Tuesday, November 19, 2013

On the Socialization of Wealth

Real wealth constantly passing from the domain of private property into the communal domain
by Sheldon Richman
That … veil which is spread before the eyes of the ordinary man, which even the attentive observer does not always succeed in casting aside, prevents us from seeing the most marvelous of all social phenomena: real wealth constantly passing from the domain of private property into the communal domain.
Wealth marvelously passing from the private to the communal domain? It sounds like a socialist’s redistributionist fantasy!
But wait — Frédéric Bastiat, the great laissez-faire radical, wrote those words in his book Economic Harmonies, chapter 8, provocatively titled “Private Property and Common Wealth.”
He repeats the point throughout his fascinating chapter:
And so, as I have already said many times and shall doubtless say many times more (for it is the greatest, the most admirable, and perhaps the most misunderstood of all the social harmonies, since it encompasses all the others), it is characteristic of progress (and, indeed, this is what we mean by progress) to transform onerous utility into gratuitous utility; to decrease value without decreasing utility; and to enable all men, for fewer pains or at smaller cost, to obtain the same satisfactions. Thus, the total number of things owned in common is constantly increased; and their enjoyment, distributed more uniformly to all, gradually eliminates inequalities resulting from differences in the amount of property owned.
Here’s what Bastiat has in mind. In a competitive marketplace with advancing technology, as the effort required to produce and, hence, acquire things diminishes, the price of gaining utility falls. For example, if the average worker had to work two hours, 40 minutes, to buy a chicken in 1900, but only 14 minutes as the 21st century approached (actual statistics), Bastiat would say the chicken “is obtained for less expenditure of human effort; less service is performed as it passes from hand to hand; it has less value; in a word, it has become gratis, [though] not completely.” In other words, most of the utility that had to be paid for with painful effort in 1900 was free by 2000. (By “less value,” Bastiat meant that the market price has fallen, not that the chicken is less useful.)
Thus progress through the market order consists in ever more people satisfying more of their wants at less and less effort. Bastiat calls this a move from private property to common wealth because he roots property in effort, and greater wealth is available to all with less effort. What makes this possible? Technological innovation. As Bastiat puts it, “Production has in large measure been turned over to Nature.”

The Singularity of Fools

A special report from the utopian future
BY DAVID RIEFF 
Good books transcend their times; bad books reflect them. One reads Madame Bovary for its sublime writing and exploration of the human condition in all its tortuous complexity. But if you really want to understand 19th-century bourgeois France, you would be far better served by plowing through the literarily mediocre but historically informative novels of Gustave Flaubert's journeyman contemporary, Eugène Sue. What has always been true of literature is even more so with regard to nonfiction, especially by authors who claim to know what the future holds in store for us. The history of financial predictions made at the height of stock market booms is a well-known illustration, whether it was the great economist Irving Fisher insisting shortly before the crash of 1929 that stock prices had reached "a permanently high plateau" or the not-so-great economist Kevin A. Hassett heralding Dow 36,000 -- the 1999 book he wrote with James K. Glassman -- a little more than a year before the dot-com bubble burst.
But financial manias pale (at least for those who have not bet their 401(k)s on such fanatically rosy assumptions) when compared with the techno-utopias that, at least since the middle of the 19th century, have periodically captured the collective imagination of the general public in the West -- and today litter bookstores with their rah-rah optimism. Too bad few remember Cicero's tart observation that he did not understand why, when two soothsayers met in the street, both did not burst out laughing. But if the history of utopian fantasies has taught us anything, it is that people find it hard to accept the fact of their unreality, preferring instead to hew to their hopes, whether profound, as with Marxism, or preposterous (and commercially self-interested), as with the vision of the carefully ordered futuristic cities famously laid out for a receptive public at the General Motors pavilion at the 1939 New York World's Fair -- just as Adolf Hitler was about to blitzkrieg Poland.
If utopia has always been a kind of escape clause from the human condition, contemporary techno-utopianism represents a radical upping of the ante. For entrepreneur Peter Diamandis, creator of the X Prize to spur the development of passenger-carrying private spaceships and other innovations, not only will technology make it so that "during our lifetime … we're moving off this planet," but it will solve even the gravest problems that confront humanity -- climate change, species extinction, water and energy shortages. For futurist Ray Kurzweil, "nonbiological intelligence will match the range and subtlety of human intelligence" by 2030, making it possible to "go beyond the limits of biology, and replace [an individual's] current 'human body version 1.0' with a dramatically upgraded version 2.0, providing radical life extension."

