches of real estate," said the Buffalo News.

[...]

Sometimes these schemes have done real harm. In the 1970s, the federal government decided to invest $530 million to build a 6.2-mile light-rail system through downtown Buffalo. It was supposed to further spur redevelopment, of course.

Opened in 1985 and anchored by a transit mall that banned cars, the rail line fell well below ridership projections—and downtown businesses suffered mightily from the lack of traffic. As Buffalo landlord Stephen P. Fitzmaurice wrote in 2009: "Walk down Main Street on the transit mall; aside from a few necessities like drug and cell phone stores, blight dominates." Last month the city received a $15 million federal grant to restore traffic to Main Street.

These massive investment subsidies failed partly because officials were ill-suited to select the right projects and often instead gave money to favored insiders. Even former Mayor Anthony Masiello described the federal government's redevelopment funds as "a politically motivated system trying to please everybody."

Read the whole thing to see how taxes and regulations also play into Buffalo's poverty.

Death Rates

2012-01-16T19:02:00.000-08:00

I found this article on modeling mortality rates interesting. It doesn't deter me from expecting to live well into my 120's though ;-) (And BTW, the calculator that's linked to in the article doesn't make much sense as it doesn't take into account the person's current age. I think the probabilities it calculates only apply to a new born.)

Bain Capital

2012-01-15T18:48:00.000-08:00

While I'm not a fan of Romney, the attacks on his work at Bain Capital by other Republicans are revealing of their attitude towards capitalism. This editorial in the WSJ does a good job of making the point. An excerpt:

One Bain investment during Mr. Romney's tenure was to back an entrepreneur named Tom Stemberg, who was convinced he could provide savings for small-business owners if they were willing to shop at a store instead of taking deliveries. Today, the Staples chain of business-supply stores employs 90,000 people.

Bain also backed a start-up called Bright Horizons that now manages child-care centers for more than 700 corporate clients around the world. Many other venture bets failed, but that's capitalism, which is supposed to be a profit and loss system.

The loss part is what seems to trouble the Gingrich-Perry-Obama critics, especially in Bain's private-equity business. Like some 2,300 other such U.S. equity firms, Bain looks to buy companies that are underperforming or undervalued and turn them around.

Far from "looting," this is a vital contribution to capitalism and corporate governance. One of the persistent gripes of the left is that too many CEOs make too much money even as their companies flounder. Private-equity firms target such companies or subsidiaries, replace their management, and try to unlock the underlying value in the enterprise.

Read the whole piece.

Chinese Volleyball

2012-01-12T16:41:00.000-08:00

For any volleyball fans out there, this page highlights an amazing rally.

(I should resume semi-regular blogging shortly.)

Debt and Unfunded Liabilities

2012-01-02T09:22:00.000-08:00

This week's Mauldin letter has a good chart showing the extent of debt and liabilities for several Western nations. It's very unlikely that these will be paid off as they stand, even with increased inflation.

(My understanding is that Japan's situation is even worse, but I don't have the exact numbers.)

Creating Bubbles

2011-12-29T15:20:00.000-08:00

Bloomberg has an interesting story, suggesting a bubble in 30 year mortgage bonds. As usual, it's government rules that are largely responsible:

Because of the government guarantees, banks that hold these securities qualify for favorable capital treatment under risk- based-capital rules. Securities of Ginnie Mae, a government- owned entity that subsidizes affordable housing, carry a risk weight of 0 percent, meaning a bank doesn’t have to hold any capital against them. Fannie and Freddie securities carry a risk weight of 20 percent, meaning 1.6 percent capital is required rather than the normal of about 8 percent. These same capital rules allowed European banks to load up on the 0 percent risk- weighted debt of Greece and other countries on the periphery of the euro area.
[...]
This wouldn’t be the first financial crisis in which the 30-year fixed-rate mortgage played a large role. Twice in the last 20 years we have seen spectacular failures of U.S. housing finance, each at enormous cost to taxpayers. Both the savings and loan crisis and the Fannie-Freddie bailouts can be traced to congressional support for, and subsidization of, the 30-year fixed-rate mortgage.

The S&Ls invested in 30-year mortgages that they funded with short-term deposits. By 1981, when deposit rates soared as high as 15 percent, the thrift industry found itself insolvent due to portfolios stuffed with 9 percent mortgages.

Fannie and Freddie were set up to support the 30-year fixed-rate mortgage market, buying the loans from lenders, packaging them into securities and selling some of them to investors -- all with an implicit federal guarantee that helped to lower mortgage rates. In 2008, both were taken over by the government, costing taxpayers more than $160 billion and counting.

Freddie, and Fannie to a lesser extent, suffered a classic liquidity squeeze. In the late summer of 2008 as debt markets became concerned about the two companies’ solvency, yields on their debt relative to U.S. Treasuries ballooned. That imperiled their ability refinance hundreds of billions in debt used to back its huge mortgage portfolio.

The solution is to wean the housing market from its dependence on subsidized 30-year fixed-rate mortgages, starting with winding down Fannie and Freddie over a period of five to seven years. A private market focused on prime quality mortgages would offer borrowers a wider variety of loan choices. These loans would have varying amortization terms, prepayment options and periods of protection against changes in interest rates. In flush times, lenders should be required to build capital to better cover credit risk. Finally, risk weights should be increased to reflect price volatility inherent in securities backed by long-term mortgages.

Teaching Character

2011-12-28T17:50:00.000-08:00

Via crossfit.com comes this article on education. There are lots of reasons to read it, e.g. to whet your appetite as to what might be possible if free-market innovation were ever let loose in the sector, but I'll highlight this:

In fact, though, the character-strength approach of Seligman and Peterson isn’t an expansion of programs like CARE; if anything, it is a repudiation of them. In 2008, a national organization called the Character Education Partnership published a paper that divided character education into two categories: programs that develop “moral character,” which embodies ethical values like fairness, generosity and integrity; and those that address “performance character,” which includes values like effort, diligence and perseverance. The CARE program falls firmly on the “moral character” side of the divide, while the seven strengths that Randolph and Levin have chosen for their schools lean much more heavily toward performance character: while they do have a moral component, strengths like zest, optimism, social intelligence and curiosity aren’t particularly heroic; they make you think of Steve Jobs or Bill Clinton more than the Rev. Martin Luther King Jr. or Gandhi.

If today's generally accepted ethics were actually aimed at making each of our lives go well, there would be no such divide. But under altruism it's a real problem.

(This is but one example of why Yaron and Onkar argued for a new moral code --Ayn Rand's -- in a CNN editorial last year.) Their commentary is relevant to the quote above.

Ask someone on the street to name a moral hero; if he isn't at a loss, he'll likely name someone like Jesus Christ or Mother Teresa. Why? Because they're regarded as people of faith who shunned personal profit for the collective good. No one would dream of naming Galileo, Darwin, Thomas Edison or John D. Rockefeller.

Yet we should. It is they, not the Mother Teresas of the world, that we should strive to be like and teach our kids the same.

If morality is judgment to discern the truth and courage to act on it and make something of and for your own life, then these individuals, in their capacity as great creators, are moral exemplars. Put another way, if morality is a guide in the quest to achieve your own happiness by creating the values of mind and body that make a successful life, then morality is about personal profit, not its renunciation.

Immigrants as Entrepreneurs

2011-12-27T14:53:00.000-08:00

An interesting factoid: "Immigrants founded or cofounded almost half of 50 top venture-backed companies in the United States".

It doesn't surprise me, because immigrants are generally self-selected; they come to take advantage of the unique opportunities available in the US, and we all benefit as a result.

Tackling the Issue of Public Pensions

2011-12-26T14:24:00.000-08:00

An interesting development in the pension story. Previously it seemed that pensions could not be touched, even in bankruptcy, but that may no longer be true. Here's how this NY Times article describes the situation:

The last American city to work its way through Chapter 9 bankruptcy was Vallejo, Calif., which finished the process this year. It had to navigate similar stumbling blocks. Initially, it planned to cut its workers’ and retirees’ pensions, but it changed course when California’s giant state pension system, which administered Vallejo’s plan, threatened a costly and debilitating court battle.

Vallejo instead cut pay, health care and other benefits, as well as city services and payments to its bondholders, and left the pensions intact. Even though the bondholders faced a loss, all parties eventually agreed they had been treated equitably, and the state passed a law making it easier for Vallejo to continue borrowing.

