Cartoons & Politicians

DON BOUDREAUX:

"If you want to laugh, you might watch cartoons of the Road Runner and Wile E. Coyote -- but you don't watch these cartoons in order to learn the laws of physics. Indeed, if you take seriously the 'physics' portrayed in these cartoons, you'll soon kill yourself.

Likewise, if you take seriously the pronouncements on international trade issued by politicians such as U.S. Senators Byron Dorgan and Sherrod Brown, you'll learn nothing except how utterly bizarre and cartoonish allegedly serious adults can be when discussing international trade. (Alas, unlike Warner Bros. cartoons, politicians aren't good for laughs, for their detachment-from-reality has serious and sad real-world consequences.)

[. . . .]

A large and growing U.S. trade deficit is evidence that investment capital is flowing generously into the United States rather than away from the high-wage, high-labor-standards American economy.

But what relevance do facts and logic possess when political grandstanding must be done to appease the greedy interest groups who are so vital to keeping arrogant, obnoxious, and utterly repulsive politicians in power?"

Hmmm, good point, eh?

Prairie Dogs And Property

Eduardo Penalver:

"There's a terrific story in today's NY Times about a conflict between some ranchers over a prairie dog colony. Apparently, a couple of Kansas ranchers want to preserve a prairie dog colony on their property but their neighbors believe this will harm their property values, so they want to invoke a state law that permits the state to exterminate the colony against the property owners' wishes and at the property owners' expense. This is sort of a latter-day Miller v. Shoene, one of my favorite takings cases. The prairie dog story is great on a number of levels. First, I always love stories -- great for teaching purposes -- where the normal sides are reversed in a property-rights dispute. Here we have environmentalists (according to the story, two environmental groups are backing the pro-prairie dog ranchers) on the property-rights side, where they are usually not to be found. On the other side, we have a bunch of conservative Kansas ranchers, who, I would guess, are usually not great fans of the state telling people what to do with their property. But here they are, arguing that the state should physically invade private property against the owners' wishes to keep the owner from maintaining this prairie dog colony and then make him pay the state for its trouble. (I feel like my head is going to explode.) The other great part about the story is Larry Haverfield, the rancher who wants to preserve the colony. He sounds like a reincarnation of Aldo Leopold, especially when he starts talking about all the species that have been (or that he hopes will be) attracted to his farm by the colony. The story is definitely worth a read."

My head is spinning. Whose prairie dogs are they anyway?

Do economists agree on environmental policy?

John Whitehead: "Robert Whaples asks 'do economists agree on anything?' in the Economists' Voice. His answer is Yes. Here are what the surveyed economics think on questions related to environmental economics [my comments in brackets]:

* The typical economist thinks that climate change will not change GDP by the end of the 21st Century [I agree, all the impacts are 200 years away, right?]
* 65% agree with an increase in energy taxes [right on]
* 63% favor more nuclear energy [ditto]
* 54% think that CAFE standards should be increased [ugh]
* 'economists lean against drilling for oil in the ANWR by about three to two' [I'm one of the three]"

Rule of Law

Yesterday I posted something on the rule of law. Here is something from Michael J. Totten that is also about the rule of law:

"PM Siniora saw today’s mass protests (plural because March 14 staged another in Tripoli) as 'freedom of expression', and proof that 'freedom should be protected in Lebanon'. On Friday, he accused Hizbullah of staging a coup d’etat. I am sorry, but if you're going to accuse someone of staging a coup, you have to keep at it and not spin it into 'freedom of expression'. There are other things you need to do, like mobilize your army and security forces against the organizers of this coup. Let it be war between the legitimate authority and the illegal militia before it becomes a war between sects."

It seems to me that making the war be between legitimate authority and illegal forces attempting a coup would mean the leaders of the country are committed to protecting and enforcing the rule of law.

Law & Prosperity

Lawrence Solum posts a short essay on the meaning of the rule of law, and he asks why the rule of law is important. Here is his answer:

"What values are served by the rule of law? Why is the rule of law important? Those are big questions, but we can at least give some quick and dirty answers. One reason that the rule of law is important has to do with predictability and certainty. When the rule of law is respected, citizens and firms will be able to plan their conduct in conformity with the law. Of course, one can dig deeper and ask why that predictability and certainty are important. Lot's of answers can be given to that question as well. One set of answers is purely instrumental. When the law is predictable and certain it can do a better job of guiding conduct. Another set of answers would look to function of law in protecting rights or enhancing individual autonomy. The predictability and certainty of the law creates a sphere of autonomy within which individuals can act without fear of government interference."

Note that the rule of law means people can "plan their conduct," and that it "creates a sphere of autonomy" for people vis a vis government. The rule of law is the important foundation for Mancur Olson's (Power and Prosperity) "socially contrived exchange." The rule of law is the foundation upon which capital and insurance markets are built, and therefore, the rule of law is the foundation of economic prosperity.