The Extraordinary Business of Life

Business is the most dynamic social institution known to mankind
by SANDY IKEDA
I heard it again from this year’s commencement speaker: the common mistake of thinking economics is just about business and making money. I know I’m not the only economics teacher who every year has to disabuse his students (and many of his own colleagues from other disciplines) of that same error. 
Economics is not business administration or accounting. Economics is a science that studies how people interact when the means at their disposal are scarce in relation to their ends. That includes business, of course, but a whole lot more as well.
Where Does That Notion Come From?
Well, for starters, perhaps from one of the greatest economists in history, Alfred Marshall. He opens his highly influential textbook, first published in 1890, with this statement:
Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well being. (Emphasis added)

The Friedmanite Corruption of Capitalism

Friedman shifted the foundation of the nation’s money supply from gold to T-bills
by Thomas J. DiLorenzo
All throughout his new book, The Great Deformation: The Corruption of Capitalism in America, David A. Stockman is critical of the Chicago School, especially its intellectual leader during the last half of the twentieth century, Milton Friedman. He captures the irony of the so-called free-market Chicago School on the very first page of his introduction, where he writes of the “capture of the state, especially its central bank, the Federal Reserve, by crony capitalist forces deeply inimical to free markets and democracy.”
This is a deep irony because it was Chicago School economists such as George Stigler who wrote of the “capture theory of regulation” when it came to the trucking industry, the airline industry, and many others. That is, they produced dozens of scholarly articles demonstrating how government regulatory agencies ostensibly created to regulate industry “in the public interest” are most often “captured” by the industry itself and then used not to protect the public but to enforce cartel pricing arrangements.
This was all good, solid, applied free-market economics, but at the same time the Chicago Schoolers ignored the biggest and most important regulatory capture of all — the creation of the Fed. The Chicago School simply ignored the obvious fact that the Fed was created as a governmental cartel enforcement mechanism for the banking industry — during an era when many other kinds of regulatory institutions were being created for the same purpose (i.e., “natural monopoly” regulation).
Not only did the Chicago School ignore this glaring omission from its “capture theory” tradition of research on regulation; it also ignored the realistic, economic analysis of political decision making that was an important part of the research of the two most famous Chicago School Nobel laureates next to Friedman — George Stigler and Gary Becker. Stigler and Becker published some important articles in the field that is better known as public choice, or the economics of political decision making. Friedman himself had long been an advisor to Republican politicians, so no one could credibly argue that Chicago School economists were naïve about the realities of politics.

The High Cost of “Free”

Paying people to be disabled, sick, reproduce, unemployed, unmarried, retired, poor, homeless, hapless, or drugged
by Loyd S. Pettegrew and Carol A. Vance
Why does a large portion of the population choose not to work when there are many jobs available? The answer is simple. If you can receive 2-3 times as much money from unemployment, disability, and/or welfare benefits (subsidized housing, food stamps, free cellphones, etc.) as you can from a temporary or part-time job, and live a life of leisure, why work? In 2011, the U.S. government spent over $800 billion[1] on this “welfare,” exceeding expenditures on Social Security or Medicare.
In the Denver arena where Mr. Obama gave his DNC 2008 acceptance speech, a woman in the audience became overwhelmed by the speech and said that she no longer needed to worry if she could make her car or mortgage payments because he would take care of it for her. In Cleveland, a woman claimed that she was going to vote for President Obama again because he gave her a free cellphone (along with a litany of other entitlement giveaways). Before you growl, you should know that the free cellphone program was instated by President Bush in 2008 through the FCC’s Universal Service Fund. Fees for these “free” cellphones are paid by all telecommunications service providers out of the revenue received from their paying customers. Despite the political rhetoric over the past half century, entitlements were actually highest during Republican administrations. The political allure of free is bi-partisan.
The political allure of free is so strong that an alarming number of people choose to become wards of the entitlement/welfare state rather than captain their own destiny. Economist Nicholas Eberstadt of the American Enterprise Institute believes that Americans have become a nation of takers, threatening the self-reliance that has long characterized our national psyche. Eberstadt (2012, p. 4) presents data showing that entitlement payments to Americans, since 1960, have risen annually by 9.5 percent. He argues that over the past 50 years the ever-increasing array of transfer payments to Americans have risen 727 percent. In 2010 such payments alone totalled $2.3 trillion with Social Security (for old age and disability) accounting for 31 percent, Medicare 24 percent, Medicaid 18 percent, Income Maintenance 12 percent, other giveaways (free cell-phones, support for a broken education system, housing, the arts, etc.) 8 percent, and Unemployment Insurance 6 percent (Eberstadt 2012, C1-2). This has resulted in 49 percent of American households receiving one or more government transfer benefits (Eberstadt 2013); this amounts to 18 percent of all personal income and a burden of $7,400 for every American.
The Balance Sheet on Government Giveaways
Our economic analysis shows that retirees who worked for 40 years and then live 20 years past retirement will receive more than twice what they, and their employers, contributed over their lifetime of working. Only retirees who survive a decade or less after their retirement do not take more out of Social Security than they contributed. Most people will agree that the retirees should receive his/her Social Security benefits at retirement. But with people living longer, who will pay for all the additional benefits now promised? Most people who have not done their homework (including Congress) fail to realize that the numbers for Medicare benefits exceed those for Social Security. Since 1965, Medicare required less than a 3 percent contribution from a worker’s gross wages, yet most people receive over $250,000 in medical benefits before reaching the age of 74, assuming no catastrophic illness. You can do the math on your own wages, assuming a lifetime salary of $100,000 per year for all 40 working years, a worker will have paid in only $120,000 into the Medicare system. Congress, after agreeing to take care of everyone after retirement for the rest of their lives, has broken a sacred trust and used incoming contributions to fund other government expenditures, instead of letting the contributions build over the past 50 years.