The episode strengthened the perception that public retirement plans were unalterable, even in bankruptcy.

[...]

Until now, 60 percent of Central Falls police officers and firefighters have retired on full disability pensions, drawing the inflation-protected and tax-free payments even when they embarked on new careers. One of them, at 43, has become a prominent personal-injury lawyer and can be seen in television ads shooting baskets and pretending to fall down a manhole. That retiree, Robert Levine, a former police officer, said his disability was the result of an on-duty car crash where he was not at fault, and that his pension had been granted lawfully after his condition was certified by three different doctors.

The retirees, who are not represented by the unions, voted in favor of their pension reductions last week. The cuts would be up to 55 percent of each retiree’s benefits, which now vary widely, from about $4,000 to $46,000 a year, depending on final salary, years of service and other factors. A few retirees would give up more than $25,000 a year. Central Falls’s police and firefighters do not participate in Social Security.

Merry Christmas

2011-12-23T14:18:00.000-08:00

Merry Christmas everyone!

To mark the day, here's my favorite "holiday" editorial, written by Dr. Peikoff: Why Christmas Should be More Commercial. A sample paragraph, but be sure to read the whole thing:

Of course, the Puritans denounced Santa as the Anti-Christ, because he pushed Jesus to the background. Furthermore, Santa implicitly rejected the whole Christian ethics. He did not denounce the rich and demand that they give everything to the poor; on the contrary, he gave gifts to rich and poor children alike. Nor is Santa a champion of Christian mercy or unconditional love. On the contrary, he is for justice--Santa gives only to good children, not to bad ones.

For more on the history of the holiday, see this Bloomberg piece.

2011-12-21T20:35:00.000-08:00

This is a promising development. (Of course longer term any real hope for better politics is a return to an explicit protection of individual rights, but this type of legislation can buy us time to get there.)

A bill that would give the controlling party of either chamber of Congress veto power over any major new regulation passed the House of Representatives Wednesday.

The measure, dubbed the Regulations From the Executive in Need of Scrutiny -- or REINS -- Act, would require Congress to sign off on any new rule estimated to cost more than $100 million. It passed 241 to 184, with a handful of Democrats crossing the aisle.

Greece as Harbinger of Socialist Europe and perhaps the US

2011-12-20T16:53:00.000-08:00

This well-written story does a good job of concretizing the situation in Greece, including its cause: the entitlement mentality bred by the socialist state. An excerpt:

Spray paint is ubiquitous, besmirching the marble steps leading up to the front of the Parliament, the walls and columns of the surrounding streets, and the storefronts in the nearby shopping district. The odor of urine is an unwelcome companion, not just in back alleys but along the sidewalks of major streets near the Parliament and along the walk to Hadrian’s Arch. Windows have been broken, marble walls and columns smashed.

Let’s be very clear about who is being targeted here. The shops that have been trashed are not just the chic brand names one finds in major cities all across Europe. No, these noble protestors have not confined their destruction to icons of wealth and power. They are equally destructive of small religious goods stores and assorted “Mom and Pop” establishments. They disrespect all businesses, small and large, in the same ugly fashion.

The police, union members after all, have done little to prevent the violence and property destruction. And their inaction, as we heard many say, has simply emboldened the thuggish elements among the protestors.

For ordinary Athenians the ongoing “occupation” has had a variety of unpleasant consequences. A young schoolteacher we know shops for her parents; they are afraid to leave their apartment. Other Athenian friends tell us that union thugs sympathetic to the “indignants” frequently intimidate ordinary citizens, whether they are shopping or going to work or simply out for a walk. This is understandable when one considers that the protestors’ goal is to bring everything to a halt. Quite simply, that means disrupting the public’s ability to carry on with daily life. People are told they should have known what would happen, they should stay off the streets.

The disruption, of course, is aimed at more than the general population. The strikes and other unannounced work stoppages cause electricity and water service outages frequently. Many of these are deliberately timed for late afternoon, to maximize discomfort for tourists checking into hotels, for restaurants preparing evening meals (it’s tough to cook and wash dishes without electricity or hot water), for merchants trying to make sales at the peak shopping time of day (electronic cash registers and inventory systems go “down” when the power fails), and so on.

Welfare as a Way of Life

2011-12-13T19:04:00.000-08:00

An interesting account of the welfare mentality as seen through the eyes of a Walmart cashier.

Argument via "Mic Check"

2011-12-09T07:02:00.000-08:00

An interesting story reporting Dr. Bernstein's recent lecture at UMass and the OWS protest it sparked. As far as I can tell, the OWS crowd has no arguments or even anything positive to offer, the best they can do is invoke censorship (at an institution of higher learning no less!):

Klein continued, questioning what kind of subject matter should be allowed to be discussed on the campus of a public university.

“What they were saying was not in the interest of our school. We’re a public school. We’re not in support of the destruction of the public sector,” said Klein.

Hedge Fund Manager Kyle Bass on Europe and Trading.

2011-12-08T18:55:00.000-08:00

Worth a listen to. I'm as much impressed with the way he handles himself in the media as with his research and trading.

OWS as Tantrum

2011-11-28T16:34:00.000-08:00

I enjoyed this commentary from Canada's National Post. An excerpt:

The lawns on which they park, the buildings in front of which they demonstrate, the mass media that gives them attention, the universities many of them attended – the very luxury that allows whole swathes of people to take two or three months, squat in a downtown park, and apparently live quite satisfactorily – all came from, or was enabled by, the system they thoughtlessly despise. Not to mention that all those iPhones and laptops, the backpacks and sneakers, the espresso machines and digital cameras didn’t manufacture themselves. The Occupiers are only too comfortable using the products and the largesse of capitalism while railing against it.

Some people try to make the movement’s incoherence, its refusal to declare what its goals are, as something approaching a strategy in itself. Ah, yes – the old “we have no strategy” strategy. Apparently, not knowing what you’re doing or where you wish to go is now something of a mystic state. Declining to nominate a spokesman, decrying the very idea of leaders and leadership, working to “consense” all your scattered issues is the new way of building a movement.

Thanking the 1%

2011-11-26T17:04:00.000-08:00

Thanking the productive: Alex Epstein has a good piece on giving thanks to the 1% (though somehow a few typo's crept in).

Setting the Historical Record Straight

2011-11-24T18:28:00.000-08:00

Brook and Watkins do a nice job showing what life was like for the minority of the poor before the rise of the Entitlement State.

Downsize Government by Selling Assets

2011-11-23T17:52:00.001-08:00

Even without invoking the principle of individual rights or the question of the proper role of government, I think that articles such as this one can help return government to its proper scope and role.

California's Woes

2011-11-22T17:25:00.000-08:00

This is a good story outlining how California's politics have negatively impacted business and employment in the state. And judging by this quote, things aren't likely to improve in the short term:

Similarly, though an older Jerry Brown—returned to the governor’s office in 2010—has acknowledged that California’s approach to retaining businesses may need some work, his administration considers worry about the business environment overblown. “Rhetoric aside, there are many indications that California is outperforming most of the country from an economic and productivity standpoint,” Joel Ayala, director of the governor’s Office of Economic Development, said earlier this year.

Ann Barnhardt Quits

2011-11-21T19:05:00.000-08:00

Scary stuff:

Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,

It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

CIP

2011-11-20T16:39:00.000-08:00

Congrats to Alex Epstein for getting much deserved publicity for his Center for Industrial progress: PJMedia, Objective Standard Blog.

John MacKay Wants Increased Economic Freedom

2011-11-17T18:28:00.000-08:00

Not principled enough, but the proposals outlined in this WSJ editorial would definitely buy us time.

Ayn Rand on NPR

2011-11-14T13:38:00.000-08:00

It's encouraging to see this kind of exposure at NPR of all places: 1, 2.

The Market is Selfishness

2011-11-11T17:52:00.000-08:00

I enjoyed Dr. Brook's recent talk at FEE on Ayn Rand's Moral Defense of Capitalism:

Motivation by Love

2011-11-01T16:31:00.000-07:00

Steve Job's sister eulogy. (The eulogy reminded me of Ayn Rand's deep insight into the nature of joy and happiness, i.e. that they come from the achievement of values; they can't be equated with the absence of pain.)