Iraq Reports

Michael Fumento:

"In a Nov. 29 blog, 'Will the real Ramadi please stand up?' I observed that three articles on conditions in Ramadi and al Anbar Province had appeared within a week of each other giving entirely different points of view. Mine and one in the Times of London said we're winning the war in Ramadi; a Washington Post A1 story co-authored by 'Fiasco' author Thomas Ricks claimed exactly the opposite. The difference, I said, could be explained simply. I and the Times writer reported from Ramadi. Ricks and his co-author have not only never been to Ramadi, they wrote their piece from Washington. Well now the WashPost has printed another article on the city, this time an upbeat one. What gives? You guessed it.The second one was reported from Ramadi. Case closed, thank you very much. Unfortunately, it's little solace knowing how few journalists ever leave their safe little hovels in Baghdad hotels or Washington, D.C."

Pharmaceuticals

GLENN REYNOLDS writes about an email interchange with someone working for Pfizer:

"It's kind of sad that such a small email means so much, but I suppose that these guys get a lot more criticism than praise, despite the miracles they produce. But it occurs to me that -- while so-called 'Big Pharma' may not be perfect -- drug companies have done a lot more to make my life better than their critics have. Maybe someone should point that out more often."

I think he just did, and I think it is good to keep in mind that businesses are about advancing the well-being of individuals, and not just advancing themselves. Even when someone in business mostly thinks of himself or herself, to advance his or her own interest means providing goods or services that mean others are better off. That old Adam Smith idea of an invisible hand was a great insight, eh?

Senator Rangel, War & The Minimum Wage

DONALD BOUDREAUX:

"Rep. Charles Rangel (D-NY) believes that by forcing the children and grandchildren of high government officials into the military, the draft would reduce Uncle Sam's likelihood of going to war ('Rangel: Bring On the Draft,' Nov. 21). In other words, Rep. Rangel recognizes that government makes irresponsible decisions whenever politicians have no large, personal stakes in the matters they decide.

Rep. Rangel's insight applies more broadly than he suspects. It means also, for example, that minimum-wage legislation is ill-advised, for very few politicians have family members who are likely to lose jobs as a result of raising the minimum wage."

Bulls-eye!

The Nature Of This War

IRAQ THE MODEL:

"Lebanese industry minister Pierre Gemayel was assassinated a few hours ago this afternoon…

Prime ministers, MPs and journalists; all are targets for terrorist regimes if they dare show their opposition to Damascus or Tehran.

The message is clear and loud, I just wonder how many more messages do we need before the world realizes that these murderous regimes are not so much into dialogue?

I accuse Syria of being behind this crime. Syria thinks that just because they made a 'friendly' gesture towards Iraq yesterday they would have the right to unleash their dogs in Lebanon today.

That's their definition for dialogue.

These regimes and their allied gangs will not stop their crimes; they will do anything they can to stop the movement of democratic changes and reform in the region and to keep their despotic, dark age regimes in power."

Democrats On Trade

The WSJ has commentary about the Democrat party position on protectionism. Apparently there is a debate within the party at this time. It is interesting to read that some notable Democrat Presidents did not warm up to protectionism:

"Amid the breakdown of the international trading system in the 1930s, the man who began to rebuild it was a Democratic Secretary of State, Cordell Hull. With FDR's support, he negotiated a series of bilateral trade deals that Harry Truman used as the basis for the revival of the multilateral trading system known as GATT in 1947.

Two decades later, John Kennedy pushed for freer trade with Latin America as part of his Alliance for Progress. And however reluctant at first, Bill Clinton eventually supported and signed Nafta, the creation of the World Trade Organization and most-favored-nation trading status with China. Mr. Clinton also refused to impose steel tariffs, a temptation that captured President Bush.

This is a proud pro-growth tradition, helping to keep America competitive as the world's greatest destination for capital and goods. The question now is whether Democrats newly elected to Congress will squander that legacy and turn to the populist, protectionist left. The early portents aren't encouraging."

Why might the Democrat party support protectionism and not free trade?

". . . Union politics, pure and simple. Once a free-trade supporter, the AFL-CIO began to turn protectionist in the 1960s and is now a relentless opponent of open global markets. Union leaders invested heavily in this past election, and they are boasting about the exit polls showing that nearly one in four voters last week came from a union household. Those voters went Democratic by more than 60%, and now union leaders expect legislative repayment."

Imagine that? Unions, a.k.a. labor monopolies, are protectionist and unions deliver significant numbers of votes for Democrat candidates. Of course, I think any public policy supported by a monopoly, especially a monopoly that primarily exists because the coercive power of government supports it, is most likely a policy that will not be economically efficient.

Maybe most of the Democrat politicians will turn against protectionism:

"We don't think there's much political profit in a protectionist turn. Whatever applause Democrats received from the AFL-CIO, they would lose as much support from business. They'd also advertise themselves as a party of a narrow special interest rather than the larger national good. This is why no truly protectionist candidate has won his party's Presidential nomination, Democrat or Republican, since Hoover. Voters have an instinctive sense that the only way to prosper is by competing in the global economy, not shrinking from it."