The Paradox of Imperialism

State, War, and Imperialism
by Hans-Hermann Hoppe
The State
Conventionally, the state is defined as an agency with two unique characteristics. First, it is a compulsory territorial monopolist of ultimate decision-making (jurisdiction). That is, it is the ultimate arbiter in every case of conflict, including conflicts involving itself. Second, the state is a territorial monopolist of taxation. That is, it is an agency that unilaterally fixes the price citizens must pay for its provision of law and order.
Predictably, if one can only appeal to the state for justice, justice will be perverted in favor of the state. Instead of resolving conflict, a monopolist of ultimate decision-making will provoke conflict in order to settle it to his own advantage. Worse, while the quality of justice will fall under monopolistic auspices, its price will rise. Motivated like everyone else by self-interest but equipped with the power to tax, the state agents' goal is always the same: to maximize income and minimize productive effort.
Instead of concentrating on the internal consequences of the institution of a state, however, I will focus on its external consequences, i.e., foreign rather than domestic policy.

The Eurozone's Conspiracy Theories

The ultimate audacity of conspiracy mongers is to advertise themselves as victims of conventional wisdom
By Fabio Rafael Fiallo
Putting the blame of Europe's economic woes on sinister forces operating behind the scenes has always had its charm and its advocates. Suffice it to recall General de Gaulle's invectives against what he used to name the "gnomes of Zürich," i.e. the financial markets, guilty in his view of the travails of the French franc in the 1960s.
The crisis that the Eurozone is currently going through has provided a unique terrain for conspiracy theories to blossom one more time. A race is on among politicians and economists who try to identify which sly interests have created or prolonged the current economic turmoil in the southern countries of the Eurozone.

Unintended Consequences

The law of unintended consequences is at work always and everywhere
by Rob Norton
The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.
The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner,” Smith wrote, “but from regard to their own self interest.”
Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Locke argued that instead of benefiting borrowers, as intended, it would hurt them. People would find ways to circumvent the law, with the costs of circumvention borne by borrowers. To the extent the law was obeyed, Locke concluded, the chief results would be less available credit and a redistribution of income away from “widows, orphans and all those who have their estates in money.”
In the first half of the nineteenth century, the famous French economic journalist Frédéric Bastiat often distinguished in his writing between the “seen” and the “unseen.” The seen were the obvious visible consequences of an action or policy. The unseen were the less obvious, and often unintended, consequences. In his famous essay “What Is Seen and What Is Not Seen,” Bastiat wrote:
There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.(1)
Bastiat applied his analysis to a wide range of issues, including trade barriers, taxes, and government spending.
The first and most complete analysis of the concept of unintended consequences was done in 1936 by the American sociologist Robert K. Merton. In an influential article titled “The Unanticipated Consequences of Purposive Social Action,” Merton identified five sources of unanticipated consequences. The first two—and the most pervasive—were “ignorance” and “error.”