Success as Earned

2011-10-31T14:56:00.000-07:00

Surprise, surprise, the NY Times publishes an opinion piece arguing that success isn't due to luck. Two excerpts:

Mr. Gates wasn’t the only person who knew how to program in Basic; the language was developed a decade earlier by Dartmouth professors, and it was widely known by 1975, used in academics and industry. And what about all the master’s and Ph.D. students in electrical engineering and computer science who had even more computer expertise than Mr. Gates on the day the Popular Electronics article appeared? Any could have decided to abandon their studies and start a personal computer software company. And computer experts already working in industry and academia could have done the same.

But how many of them changed their life plans — and cut their sleep to near zero, essentially inhaling food so as not to let eating interfere with work — to throw themselves into writing Basic for the Altair? How many defied their parents, dropped out of college and moved to Albuquerque to work with the Altair? How many had Basic for the Altair written, debugged and ready to ship before anyone else?

[...]

Progressive and Mr. Lewis illustrate how 10Xers shine when clobbered by setbacks and misfortune, turning bad luck into good results. They use difficulty as a catalyst to deepen purpose, recommit to values, increase discipline, respond with creativity and heighten productive paranoia — translating fear into extensive preparation and calm, clearheaded action. Resilience, not luck, is the signature of greatness.

My Thoughts on Our Entitlement Programs

2011-10-30T11:40:00.000-07:00

Thanks to PJ Media for publishing my editorial on ending entitlement programs!

Putting Wilderness over Man

2011-10-29T18:26:00.000-07:00

It's interesting and encouraging to see other commentators identify the crucial issue of environmentalists versus humanity:

These rural folks, living in the shadow of the majestic Mount Shasta, believe that they are being driven away so that their communities can essentially go back to the wild, to conform to a modern environmentalist ethos that puts wildlands above humanity. As the locals told it during the Defend Rural America conference Oct. 22 at the Siskiyou Golden Fairgrounds, environmental officials are treading on their liberties, traipsing unannounced on their properties, confronting ranchers with guns drawn to enforce arcane regulatory rules and destroying their livelihoods in the process.

An Economist Responds to OWS

2011-10-29T05:44:00.000-07:00

George Reisman offers a good economics primer for the OWS crowd. Here's an excerpt, but be sure to read the whole piece:

In the world of the protesters, means of production have the same essential status as consumers’ goods, which as a rule are of benefit only to their owners. It is because of this that those who share the mentality of the protesters typically depict capitalists as fat men, whose plates are heaped high with food, while the masses of wage earners must live near starvation. According to this mentality, the redistribution of wealth is a matter merely of taking from the overflowing plates of the capitalists and giving to the starving workers.

Contrary to such beliefs, in the modern world in which we actually live, the wealth of the capitalists is simply not in the form of consumers’ goods to any great extent. Not only is it overwhelmingly in the form of means of production but those means of production are employed in the production of goods and services that are sold in the market. Totally unlike the conditions of self-sufficient farm families, the physical beneficiaries of the capitalists’ means of production are all the members of the general consuming public who buy the capitalists’ products.

For example, without owning so much as a single share of stock in General Motors or Exxon Mobil, everyone in a capitalist economy who buys the products of these firms benefits from their means of production: the buyer of a GM automobile benefits from the GM factory that produced that automobile; the buyer of Exxon’s gasoline benefits from its oil wells, pipelines, and tanker trucks. Furthermore, everyone benefits from their means of production who buys the products of the customers of GM or Exxon, insofar as their means of production indirectly contribute to the products of their customers. For example, the patrons of grocery stores whose goods are delivered in trucks made by GM or fueled by diesel oil produced in Exxon’s refineries are beneficiaries of the existence of GM’s truck factories and Exxon’s refineries. Even everyone who buys the products of the competitors of GM and Exxon, or of the customers of those competitors, benefits from the existence of GM’s and Exxon’s means of production. This is because GM’s and Exxon’s means of production result in a more abundant and thus lower-priced supply of the kind of goods the competitors sell.

Whittle Takes on "Poor Mongering"

2011-10-28T17:29:00.000-07:00

I enjoyed this afterburner segment:

Address Budget Deficits with Spending Cuts Not Higher Taxes

2011-10-27T15:34:00.000-07:00

Interesting empirical research:

Countries that addressed their budget shortfalls through reduced spending were far more likely to reduce their debt than countries whose budget-balancing strategies depended upon higher taxes.

The typical unsuccessful fiscal consolidation consisted of 53 percent tax increases and 47 percent spending cuts. By contrast, the typical successful fiscal consolidation consisted of 85 percent spending cuts. These results are consistent with a large body of peer-reviewed research.

Via Instapundit's post.

Occupiers' First Taste of (Ultra Minimal) Responsibilities

2011-10-22T13:04:00.000-07:00

You couldn't make this up:

“They’re imposing a structure on the natural flow of music," said Seth Harper, an 18-year-old from Georgia. “The GA decided to do it ... they suppressed people’s opinions. I wanted to do introduce a different proposal, but a big black organizer chick with an Afro said I couldn’t.”

To Shane Engelerdt, a 19-year-old from Jersey City and self-described former “head drummer,” this amounted to a Jacobinic betrayal. “They are becoming the government we’re trying to protest," he said. "They didn’t even give the drummers a say ... Drumming is the heartbeat of this movement. Look around: This is dead, you need a pulse to keep something alive.”

Read the whole story.

Introducing Capitalism

2011-10-21T19:26:00.000-07:00

I thought Don Watkins did a good job in this interview. (As an aside, we often refer to such dialogues as "defending" capitalism, but more and more I think the key is to introduce it, as most people have no idea what it means or entails.)

Offering Employment to Occupiers

2011-10-19T22:15:00.000-07:00

I think this is an effective form of activism, particularly since it is also tied into the activist's job:

A Handful of Links

2011-10-07T19:26:00.000-07:00

I've been too busy to post lately, and probably will remain so for another 10 days, but I wanted to quickly point out a few worthwhile stories and links.
1. Yaron Brook and Don Watkins on What We Owe Steve Jobs and other creative geniuses.
2. A good summary of Steve Jobs' life and accomplishments.
3. The livestream links to the talks from the Undercurrent's Capitalism Awareness Week.
4. Yaron Brook's upcoming talk at FEE: Ayn Rand's Moral Defense of Capitalism
5. Peter Schiff's interview on Fox News detailing how regulation prevents employment.
6. Info on Alex Epstein's upcoming debate with Greenpeace.

A Refreshingly Real Politician

2011-09-27T13:53:00.000-07:00

I don't agree with all of Gary Johnson's positions or attitudes, but he's a very refreshing candidate and the only one I can currently support. See this GQ article for some details.

Go Industrial - Not Green

2011-09-26T10:17:00.000-07:00

Alex Epstein has a good two part post up at MasterResource.org. From part 1:

Consider the plight of the modern industrialist. Whether he wishes to construct a new apartment complex, open a coal mine, site a nuclear power plant, build a new factory, drill for oil, he cannot count on clear, objective laws to protect his right to develop. Instead, he must deal with open-ended environmental laws and near-omnipotent regulatory agencies that can forbid any project that is regarded as insufficiently “green.”

[...]

Industrial progress is not “green.” “Going industrial” requires a commitment to impacting nature as much as necessary to make it more hospitable to human life. And it is no accident that in generations past, Americans viewed industrial progress, not industrial abstention, as an ideal to strive for. Earlier generations took pride in transforming nature—in being a people that “tamed a continent,” that built new factories, that paved new roads, that drilled new wells, that mined the earth for resources. Whole towns would celebrate when a new bridge was built, when a factory was erected. They would proudly drive their automobiles, fly in planes, support new railroads, build new roads—without a shred of guilt over the fate of the two-toed sloth.

From Part 2:

The idea of “environmental impact” is what philosopher Ayn Rand called an “intellectual package-deal.” Such a concept dishonestly packages together two very different things—the impact of development on the human environment and the impact of development on the non-human environment. Industrial development will certainly often harm various non-human environments—but it is a godsend to the human environment. By lumping together concern with the non-human environment (e.g., displacing some caribou to get billions of barrels of the lifeblood of civilization) and the human environment (e.g., air quality), anti-industrialists are able to dupe Americans into thinking that sacrificing to caribou somehow benefits them.

Airline Subsidies

2011-09-25T13:59:00.000-07:00

This article provides interesting information on subsidies to small market airports. I've always thought that many small cities wouldn't be as economically attractive absent these types of subsidies.

More importantly though, I think that these types of relatively minor issues offer activists a good opportunity to argue for the proper principles and illustrate them in a very concrete and therefore understandable way. (Not that I think the author of the piece does that.) They also have the distinct plus of affording activists an opportunity to "win", since in a limited issue like this one, one can make one's voice effectively heard and significantly influence the outcome.

Peter Schiff's Take on "Creating Jobs"

2011-09-24T14:52:00.000-07:00

Forbes has published Peter Schiff's fantastic congressional testimony. It's a must read! (And let's hope it has some impact on our congressmen.)

Jobs Video

2011-09-22T13:31:00.000-07:00

I thought that this video was well done:

Union Thugs Show True Colors

2011-09-21T18:26:00.000-07:00

Check out this video to see the Left admit point blank that it has no intellectual arguments to offer, but will instead use any means, including force, to attain power.

Is Gold Gaining Traction as a World Currency?

2011-09-20T16:47:00.000-07:00

An interesting development: Swiss first to use gold in securities payments.

Regulation Nation

2011-09-13T15:56:00.000-07:00

A good article summarizing some of the regulatory costs on businesses.

Beth Haynes on Rationing

2011-09-10T15:05:00.000-07:00

Beth Haynes has a good column out at townhall.com. I particularly like this explanation, but read the whole thing:

The same people who say the ACA will not ration will also tell you that markets ration through prices. This is an erroneous portrayal of the role of prices in a free market. Free market prices are simply a signal. Prices do not ration any more than a bathroom scale makes you fat or thin. Free market prices reflect the relative scarcity of resources and then allow you to decide how to allocate your own private resources. Free market prices are what people voluntarily pay; government rationing is an act of force. It's a fundamentally different kind of interaction when the government forcibly determines how your resources must be allocated—either by expropriating them first, as in the case of Medicare, or by mandating how you must spend them, as in the case of the individual mandate to purchase health insurance.

9/11 A Decade Later

2011-09-07T15:18:00.000-07:00

ARC is hosting a symposium tomorrow entitled: "9/11 A Decade Later - Lessons for the Future". Here's the event info and livestream link.

Politicized Raids?

2011-08-28T14:45:00.000-07:00

Very scary if true:

Why Gibson?

Putting aside the presumably misguided motivation to enforce another sovereign nation’s laws, why would a homegrown American company be the target of the Department of Justice in the first place?
It’s worth pointing out that Henry E. Juszkiewicz, Gibson’s Chief Executive Officer, is a donor to a couple of Republican politicians. According to the Open Secrets database, Juszkiewicz donated $2000 to Rep. Marsha Blackburn (R-TN07) last year, as well as $1500 each to Sen. Lamar Alexander (R-TN). Juszkiewicz also has donated $10,000 to the Consumer Electronics Association, a PAC that contributed $92.5k to Republican candidates last year, as opposed to $72k to Democrats. (The CEA did, however, contribute more to Democrats in the 2008 election cycle.)

When warrants as ridiculous such as these are issued and executed, there appears no other reason than because the company or individual at hand is being targeted, not because there is any sort of wrongdoing. As a company, Gibson is a legendary. They’ve done nothing wrong, except, apparently, deigning to have a Republican CEO.
The plot thickens, however.
One of Gibson’s leading competitors is C.F. Martin & Company. The C.E.O., Chris Martin IV, is a long-time Democratic supporter, with $35,400 in contributions to Democratic candidates and the DNC over the past couple of election cycles. According to C.F. Martin’s catalog, several of their guitars contain “East Indian Rosewood.” In case you were wondering, that is the exact same wood in at least ten of Gibson’s guitars.

Returning to a Gold Standard

2011-08-27T15:59:00.001-07:00

John Allison and John Chapman provide a good overview of the merits of a gold standard.

More on California Business Climate

2011-08-26T19:15:00.000-07:00

From Forbes:

"California is like France," he said. "I try not to hire here, and I certainly would not launch a company here. But the wine is good."

[...]

Now when Vector invests in a California company, the firm methodically asks: Which jobs must remain here? Most go elsewhere.

When Vector recently acquired a 140-employee technology outfit based in Sunnyvale, Calif., it sent nearly all jobs out of state. Developers, including some Ph.D.s went to St. Louis, where income taxes and living expenses are lower. Vector is hiring actively there from Washington University's graduate pools. Back-office jobs went to Asia. Only 10 people from the firm stayed in California.

"California is facing French-like entitlement systems that will only become more expensive," says Mehta. He's worried about ever increasing tax burdens on high-earners (like his engineers) and businesses. This is a clear factor when hiring senior talent. "These people are trying hard not to be based out of California. They hope to get seriously rich on equity, and are concerned about what will happen to California's tax code in the future," says Mehta.

Taxing its Way to Poverty

2011-08-25T15:09:00.000-07:00

Investors.com takes a look at the impact of taxes and regulations on Illinois' employment scene.

A Doctor's View of Canada's Medical System

2011-08-24T11:50:00.000-07:00

An interesting indictment of Canada's supposedly exemplary medical system. But given that the problem is identified as "selfishness" -- not socialism -- I doubt it will get better any time soon.

Unemployment and the Payroll Tax

2011-08-22T15:14:00.000-07:00

Remember when President Obama and his team promised that if only we passed an emergency “stimulus” bill allowing them to wantonly spend $787 billion, unemployment would be capped at 8%? Two years later, having soared as high as 9.8%, July’s unemployment rate stands at a dismal 9.1% overall, and at a staggering 25% for those aged 16 to 19! Throw in so-called “discouraged” and “underemployed” workers, and these rates increase by half again.

Simultaneously, the costs of the government’s massive redistribution efforts have torpedoed our once pristine credit rating, shell-shocked private business owners, disillusioned the few employed taxpayers who still remain, and sent consumer confidence to a new 30 year low.

Mercifully, however, there is a silver lining. It appears that the utter failing of all of Obama’s programs and predictions has him tinkering with something new. Rather than reflexively using more government force to further redistribute wealth and impede commerce, he’s actually considering restoring a modicum of freedom to the labor markets. In various speeches around the country, the President now says he’ll propose an extension to the temporary 2% reduction in payroll taxes that was instituted for 2011.

Recall that payroll taxes are imposed on both employees and employers allegedly to pay for future Social Security and Medicare benefits. In reality, the funds aren’t segregated and are effectively spent as they’re collected. As a result, payroll taxes constitute another form by which the government redistributes wealth.

Moreover these taxes are by no means trivial. Prior to the temporary 2% reduction, most employees had to surrender 15.3% of their earnings directly to Washington. This is a significant percentage, particularly when expressed as a fraction of an employee’s discretionary income. Indeed, many lower income earners have no discretionary income at all in large part due to the payroll tax.

Obama’s proposal then is a tacit acknowledgement that payroll taxes represent a hefty punishment for working and a powerful disincentive to hire. And while these taxes are damaging to every potential worker — they’re perhaps most harmful to those who don’t yet have the experience or skills to justify higher wages, i.e. to the young. No wonder a quarter of our youths can’t find a job.

So, possibly for the first time ever, I find myself agreeing with the President. Reducing the payroll tax is a good idea. But if a temporary 2% reduction is good, wouldn’t a permanent end to the entire 15.3% tax be much better?

Consider that under the President’s proposal, wages are still taxed at 13.3%, and would jump back to 15.3% in a year. That’s not exactly conducive to hiring. Why not fully apply the logic behind the reduction? Eliminate the tax entirely, so that anyone who’s willing, can once again be productively employed. And make the cut permanent so that private business owners — the people who create real jobs — can do so in a stable and predictable environment (something which would be a welcome novelty from this administration).

Now of course for anyone who’s fiscally responsible (which likely leaves out the President), a cut in taxes must also entail a counterbalancing cut in spending. Consistent with an end to payroll taxes would be an end to the programs they’re earmarked for. That means phasing out the immoral, Ponzi-like schemes of impossible promises which are our entitlement programs. (Elsewhere I’ve suggested a starting point on how to go about this. The basic idea would be to return the dollar amounts that people have contributed to the programs, but to stop accruing any more money towards them.)

Ending entitlement programs means that instead of treating workers as helpless wards of the State, they’d be recognized as the adults they are; fully capable of planning for their own retirements and healthcare. Put more broadly, it means abandoning government paternalism by empowering those who earn the money to save, spend, and invest it according to their own personal needs, values and priorities.