Monday, November 18, 2013

Is Germany Really a ‘Weight on the World’?

Martin Wolf Complains About Germany

By Pater Tenebrarum
Few writers produce erudite-sounding nonsense with such unwavering regularity as Martin Wolf, an establishment-approved scribbler for the Financial Times. When he is not screeching for more money printing, he is belly-aching about 'trade imbalances', which allegedly condemn the world to economic hell. The latest example is his article 'Germany is a Weight on the World'.
This was written after the misguided Mercantilists apparently still populating the US treasury department (after decades of US trade deficits that have somehow completely failed to matter all this time) decided to complain about Germany's allegedly unconscionable trade surplus.
So here we are, more than a century after the fallacies of Mercantilism have been disproved by a plethora of economists, and people still allege that there is something evil in trade that requires even more government intervention than there already is.
Wolf writes: 
“The criticisms that hurt are those one suspects might be fair. This might explain the outrage from Berlin last week over the criticism by the US Treasury of Germany’s huge and vaunted trade surplus. But the Treasury is to be commended for stating what Germany’s partners dare not“Germany has maintained a large current account surplus throughout the euro area financial crisis.” This “hampered rebalancing” for other eurozone countries and created “a deflationary bias for the euro area, as well as for the world economy”. The International Monetary Fund has expressed similar worries.” 
(emphasis added)
It took him just one paragraph to mention the tiresome deflation bogey again, but allow us to point out that all these 'worries' about 'Germany's surplus' implicitly and quite wrongly assume that countries are somehow equivalent to acting human beings. This is not the case.
If, say, an American spends $50,000 to buy a car from BMW, then what this trade tells tells us that an individual residing in the US valued a German-built BMW more than $50,000, while the managers of the company BMW valued the $50,000 more than the car they offered in exchange. Both parties to the exchange have gained, otherwise no trade would have taken place. Win-win!
But no, says Martin Wolf, wagging his finger, accompanied by a chorus of bureaucrats from the US treasury to the IMF, something evil has occurred! See, due to this misguided American individual buying a car that the misguided Germans have built so well that he prefers it not only over his $50,000 but also to cars built by others elsewhere, the US now has a $50,000 deficit with Germany! This is terrible! Someone must do something!

A cosmic Stockholm syndrome

What the State Fears Most - Revelations of the Truth about the State
By Robert Higgs   
Why does the U.S. government go to such extraordinary lengths to discredit, punish, and ruin persons such as Daniel Ellsberg, Julian Assange, and—next in line, no doubt—Edward Snowden? The government alleges that these persons give aid and comfort to the nation’s enemies and endanger national security. In truth, however, these persons only “crime” is to tell the truth to the public about what the U.S. government is doing. By telling the truth about especially important matters, they endanger only the state, by exposing its lies and its hidden crimes for the world to see.
The rulers can continue to plunder and bully the great mass of people only as long as the people believe the Biggest of All Big Lies, which is that the government seeks to be, and is, their essential protector and general benefactor. The Ellsbergs, Assanges, and Snowdens, rare as they are, demonstrate that the government’s pose as protector and benefactor is nothing but a ruse to hide its essential nature and functioning. The only protection the rulers aim to provide us is the kind that a shepherd provides his sheep—protection from anything that interferes with his exclusive ability to determine how and when the sheep will be sheared and slaughtered.

The ultimate scholar

Free people are net producers

By Donald J. Boudreaux
Last Friday, marked the 10th anniversary of the death of the great economist Julian Simon. Although he never received the professional or popular acclaim of economists such as Milton Friedman, Paul Samuelson or F.A. Hayek, Simon's insights and work rank with those of history's greatest social scientists.
Simon's most important contribution was to crystallize and explain an insight that even the best economists before him only glimpsed -- namely, that human beings in free societies are "the ultimate resource." Nothing -- not oil, not land, not gold, not microchips, nothing -- is as valuable to the material well-being of people as is human creativity and effort.
Indeed, there are no resources without human creativity to figure out how to use them and human effort actually to do so. Recognizing the truth of this insight renders silly the familiar term "natural resources."
No resources are "natural."
Take petroleum. What makes it a "resource". It's certainly not a resource naturally. If it were, American Indians would long ago have put it to good use. But they didn't. I suspect that for Pennsylvania's native population in, say, the year 1300, the dark, thick, smelly stuff that bubbled up in watering holes was regarded as a nuisance.
Petroleum didn't become a resource until human beings creatively figured out how to use it to satisfy some human desires and other human beings figured out how to extract it cost-effectively from the ground.
Or take land. For at least 80 percent of Homo sapiens' time on earth, land was merely something to trod and hunt upon. Land had no special value as a resource until about 10,000 years ago when someone figured out how to cultivate soil and to plant, tend and harvest crops. Only then did land achieve the kind of status and value that we associate with a resource.
The same, of course, is true for magnesium, iron ore, bauxite, feldspar, trees, New York harbor -- you name the "natural resource" and you'll realize that it is a resource only because human beings creatively determined how to use it productively.
An important implication of this realization that humans are "the ultimate resource" is that high and growing population -- in societies with sufficient freedom to allow individuals to experiment and create -- is desirable. If human creativity and effort are not only resources, but also the ultimate resource, surely it's foolish to lament large and growing supplies of it.

Helicopter Money and Stone-Age Banking

Half baked truths and fully baked lies

by Anthony de Jasay
Teaching aids can be treacherous instruments. Images, metaphors and little tales, addressed to all and by no means only to children, are designed to convey some truth in an easy to grasp and hard to forget. Some of these aids however, also contain half-truths and falsehoods. Worse still, some of them do this by design, deliberately implanting lies in people's minds. They are easier to plant than to eradicate once they have taken root.
A classic example is the representation of the national product as society's "cake". Some good fairy flies in overnight, deposits the cake on the communal table, ready for "society" to slice it and hand out the slices to its members. The next step is unsaid, but suggested almost irresistibly: everyone is entitled to the same size of slice as everyone else. Unequal shares would be "socially unjust"—which it presumably would be if the cake really fell from heaven, unaided by human hand. Once it waits on the table, ready to be sliced, it is all too easy too ignore that human hands had first to bake it.
Helicopter money is a less insidious, but no less misleading example of the wrong sort of teaching aid. When the economy is producing at less than a comfortable rate, with capacity utilisation at less than 90 and unemployment at more than 5 or 6 per cent, it stands to reason that easy remedies must be available to put this right and only a government of retarded half-wits will fail to reach for one. It needs nothing more clever and complicated than using helicopter money. It can print a few hundred tons of banknotes, load them into helicopters and have then fly up and down the country, letting the money pour down like blissful rain in a drought. People will pick up the money, quickly spend most of it, and add the rest to their savings. Consumption, investment and the production to match them will rise to the desired capacity level and, like the pump once it has been primed, will carry on at that level. Should it fall short, the government can always dispatch a few more helicopters with cargoes of fresh money. Admittedly, some of the money would be spent on extra imports and may also absorb goods that would otherwise been exported, but these leakages will only siphon off a small part of the beneficial irrigation of the economy.
However, for much of the non-economist public, all this is a little too good to be true. The graphic image of the "velocity of circulation" of money, drawn by Irving Fisher as a teaching aid to his quantity theory, is still lurking in the sub-conscious.(1) Money, of course, has no "velocity" in the physical sense; it may stay with the same owner for a long time, or it can pass from one owner to the next at the speed of light, as the history of great depressions and great inflations has shown. Nevertheless, the idea of money moving around with a velocity of its own lives on in the mind of the lay public. It mistrusts helicopter money as blissful rain. Instead, it sees it as a fuse that will trigger off inflation before we know where we are. Fear of it might well nullify the good the spraying of the parched land with banknotes could be hoped to do. Teaching aid would be working against teaching aid.
He who sees that "helicopter money" has the symbolic form of "quantitative easing" uses it to explain how it works. In fact, it works quite differently. Instead of spraying with banknotes, the traders of the Federal Reserve Bank in New York are buying securities, primarily U.S. Treasury bonds, at an annual rate of one trillion dollars or about 6 or 7 per cent of U.S. national income. The sellers are paid by credits added to their balances at the Federal Reserve System. In plain language, this is the Fed "printing money". What the lay public overlooks and the commentators fail to mention, however, is that while the Fed is issuing a trillion dollars of new money, it also takes out of the economy a trillion dollar's worth of securities that are the closest thing to money in the spectrum of assets. Both the assets and the liabilities of the Fed increase by a trillion, but those of the economy do not change. Only their composition is altered a little, holders of securities that yield them interest of between near-zero and 2 per cent willingly sell them to the Fed in exchange for money yielding zero. Manifestly, they are not rushing to spend this money, nor even a significant part of it, on consumer goods. Judging by how the stock markets are rising, some of it is invested in shares in industry and commerce, and the indirect effect is a potential stimulus to both consumption and investment. How the stimulus works out depends on many things. One of them, alas, is the instinctive mistrust and fear that the poorly understood "quantitative easing" is the same as helicopter money and must come to some dire end. London and Tokyo are copying the Fed and Frankfurt differs more in form than in substance, so that if a dire end must come, it will come to us all. It need not come, unless by our mistrust and lack of clear thought we bring about its coming.
By quantitative easing, the authorities gently press the accelerator. By partially dismantling the banking system to punish it for its post-2007 misbehaviour, they are standing on the brake pedal. They seem surprised and disappointed that the banks are shrinking their balance sheets, pulling in their horns, and starving small business of credit. Except for household names, non-bank sources of credit in Europe are embryonic and the withdrawal of bank credit from medium and small firms is one of the chief reasons for Europe's present stagnation.