Understood this way, eliminating payroll taxes — and the paternalistic programs they’re associated with — is a win-win proposition whose time has come.

Ayn Rand Documentary

2011-08-21T09:56:00.000-07:00

I'm looking forward to this (though I've never liked the terms prophet or prophecy):

Subsidizing Crime

2011-08-18T20:09:00.000-07:00

I guess it's time to move the HUD up on the list of government programs to eliminate sooner rather than later. From an interesting WSJ article:

In the 1990s, the feds were embarrassed by skyrocketing crime rates in public housing—up to 10 times the national average, according to HUD studies and many newspaper reports. The government's response was to hand out vouchers to residents of the projects (authorized under Section 8 of the Housing and Community Development Act of 1974), dispersing them to safer and more upscale locales.

[...]

After a four-year investigation, the Indianapolis Housing Authority (IHA) in 2006 linked 80% of criminal homicides in Marion County, Ind., to individuals fraudulently obtaining federal assistance "in either the public housing program or the Section 8 program administered by the agency." The IHA released an update last month citing recent crackdowns on a "nationwide criminal motorcycle gang operating out of a Section 8 home." It also noted one "attorney who allegedly operated a law practice from a Section 8 home for eight years, providing shelter to unauthorized occupants who were linked to 10 homicides, 431 police calls and 394 criminal arrests during that time period."

Read the whole thing.

Criticism without Substance

2011-08-17T19:27:00.000-07:00

James Valliant has a well done article on the paucity of actual arguments put forth by the best of Ayn Rand's critics.

Obama Tells Car Companies How to Run Their Businesses

2011-08-15T17:52:00.000-07:00

Here's a fun fisking of Obama's latest campaign speech.

Bowden on Obamacare Legislation

2011-08-14T18:32:00.000-07:00

Tom Bowden has a good column out looking at the bigger picture of the recent Obamacare legislation.

USPS Tries to Address Labor Costs

2011-08-12T13:04:00.000-07:00

This is worth keeping an eye on, as it could be a model for cuts to federal, state and local government employees as well.

Regulation Destroys Commerce

2011-08-10T15:26:00.000-07:00

Another illustration.

Let's Leave the Debt to Our Children

2011-08-09T13:23:00.000-07:00

This is a well done parody. The opening gives a good taste of the rest of the piece:

Wow, that whole debt-ceiling debate was scary. For a while there, it looked like a few radical extremists were going to keep the country from going further into debt. And then where would we be? Without all the free stuff we like, because some people are stuck on the primitive notion that a budget should balance? I think you can say without hyperbole that people who think like that are literally terrorists, except a million times worse.

Why Believe the Government's Rosy Forecasts?

2011-08-08T09:04:00.000-07:00

According to the CBO's forecast from 2000, the US should currently have a net surplus of $2.5T. It illustrates how much of a sham the government's deficit projections are, particularly as they apply to further out years. (And yes, I realize that 9/11 skews the results, but not nearly to the extent of the miss.)

Hopefully the electorate at large will begin to see this and insist on immediate cuts, not ones to take place 5 years down the road, and to use conservative private projections instead of government ones.

Government Science

2011-08-07T15:02:00.000-07:00

Robert LeChevalier points out the perfectly appropriate logo for the Smithsonian's new "Department of Innovation": three gears that can't turn! How about we leave science and technology to the private sector?

Arthur Brooks Sees a Moral Dimension in the Fight Against Statism

2011-08-06T18:14:00.000-07:00

While his moral views leave a lot to be desired, I found it encouraging that defenders of the free market are starting to appreciate that the real battle is at the level of morality, not just economics. I think it's an indication of how far Ayn Rand's ideas are starting to penetrate the culture (thanks in no small part to the efforts of the Ayn Rand Institute).

Announcement from The Undercurrent

2011-08-05T17:41:00.000-07:00

From the staff at the Undercurrent:

Dear Potential Supporter,

In his lecture at this summer’s Objectivist conference, Yaron Brook, President of the Ayn Rand Institute, reflected on the first 50 years of the Objectivist movement. During that session, Dr. Brook stated that if we are to succeed in changing the culture, "we need more than an Institute: we need a movement."

We at The Undercurrent wholeheartedly agree, and we think a key part of the Objectivist movement needs to be a student movement. For the upcoming academic year, we're planning a number of programs designed to spark an Objectivist student movement on college campuses. To make these programs possible, we're asking for your support.

Foremost among our 2011-2012 programs is an event called "Capitalism Awareness Week." This week-long event will consist of a series of lectures and discussions at different college campuses across the country. Each lecture will be broadcast live via the Internet so students elsewhere may participate.

This event follows in the footsteps of last Spring's virtual campus lecture, "Ideas Matter: Ayn Rand's Message to Today's World", which was broadcast to 20 other campuses live and attained a student audience of just over 600. (If you haven't seen it, that lecture is available to view here: http://bit.ly/aynrandideas.)

For this and other programs, we're seeking to raise $40,000 for the upcoming academic year. I hope you can help us as we fight to change the culture.

For more information on our plans for the year, I invite you to browse through our donor package. And if you have any questions, please feel free to contact me.

Best Regards,

Jared Seehafer

Publisher

The Undercurrent

jared@the-undercurrent.com

To make a one-time donation, visit this page

To make a recurring donation, visit our donation page and follow the instructions for “Recurring Monthly Payments”.

Remembering and Learning From the Horrors of Communism

2011-08-04T19:14:00.000-07:00

This 1 1/2 hour lecture is well worth listening to. I think that many of Dr. Kors' points illustrate the crucial importance of morality: if one treats the morality of altruism as unquestionable -- as the West (and indeed the world) currently does -- then no real lessons can be drawn from the horrors of communism, nor from its contrast to freer societies.

It's one of her many feats of intellectual genius that Ayn Rand could in effect stand outside of the ubiquitous moral climate and carefully question and analyze it (to spectacular effect). Armed with her analyses, the facts that Dr. Kors cites can't help but drive home the fact that altruism really is a form of zero worship (= death worship).

Gary Johnson

2011-08-03T17:56:00.000-07:00

I hope that Gary Johnson is able to make some gains in the GOP presidential primaries. What I've seen of him so far is head and shoulders above any of the other candidates.

Washington's Newspeak

2011-08-02T15:45:00.000-07:00

Cato has a good post showing what's now taken as a "cut" by the politicians in Washington. Here's what it looks like graphically:

Of course ultimately this speaks not to the politicians but to the electorate at large and to the intellectuals who educate them. As things stand now, any aspiring politician who speaks plainly, andwho doesn't pander to those living in a fantasy world, is unelectable.

There's simply no getting around the fact that the only way to achieve any long term, meaningful political change is by instituting a significant cultural and educational shift.

2011 Crossfit Games

2011-08-01T18:05:00.000-07:00

I attended the 2011 Crossfit games this weekend. While they were enjoyable, I'd put them well below the 2010 games for a variety of reasons. But congrats to my two favorites who both took second: Josh Bridges and Kristan Clever. Here are two photos of Josh which one commenter aptly describes as "Beast Mode On" and "Beast Mode Off".

Update: Here's a video showing Bridges' amazing capacity. For anyone wishing to try it, it's a rep scheme of 3 100 lbs thrusters, 3 chest to bar pullups, then 6/6; 9/9 and just keep going for 7 minutes. He ended up finishing the round of 21 and then got 1 thruster!

If it's Considered Good, People Will Fight for It

2011-07-30T08:35:00.000-07:00

This is a good chronology of the expansion of our entitlement programs. I think it illustrates clearly why the argument to disband the welfare state has to be taken to the moral level, i.e. if something is good but expensive, people will tend to advocate for it. The real issue is whether it's good (and what does judging the good entail).

Article Published

2011-07-28T19:16:00.000-07:00

Thanks to Capitalism Magazine for publishing my article on our entitlement programs.

What To Do With Our Entitlement Programs?

2011-07-26T13:02:00.000-07:00

America’s financial situation is precarious. Over the past 8 years our national debt has doubled to $14.5 trillion and our total unfunded liabilities now exceed an astonishing $114 trillion. That’s $1,115,000 per federal income tax payer.

Even the most unrepentant spendthrift understands that these debts and liabilities are unsupportable, nor can they be solved by immorally targeting the rich. Instead, we must enact immediate, across-the-board spending cuts, with special emphasis on the biggest components of our financial wreck: Social Security, Medicare and Medicaid. These entitlement programs constitute the majority of our unfunded liabilities, because, despite being labeled “trusts”, they’re not actually savings plans.