The Fantasy World of the Statist

Fantasies explode on contact with reality
by james holmes
Democrats are now requesting, nay expecting, nay demanding that Republicans cooperate with them to save ObamaCare by reforming it. For example, President Obama's former economic advisor Larry Summers blames the failure of ObamaCare on "the systematic effort of the president’s opponents to delegitimize and undermine the project."
"It is disingenuous for those who stood ready to turn any regulatory detail into an attack ad to profess outrage when guidance was not provided during an election campaign. It is hypocritical for those who held up confirmations of key officials with responsibility for managing federal health-care programs and whose behavior deterred many people from coming into government to lash out at the incompetence of government management. And it is indefensible to refuse to appropriate money to carry out a program and then attack it for being under-resourced.
"There is a line that must be respected between political opposition and conscious subversion. Everyone understands that when the country is at war, even a war a person may oppose, vigorous oversight is essential, but, in the end, there is an obligation to support American troops. In the same way, history will not judge kindly those who, having lost political debates over policy, go beyond vigorous oversight and seek to subvert enacted programs."
Let's leave aside the dishonesty of blaming a "refusal to appropriate money" for the fact that the administration couldn't build a website after spending between $175 and $300 million. Consider the overall message: that political opposition to ObamaCare as the equivalent of wartime subversion.
This is the consequence of supporting a major piece of legislation with a lie. When things go wrong, you have to keep on maintaining that lie through attempts to suppress the truth by suppressing the political opposition.
This is a vile argument, but it's also a bluff. It comes, not from a position of power, but from a position of desperation.
Did Summers mention funding and cooperation from the states? Consider what has happened in Oregon.
"With a reputation as a pacesetter in health care, Oregon laid out bold plans for complying with the federal overhaul.
"The state wouldn’t just create a health insurance exchange, a complicated undertaking in its own right. Oregon officials set out to build one of the biggest and best in the nation—a model that other states would want to copy.
"But more than a month after Cover Oregon’s online enrollment was supposed to launch, reality is lagging far behind Gov. John Kitzhaber’s grand ideas. The online system still doesn’t work, and the exchange has yet to enroll a single person in health insurance."
Oregon has spent more then $300 million so far to accomplish, basically, nothing.

Entitlement Reform, Tea Party Style

New CBO numbers leave no other choice

By Peter Ferrara
The Tea Party/Republican House majority was elected in 2010 to stop the runaway Obama Progressive Democrat big government spending spree. And it has had a decisive effect in that regard, as recorded in the annual CBO budget report released last week.
Federal spending soared from $2.655 trillion in 2006, when the Democrat Congress was elected to replace the Republican Congress, to $3.6 trillion in fiscal 2011, reflecting the last spending legislation adopted by that completely Democrat Congress in the prior year, an increase of 36% in just four years of control.
But after the new Tea Party/Republican House majority forced a major budget showdown in 2011, total, actual, nominal federal spending actually declined in fiscal 2012 to $3.54 trillion. Such an absolute decline rarely ever happens with federal spending. But for the next 2013 fiscal year, which just ended September 30, it happened again, declining to $3.45 trillion. That is the first two year decline in federal spending since the end of the Korean War.
In the process, total federal spending was slashed from a record peak (except only during World War II) of 24.4% of GDP in 2009 to 20.8% in 2013. That peak is still above the long-term average since World War II. These declines in spending are due to the budget caps and sequester adopted in the 2011 budget deal with the House Tea Party/Republicans.
Similar progress has been made against the deficit. The deficit for the last budget adopted by the full Republican Congress was $160 billion in fiscal year 2007. But the Democrat Congress had raised that to $1.413 trillion by 2009, almost nine times as much, the greatest government deficit in world history, ever. In just five years as President, Obama has borrowed roughly $5.7 trillion, which is larger than the entire gross federal debt in the year 2000, more than debt accumulated under all other American Presidents, from George Washington up until George Bush. Since the Democrat Congress was elected in the fall of 2006, the national debt has doubled.
But the deficit for 2013 is down to $680 billion, less than half of its peak under the full Democrat Congress repudiated in 2010. That is still the biggest deficit in world history, except for under President Obama.