Rather, the programs are essentially pay-as-you-go schemes. (What little surplus the trusts did accumulate was used to fund other government programs such that nothing’s been saved[1].) Operating this way has two terrible consequences. First, because funds aren’t saved and invested, they don’t generate returns. Thus there’s no compounding effect for any of the money that’s been withheld. Second, for every year that the programs are in existence, their total future liabilities increase.

Moreover, the programs have grown inexorably over time, partly because they were deemed good in principle, and partly because it takes nothing but a vote to increase benefits.

When Social Security was first rolled out in 1936, the promise was that the program would be very limited, both in terms of contributions and of payout. The most anyone would contribute was $360 per year including the employer’s contribution. By 2010 entitlement programs cost employees up to $12,648 for Social Security and an unlimited amount for Medicare (at a rate of 2.9% of salaried income). Promised — but unfunded — benefits grew even faster, with payouts exceeding inflation and the years of retirement coverage continuously increasing. By some estimates, a typical 66 year old couple today will get back double what they paid in. It’s no wonder that our entitlement programs are often compared to criminal Ponzi schemes.

A myopic focus on the short term may previously have allowed some to gloss over the long term insolvency of the programs, but that’s no longer possible. For we’re now rapidly approaching the time when the money deducted from employees’ paychecks is much less than payouts promised to program participants. Already today, approximately half of Medicare’s funding comes from general tax revenues.

Clearly then, our entitlement programs are an unmitigated financial disaster. But if we’re to properly deal with them, we mustn’t limit our analysis to economics alone. For after all, the deepest arguments underlying the programs aren’t financial — they’re moral. Indeed, much of the reason that there’s never been any reform of the programs is that, until recently, few would question the moral views of man’s nature upon which they’re justified.

What are some of these questions?

As recently discussed here and at length here, one fundamental question pertains to whether men are ends in themselves or means to others’ ends. I won’t recap the arguments, but suffice it to say that when the Founders created this land of opportunity (not of entitlements), they clearly enunciated a new — American — ideal in which each of us pursues our own happiness. This put them squarely in the camp of treating individuals as ends in themselves. It’s a camp to which more and more of us are proud to belong.

Another crucial question is whether, in general, men are capable of thinking and fending for themselves?

This question is best answered by observing people throughout history. Compare the success and can-do attitude of citizens living under freedom to those living under any form of statism and one has to conclude that — when left alone — men are eminently capable of thinking and fending for themselves. It’s only when the state removes and restricts incentives and choices that men become dependent.

For nearly two centuries, Americans — including millions of penniless immigrants — eloquently proved the point. The world marveled at the typical American’s self-reliance, be it his ability to earn a living, build his house, fix his car, or move up the social ladder. In every domain — when left free to think, act and enjoy the rewards of hard work — Americans surpassed themselves and the rest of the world.

But advocates of entitlement programs deny this. They view man (except perhaps that special breed which constitutes the governing class) as feeble and incapable. He can’t think or plan for himself. He must be forced to act for his own “good”. Indeed, as we saw with the passage of Obamacare, there’s no longer even a pretense of persuasion; we childlike peons are to find out what’s in store for us when the laws have been passed. Ever since the New Deal, it’s this paternalistic view that’s guided government policy.

Tragically, however, the paternalists have the causation backwards. In actuality, it’s their myriad of forced redistribution programs which has fostered a mentality of dependence among the populace. With each new program they implement, they further sever the link between personal action and personal outcomes. Slowly people lose the idea of individual responsibility and begin to believe that somehow they’re “entitled to”, or have a “right to”, the products of other people’s efforts. As a result, America’s independent spirit is waning.

A final key moral question is whether people should be treated primarily as independent individuals or as interchangeable parts of a larger collective?

Here again history provides ample evidence. Wherever and whenever they’ve been free to do so, people have exhibited differing values, plans and priorities. Societies succeed by respecting and catering to these individual choices and preferences; they fail when individuals aren’t even recognized. Take, for example, the contrast between the Free World’s outpouring of diverse and imaginative consumer products with the Soviets’ monotonously drab and barren output during the Cold War. Or the Maoists’ brutal mainland uniformity versus the flourishing trade and production of free Hong Kong. Or, for history buffs, the contrast between ancient Athenian and Spartan cultures.

But the evidence isn’t only historical, it’s also intimately personal. We each have unique dreams and aspirations which require differing paths and choices. No one else, much less the government, can know what’s best for us (despite what might be “good” for a fictional “average person”). College may be generally worthwhile, but the next Bill Gates might be completely justified in dropping out to start a business. Following a safe and steady career path may be good for most, but for the aspiring actor or musician, success may mean taking a very unorthodox route to that one big break.

Yet those pushing entitlement programs see it otherwise. They have a collectivized, one-size-fits-all approach to man. To whatever extent possible, the government should create and impose uniformity: All children should go to public schools until they’re 16. Patients should only be allowed to take drugs approved by some government board. Everyone should contribute 15% of their income to their future retirement and medical needs each and every year. Everyone should retire at 65. Etc.

Part and parcel of this collectivized view is the refusal to see individuals at all. Thus there’s no recognition that it’s particular people, engaged in particular processes and efforts, who earn and produce wealth. By dropping the individual from their world view, collectivists don’t have to confront the moral question of why they find it proper to take from some to give to others.

The result of these collectivist and paternalistic views is a continuous assault on individuals and their rights. This is borne out in the implementation of our entitlement programs.

For example, consider all those who haven’t yet acquired sufficient skills and experience for a potential employer to justify both their salary and the additional burden of a 15.3% FICA tax. Entitlement programs price these people out of the labor market and thereby contribute to our stubbornly high rates of unemployment — particularly among the young.

The same type of analysis applies to those employees trying to save enough to start a family or a business of their own. For many starting out, the 15.3% withholding tax represents a huge percentage of their discretionary income. Forcing them to prioritize retirement over other genuine values is inimical to their personal success and happiness. Contrary to the one-size-fits-all mentality, people’s circumstances vary widely, and there are often times in a person’s life when withholding for retirement is not a good thing.

Next, consider every responsible person who could have — and would have — saved and invested the equivalent of his mandatory FICA withholdings had he simply been allowed to. Over the years many wanted to opt out of the entitlement programs to build their own nest eggs, but they were prohibited from doing so in the name of protecting them from themselves. Now, thanks to our paternalistic caretakers, all that money is gone.

But it doesn’t end there, for not only is inclusion in these Ponzi schemes mandatory to employees, but when FICA contributions are inadequate, as they already are for Medicare, every taxpayer is forced to contribute to the deficiency via the general revenues.

As bad as all this is, perhaps the most egregious violation of rights comes in the treatment of future generations. Thanks to a complicit majority, those of voting age have for years now sought to burden (some might say indenture) the next generation with their retirement and medical bills. It’s a classic case of trying to have one’s cake and eat it too. Voters approve and enjoy all the current year spending to which their withholding taxes go, but still expect someone else — indeed a whole generation — to provide them with the very goods they refuse to set aside.

Redistributing wealth in any form is bad enough, but there’s a certain audacity to forcing the young and not-yet-born to become the primary victims. (This type of conflict is far from an anomaly; collectivist schemes to redistribute wealth always pit one group against another, here the strife they cause is intergenerational.)

Having now established the moral and economic bankruptcy of our entitlement programs, the question becomes: what do we do with them? Given how long the programs have run and how many people have been forced to participate, there can be no easy answer. But to get us started, why not look at an analogous situation? There are obvious differences between Madoff’s and FDR’s Ponzi schemes, but reviewing how Madoff’s is being handled does provide two valuable insights.

First, as soon as Madoff’s scam was discovered, it was shut down. Second, a trustee was appointed to return what funds remained, and then to reclaim money from anyone who’d knowingly or unknowingly profited from the scheme. In justifying this, the trustee appropriately decided that no one had a right to “fictitious profits” or “other people’s money”. Since there was no investment to generate returns, the most anyone could get back was the dollar amount they’d contributed.

With this in mind, here are some initial ideas on how to tackle our entitlement mess:

1) Stop the programs immediately. No one would accrue another cent towards Social Security, Medicare or Medicaid.

2) Continue to make Social Security payments on the existing schedule, but cap the lifetime payouts to the nominal value of past contributions. For younger people this would be an easy transition as they could plan their retirements accordingly. For some older people this would be more difficult, and in those cases of real hardship, they could be added to the welfare rolls. (Indeed, it’s been argued that entitlement programs are already a form of welfare.)

3) Convert Medicare and Medicaid to a monthly payment similar to Social Security and cap these to lifetime contributions as well.

4) Fund the remaining liabilities through the general revenues. This is already how SMI and Part D of Medicare are funded, but the difference here is that over time expenditures would taper to zero rather than growing exponentially as they do now.

Ending a fantasy is never welcome for those who want the impossible and who think that all they have to do is cast a vote to make it happen. Nor can there be any easy or completely just solutions to a colossal, multi-decade, Ponzi scheme. But the solution outlined above has several merits:

-- It ends the program.

-- No one is cut-off “cold turkey”.

-- Anyone who lives long enough gets back what they put in (less inflation).

-- Unemployment is reduced by the elimination of the FICA payroll tax.

-- People are once again able to prioritize their values and plan for their own retirements and medical care.

Finally, and most importantly, future generations can once again enjoy the freedoms and opportunities that were — and should be — this nation’s hallmark.

[1] President Obama recently admitted as much when he declared that Social Security checks might not go out absent a debt ceiling increase. In other words: we must incur new debt to pay for the programs since the “trusts” are empty.

Atlas Shrugging?

2011-07-25T15:17:00.000-07:00

An interesting account of one coal miner deciding it's not worth opening another mine. (The comments contain more similar stories.)

Presumed Guilty

2011-07-20T19:51:00.000-07:00

This is an incredible story about Stanford University's policies on sexual assault.

"Imagine being a male Stanford student at your sexual assault hearing," said FIRE Senior Vice President Robert Shibley. "The 'jury' has been told that denying the charges is a sign of guilt, and so is being persuasive and logical. They've been told that accusers almost never lie, that they need to be extra suspicious of men who don't seem like they'd commit rape, and that being neutral is taking the side of abusers. Additionally, the Department of Education has mandated that a sliver of certainty is all that is required to find you guilty. Would any Stanford administrator volunteer to be tried for sexual assault in a real court under the same conditions that they have imposed on their students?"
Stanford's definition of consent to sex imposes a concept that is foreign to most people's idea of adult consent and inconsistent with California state law. Stanford policy states that sexual assault occurs "when a person is incapable of giving consent. A person is legally incapable of giving consent ... if intoxicated by drugs and/or alcohol." In other words, any sexual activity while intoxicated to any degree constitutes sexual assault. This is true even if the activity was explicitly agreed to by a person capable of making rational, reasoned decisions, and even if the partners are in an ongoing relationship or marriage. Further, under a policy like Stanford's, if both parties are intoxicated during sex, they are both technically guilty of sexually assaulting each other.

OT Blockbuster and Netflix

2011-07-18T07:14:00.000-07:00

Off topic post. Just thought I'd mention that in light of Netflix's recent dramatic price increase, anyone who plays video games or lives near a Blockbuster store might consider Blockbuster's deal to current Netflix subscribers.

Steyn on the Debt Ceiling Negotiations

2011-07-17T15:39:00.000-07:00

Mark Steyn has nice column in this weekend's OC Register. As usual, I enjoy his pithy use of language, for example the last sentence of this paragraph:

Meanwhile, the World's Greatest Orator bemoans the "intransigence" of Republicans. OK, what's your plan? Give us one actual program you're willing to cut, right now. Oh, don't worry, says Barack Obluffer. To demonstrate how serious he is, he's offered to put on the table for fiscal year 2012 spending cuts of (stand well back now) $2 billion. That would be a lot in, say, Iceland or even Australia. Once upon a time it would have been a lot even in Washington. But today $2 billion is what the Brokest Nation in History borrows every 10 hours. In other words, in less time than he spends sitting across the table negotiating his $2 billion cut, he's already borrowed it all back. A negotiation with Obama is literally not worth the time.

Capitalism on Video

2011-07-16T21:05:00.000-07:00

This is a pretty well done, short video explaining various aspects of capitalism's working, including how rich first adopters are necessary for technological advancements, and how even the poor in America today are much better off than the rich in previous times. The latter always reminds me of the time I went through Versailles and saw the gold pick that was used to get the lice out of Louis the XIVth's hair...

Earth Day Interview

2011-07-15T17:20:00.000-07:00

I just realized that I'd accidentally posted this to the OActivity blog back in April. But on the premise better late than never, here it is on Thrutch:

For his most recent Power Hour podcast, Alex Epstein interviews Onkar on the topic of environmentalism. Check it out.

Subsidies and the Robber Barrons

2011-07-14T17:18:00.000-07:00

I enjoyed this talk by Prof. Burt Folsom. But as a warning, it's quite slow paced, so I'd recommend listening to it while doing other things (chores, stretching, etc.)

Companies Continue to Leave California

2011-07-13T15:26:00.000-07:00

This is an interesting article summarizing the woes which force businesses to relocate from California. And given that the state thinks the solution to the problems is to create another government agency, I doubt that the trend will be reversing anytime in the near future.

Newsom's plan will focus on California's premier industries, including biotechnology, agriculture and digital media. It will highlight the state's strengths in innovation and research and cultivate more manufacturing and exports. It also will examine how to address executives' concerns about regulation, taxes and layers of bureaucracy.

Later this year, California will set up a new agency that will serve as a focal point for economic development and job creation, he said. Among its goals will be to reverse the perception that California is business-unfriendly.

Santelli vs. the Pragmatists

2011-07-08T19:18:00.000-07:00

This Rick Santelli clip appears to be going viral. I found it particularly interesting not for his input (which is good and refreshing), but for the clear exposure of the compromising/pragmatist mentality of his opponents ("we have a problem now, never mind how we got here, etc. etc."). It really concretizes the weak and pathetic nature of the typical mainstream mentality that we must overcome.

Broun Proposes to Reduce Debt Limit

2011-07-07T14:03:00.000-07:00

I'd be in favor of reducing the limit by $1.3T every year until the debt is gone and the budget balanced. Here's the gist of representative Broun's proposal:

Today, I introduced a unique bill that goes in a completely different direction than everything else we’ve been hearing out of Washington. It would force politicians to start practicing what they’ve been preaching by lowering the debt ceiling from $14.3 trillion back down to $13 trillion. Admittedly, this is not your run-of-the-mill kind of law, but it would make it imperative for Congress to think outside of the box and come up with ways to pay off a portion of our debt while drastically cutting back spending. Since 1996, the national debt has increased by an inexcusable $8.79 trillion. I firmly believe that this calls for emergency measures to reduce the debt.

Lawmakers on both sides of the aisle are equally responsible for the government’s past fiscal irresponsibility. Sadly, whenever Congress has been given a chance to make a real impact on the budget, our spending habits, and our nation’s livelihood, Democrats and Republicans alike have caved.

Moreover, in this time of crisis, liberals are pushing for a $2 trillion increase in our debt ceiling. And their only answer for our financial fiasco is to cut nothing and raise taxes on everything — which would simply give Washington more money to burn through. Even more disturbingly, under the president’s budget proposal, the debt would double to $26.3 trillion by 2021, and he has no intention or plan to pay it down.

Should my legislation be signed into law, Washington would have to get serious about making the cuts they’ve been talking about, and our national debt would be one step closer to being manageable. My legislation would not just slow down, or stop the reckless spending train; it would completely turn it around. To be realistic, we can’t lower the debt limit today, but if we set a deadline, the beginning of FY 2012, it would force politicians to make those decisions in the months to come.

Onkar on NPR

2011-07-02T16:21:00.000-07:00

Onkar was recently interviewed on NPR's Interfaith Voices. I haven't listened to it yet, but here's the link.

Regulation Impedes Innovation

2011-07-01T17:06:00.000-07:00

I think this short post over at Marginal Revolution makes some important points.

Challenging the Morality of the Welfare State

2011-06-29T08:26:00.000-07:00

Onkar answers the question: Does America Need Ayn Rand or Jesus?

Update: See also this story on CNN.

Unfunded Government Pensions

2011-06-23T18:12:00.000-07:00

I thought this was a good way to present the numbers:

U.S. 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, a study released on Wednesday said.