Fools and their Futile Appeals

Useless Idiots
by Tim Newman
In all the books I have read about Stalin and the Great Terror (e.g. 1234), there is a discussion on the reaction of middle and upper echelon Communists when they are first arrested by the NKVD.  Consistently, and to the point that one must assume this was typical, they report reactions of utter surprise and bewilderment, followed rapidly by the conclusion that it must be some kind of terrible mistake.  Those of more senior rank implored their captors and families to inform Stalin in person and beg him to intervene; whilst those from the middle ranks – sometimes even after they’d been tortured, processed, and shipped off to the camps – would labour under the delusion that Stalin was entirely unaware of what was going on, and they were caught up in some kind of rogue operation of which he would never approve.  It dawned on them very, very late – and sometimes not at all – that Stalin personally oversaw this apparatus of terror and in many instances had ordered the arrest of the individual in person.
Reading these books gave me a new, and as far as I know, somewhat unusual (in the sense that I don’t know anyone else who shares it) view on the victims of the Great Terror: that their innocence cannot automatically be assumed.  For sure, the crimes for which they were actually charged were dreamed up out of nowhere, and there were undoubtedly a very great many who perished or suffered who were entirely innocent in all respects.  But many of the victims of the second wave of terror were those who took part in the first wave: thousands of NKVD thugs who were happy to sign the orders, knock on the doors, dish out the beatings, and pull the triggers found themselves up against a wall alongside thousands of Communists who had cheered them on earlier.  Similarly, the third wave incorporated thousands of those who actively participated in the first and second waves, and thousands more of those who, up until their own arrest, thought it was all fine and dandy.  For these individuals, it is difficult to feel much sympathy.
Mark Holland, of the now sadly defunct Blognor Regis, put this brilliantly in a post which is no longer online in response to this obituary of Alexandr Solzhenitsyn:
Meanwhile, [Solzhenitsyn] switched faiths, throwing out Christianity in favour of Marxism, by which he professed himself “absolutely sincerely enthralled” – and this in spite of the fact that, at 14, he had witnessed his substitute father, an engineer friend of the family, being dragged off in the first spate of purges, and some of his father’s relatives, too, denounced as kulaks and exiled to Siberia.
At university Solzhenitsyn was awarded a Stalinist scholarship for his keen work in the Communist youth league … in 1939 he was reported to have attended more to his copy of Marx’s Das Kapital, than to his young bride.

A Faustian bargain

Social Security: The New Deal’s Fiscal Ponzi
Charles Ponzi 1920
by David Stockman
The Social Security Act of 1935 had virtually nothing to do with ending the depression, and if anything it had a contractionary impact. Payroll taxes began in 1937 while regular benefit payments did not commence until 1940.
Yet its fiscal legacy threatens disaster in the present era because its core principle of “social insurance” inexorably gives rise to a fiscal doomsday machine. When in the context of modern political democracy the state offers universal transfer payments to its citizens without proof of need, it offers thereby to bankrupt itself—eventually.
By contrast, a minor portion of the 1935 legislation embodied the opposite principle—namely, the means-tested safety net offered through categorical aid for the low-income elderly, blind, disabled and dependent families. These programs were inherently self-contained because beneficiaries of means-tested transfers simply do not have the wherewithal—that is, PACs and organized lobbying machinery—to “capture” policy-making and thereby imperil the public purse.
To the extent that means-tested social welfare is strictly cash-based, as was cogently advocated by Milton Friedman in his negative income tax plan, it is even more fiscally stable. Such purely cash based transfers do not enlist and mobilize the lobbying power of providers and vendors of in-kind assistance, such as housing and medical services.
Social insurance, on the other hand, suffers the twin disability of being regressive as a distributional matter and explosively expansionary as a fiscal matter. The source of both ills is the principle of “income replacement” provided through mandatory socialization of huge population pools.