Individual Rights Concretized

2011-06-14T07:05:00.000-07:00

I enjoyed Paul Hsieh's editorial which both concretizes the effects of a government no longer limited to protecting individual rights and then indicates what a return to such principle might look like. (I must confess, though, that I personally don't see the issue of gun control as central to these types of arguments.)

Keynes vs Hayek

2011-06-13T07:01:00.000-07:00

I'd previously posted a link to a very clever Keynes vs Hayek video, this page has it and its followup plus various explanations and lyrics.

On the positive side, people are starting to take notice of Ayn Rand

2011-06-12T09:27:00.000-07:00

Tom Bowden's blog post "The Constitution of Ayn Rand" is well worth reading.

Dependence and Poverty

2011-06-11T07:00:00.000-07:00

I'm starting to come around to the view that government redistribution of wealth is even worse than I'd thought previously. Even the people it purports to help aren't in fact helped. Yaron Brook often talks about the culture of dependence that such aid creates. Here's a John Stossel column making the same point.

Four Dirty Secrets about Clean Energy

2011-06-10T07:24:00.000-07:00

Alex Epstein has a nice piece out at Fox News.

The Slow Death of our Public Markets

2011-06-09T07:42:00.000-07:00

The NY Times reports on a phenomenon I've discussed a few times: companies are less likely to go public, or if they do, they'll be more likely to do it outside of the US. From the article:

Nearly one in 10 American companies that went public last year did so outside the United States. Besides Australia, they turned to stock markets in Britain, Taiwan, South Korea and Canada, according to data from the consulting firm Grant Thornton and Dealogic.

The 10 companies that went public abroad in 2010 — and 75 from 2000 to 2009 — compares with only two United States companies choosing foreign exchanges from 1991 to 1999.

The trend reflects a decidedly global outlook toward stocks, just as the number of public companies in the United States is shrinking.

From a peak of more than 8,800 American companies at the end of 1997, that number fell to about 5,100 by the end of 2009, a 40 percent decline, according to the World Federation of Exchanges.

[...]

A variety of factors explain each company’s decision to list on a foreign exchange, like the increased regulatory costs of going public in the United States. Underwriting, legal and other costs are typically lower in foreign markets, companies say.

The Alternative Investment Market, or AIM, a part of the London Stock Exchange intended for small company listings, is a popular destination for some American companies. The cost of an initial public offering there is about 10 to 12 percent of total capital raised, compared with 13 to 15 percent on Nasdaq, according to Mark McGowan of AIM Advisers, which helps American companies list on AIM.

In addition, the extra annual cost of maintaining a public listing, including http://www2.blogger.com/img/blank.gifcomplying with Sarbanes-Oxley rules, can be typically much higher in the United States: $2 million to $3 million each year depending on the size of a company compared with a cost as low as $320,000 on AIM or $100,000 to $300,000 in a market like Taiwan, according to advisers.

For more see my article "Stop the Assault on our Public Markets"

DOE Pulls Out the Gun

2011-06-08T09:27:00.001-07:00

Perhaps another reason to privatize education post-haste? There's no way a private entity could get a SWAT team to collect a student loan.

Facing Reality

2011-06-02T09:19:00.000-07:00

Dr. Beth Haynes has an excellent editorial out at PajamasMedia today. Here's a point that needs to be hammered home:

Before the government created the means to “tax, spend and go into debt” for health care, people had to make those difficult decisions for themselves looking at their own resources, unable to take advantage of their neighbors’ bank accounts — at least not without directly asking. The family’s doctor would talk with his patients about the pros and cons of various treatment options, including the cost. Some of the time that meant forgoing treatment in order to “save the widow the farm.” Tough choices? You bet. Sometimes tragic? Without a doubt. But it kept us living consistent with the reality of limited resources and personal responsibility, preventing the drift off into fantasy land where every need can be met by reaching into our neighbor’s (or our children’s) pockets while they aren’t paying attention.

National Politics Chicago Style

2011-05-28T13:36:00.000-07:00

The Washington Examiner has a good column lamenting -- and warning against -- the further erosion of the rule of law in our nation. It's a very scary trend, which if not stopped soon (and on principle) may be impossible to recover from. The whole article is well worth reading, but here's an excerpt to whet your appetite:

One basic principle of the rule of law is that laws apply to everybody. If the sign says "No Parking," you're not supposed to park there even if you're a pal of the alderman.

Another principle of the rule of law is that government can't make up new rules to help its cronies and hurt its adversaries except through due process, such as getting a legislature to pass a new law.

The Obamacare waiver process appears to violate that first rule. Two other recent Obama administration actions appear to violate the second.

One example is the National Labor Relations Board general counsel's action to prevent Boeing from building a $2 billion assembly plant for the 787 Dreamliner in South Carolina, which has a right-to-work law barring compulsory union membership. The NLRB says Boeing has to assemble the planes in non-right-to-work Washington state.

"I don't agree," says William Gould IV, NLRB chairman during the Clinton years. "The Boeing case is unprecedented."

The other example is the Internal Revenue Service's attempt to levy a gift tax on donors to certain 501(c)(4) organizations that just happen to have spent money to elect Republicans.

Medicare Fund Warning

2011-05-26T18:19:00.001-07:00

In an earlier post I'd wondered why we have debt limit laws if, every time we approach the limit, we "automatically" raise it (with claims of imminent financial crisis if we don't)? In researching the social security and medicare debacles, I realized we do the same type of thing with respect to those schemes:

The Medicare Modernization Act (2003) requires that the Board of Trustees determine each year whether the annual difference between program outlays and dedicated revenues (the bottom four layers of Chart C) exceeds 45 percent of total Medicare outlays in any of the first seven fiscal years of the 75-year projection period. In effect, the law sets a threshold condition that signals that a trust fund’s general revenue financing of Medicare is becoming excessive. In that case, the annual Trustees Report includes a determination of "excess general revenue Medicare funding." When that determination is made in two consecutive reports, a "Medicare funding warning" is triggered. The warning directs the President to submit proposed legislation within 15 days of the next budget submission to respond to the warning and requires Congress to consider the proposal on an expedited basis.

This year’s report projects the difference between outlays and dedicated financing revenues to exceed 45 percent of total Medicare outlays during fiscal year 2011, prompting a determination of "excess general revenue Medicare funding" for the sixth consecutive report, triggering another "Medicare funding warning."

It's as if just having the warning system makes people feel like they did something about the problem.

Ari Armstrong on Free Speech

2011-05-23T14:04:00.000-07:00

Two excellent columns of Ari Armstrong's are highlighted at Noodlefood. I particularly like opening of the first one.

Druckenmiller on the Debt Limit Discussions

2011-05-21T17:19:00.000-07:00

Legendary hedge fund manager Stanly Druckenmiller was recently interviewed in the WSJ on the impact of a technical treasury default arising from our debt ceiling law. I agree with his main point and recommend reading the entire story:

"Here are your two options: piece of paper number one—let's just call it a 10-year Treasury. So I own this piece of paper. I get an income stream obviously over 10 years . . . and one of my interest payments is going to be delayed, I don't know, six days, eight days, 15 days, but I know I'm going to get it. There's not a doubt in my mind that it's not going to pay, but it's going to be delayed. But in exchange for that, let's suppose I know I'm going to get massive cuts in entitlements and the government is going to get their house in order so my payments seven, eight, nine, 10 years out are much more assured," he says.

Then there's "piece of paper number two," he says, under a scenario in which the debt limit is quickly raised to avoid any possible disruption in payments. "I don't have to wait six, eight, or 10 days for one of my many payments over 10 years. I get it on time. But we're going to continue to pile up trillions of dollars of debt and I may have a Greek situation on my hands in six or seven years. Now as an owner, which piece of paper do I want to own? To me it's a no-brainer. It's piece of paper number one."

(I'm also at a loss for why we even bother having a debt ceiling limit if everyone "knows" we just "have to" raise it any time we approach it?)

Study Shows "Stimulus" Protected Government Jobs while Destroying Private Ones

2011-05-20T16:46:00.001-07:00

I may be suffering from confirmation bias, but this report showing that "the ARRA created/saved approximately 450 thousand state and local government jobs and destroyed/forestalled roughly one million private sector jobs" rings very true to me. Of course I doubt anyone could ever determine precisely what would happen in the absence of any particular government intervention in the economy, but we definitely know what it means in broad principle. This study fits that knowledge.