Aristocracy in America

Huckleberry Finn portrays both the American dream and its nightmarish underside
By Paul Cantor
Mark Twain's Adventures of Huckleberry Finn is at once a comic masterpiece and a serious exploration of what distinguishes the American character, above all, its love of freedom and independence. Although still widely read in its original book form, Huckleberry Finn has passed into the broader realm of American pop culture. It is endlessly recycled in film and television versions, often in Disneyfied adaptations that turn it into musical comedy. It has become the sort of book that is commonly described as "beloved." Despite its racist language, which often keeps it from being taught to young people in schools, it is often classified as a children's book.
Yet Huckleberry Finn is dark and deeply unnerving. It is filled with an unending parade of con artists, impostors, vigilantes, lynch mobs, and other practitioners of fraud and deception or cruelty and inhumanity. Wherever one turns, one finds murder or the threat of murder. At its most disturbing, Huckleberry Finn confronts the darkest blot on the land of the free—the crime of slavery. The book seems misanthropic, anticipating Twain's cynical vision in his later work, especially the Mysterious Stranger fragments. To varying degrees, he seems to be questioning conventional morality and religious faith in Huckleberry Finn. It seems to be the very opposite of a children's book as commonly understood.

Of Mice and Men, Morals and Markets

Under the shiny veneer of science
by Bart Wilson
Good morals make for good markets is hardly a contentious claim. Reputations for honest dealing grease the wheels of commerce. But does it go the other way? Do markets foster good morals? The intuition of most people is that markets may do many positive things, but, no, they don't cultivate ethically better people. If anything, people are moral in spite of the tendency of markets to corrupt their morals. In a recent paper published in Science, Armin Falk and Nora Szech set out to test whether participating in a market institution causally corrupts its participants.
In one treatment the instructions state (translated by the authors from the original German) that "the life of a mouse is entrusted to your care. It is a healthy, young mouse, living with some other mice together in a small group. The expected lifetime of this mouse is approximately two years." The experimenters then ask the participants to choose one of two trivia quizzes. "In Quiz A, at the end of the experiment, you earn no additional money besides the 20 euros for participation and the mouse stays alive." But "[i]n Quiz B, at the end of the experiment, you get 10 euros in addition. As another consequence, the mouse will get killed." The instructions then explain how the mouse is gassed and the subjects are shown a 30-second video. Importantly, other researchers had already scheduled the mice to die, so it is only the experimental participants who could in fact save the mice from certain death.
There are two market treatments, one with a single buyer and a single seller and another with 7 buyers and 9 sellers. Buyers submit bids and sellers offers in continuous time for three minutes. A trade is finalized if a buyer accepts a seller's offer or a seller accepts a buyer's bid. The buyer's payoff is €20 minus the price paid, and the seller's payoff is the transaction price. The instructions state that "[i]n the market described above, a mouse is traded. This mouse is alive. It gets killed as soon as the trade, i.e., the selling, is finalized."
The authors hypothesize that the two market treatments will "display a tendency to erode moral standards" relative to the quiz treatment for three reasons. First, by trading with each other a buyer and seller share the responsibility for the death of the mouse, which partially mitigates any moral guilt of the individual. Second, the existence of a market and observed participation of others in it legitimizes the killing of mice for profit. Finally, money and the competition for money overtake working access memory to crowd out the moral reasoning of imposing harm. In short, the last reason plays off the folk notion that money corrupts people, where the corruption in this case is gassing a mouse for more money.
Before reporting the results, I find it curious that gassing a mouse for money indicates a moral lapse for the participants, but that it is morally permissible for the authors in the pursuit of science to conduct such an experiment. A rejoinder might be that any moral corruption on the part of the authors equally legitimizes the erosion of morals in all treatments, so the question remains whether the market treatments comparatively erode morals. But this misses the point. If it is morally permissible for the authors to share the guilt of killing mice with others in the scientific community who kill mice, then it isn't a peculiar feature of markets that causes people to mitigate moral guilt and legitimize "lower" moral standards. It is rather a human propensity to share moral guilt and agree with other humans when it is legitimate to harm other animals.