Maybe. On the other hand, whether voters have "an instinctive sense" for good economics or not (and I suspect "they" don't after the recent state votes with respect to minimum wages), economics suggest that most voters will be "rationally ignorant."

Liberty

Neil Boortz:

"It is clear that something is terribly wrong in Washington right now. We just went through an election where principles of individual liberty and limited government were not even on the table. I am hard-pressed to name one leading Republican or Democrat who still extols the virtues of freedom, individualism, free markets and limited government. "

Seems true. I'm trying not to be discouraged.

Minimum Wage

The Wall Street Journal has an article this morning about what the agenda of the Democrat Congress may be, and it includes an increase in the minimum wage:

"Raising the minimum wage is one fight the Democrats are expected to win. That would be a victory for organized labor, which has pushed for an increase for years, but a defeat for the restaurant and retail industries and small-business owners, who argue it would hurt the economy by forcing them to hire fewer workers.

Mrs. Pelosi has promised to bring legislation to the floor within the first 24 hours of the new Congress to boost the minimum wage to $7.25 an hour from the current $5.15. The idea is popular with voters: Six states overwhelmingly passed ballot initiatives Tuesday to raise the minimum wage and tie future increases to inflation. Republicans may feel hard-pressed to oppose the move.

At a news conference yesterday, President Bush cited the minimum wage as 'an area where we can ... find common ground.'"

There is an old refrain in all of this that I want to mention.

Who is fighting for an increase in the minimum wage? Labor unions. Why? Because labor unions benefit from increases in the minimum wage.

Is anyone harmed by an increase in the minimum wage? Yes, some people who would otherwise be employed will lose their jobs. Businesses (in retail and small business) who employ workers that will be paid the increased minimum wage will see increased costs, so they will see decreased profit (a.k.a. income to the small business owners). Consumers will see increased prices.

What happens to the workers who will be unemployed? Well, perhaps some of those workers will become another statistic counted as those in our country who are below the poverty line. This means a scenario for the Democrat party that is almost a "have your cake and eat it to" story,since increasing the minimum wage can make it easier for the Democrat party to argue that something must be done about the growing number in poverty.

On the other hand, it seems that most of the workers harmed by an increase in the minimum wage will be teenagers who will not be able to find employment.

An increase in the minimum wage will change incentives in other ways as well. It will increase the incentive employers see to hire illegal workers, while at the same time increasing the incentive illegal workers see to risk illegally entering this country.

As you can tell, I do not support an increase in the minimum wage because I don't think any of the economic results are good for our system of political economy.

If you support an increase in the minimum wage (and apparently many do since many of the ballot measures passed in this election) perhaps you can convince me the results will be good, or that the results I think will occur simply will not occur.

What Does It Mean?

After any election, there is discussion of what the election means. I wonder what yesterday's election means? There are many suggestions out there in the public square today.

Here's one observation I'm interested in that is offered byAustin Bay:

"The big race in 2006 was Lamont versus Lieberman. Joe Lieberman won. Joe’s core issue: VIctory in the War on Terror, which means victory in Iraq. That’s a warning to Nancy Pelosi and Co. If they go “nutsroots-Lamont Left” they will squander their victory. Ed Driscoll suggests 2006 is a race-to-the center. Lieberman has carved out one the strongest personal political position in America. For Joe, it’s November lemonade made from the bitter lemons of August."

I think another suggestion was actually offered on election day by Tom Sowell:

"Democrats have learned to avoid admitting to being liberals and this year are running a number of moderate candidates.

If these new moderate candidates are elected and give the Democrats control of Congress, that control will be exercised by senior Democrats who will hold leadership positions -- and all of them are liberal extremists, whether people like Nancy Pelosi in the House or Ted Kennedy and John Kerry in the Senate.

Getting people to vote for moderates, in order to put extremists in power, may be the newest and biggest voter fraud."

Both these suggestions suppose that this election involved, at least on the surface, a bit of a move toward the right of the political spectrum because this election seems to bring a few more hawkish Democrats to Congress. But, Austin Bay seems to suspect the Democrat leadership will not notice this lesson, and Tom Sowell seems to suspect that the Democrat leadership actually designed their strategy to gain Congress by fooling the voters.

What does this election mean? I think both of these suggestions are worth considering, and, unfortunately, I'm tending to agree with Sowell because there also seems to have been a strong strain in the electorate this time to throw the incumbents out. Yet, after throwing the Republican bums outs, the replacement leaders in Congress still look like incumbent bums, only now they have the big D after their names.

Wal-Mart & The Poor

Arnold Kling discusses this paper by Hausman and Leibtag which measures consumer benefits from Wal-Mart. Kling writes:

At the MIT economics alumni event this morning, Jerry Hausman spoke about his research on Wal-Mart. He says that Wal-Mart lowers prices to consumers primarily by bargaining down the prices charged by suppliers, such as Procter and Gamble. It also uses cost-saving logistics. Lower labor costs may contribute to its low prices, but not as much as the other factors.

Hausman argues that driving down prices of suppliers is a benefit, because prices are being driven closer to marginal cost. In welfare-economics terms, you can think of Wal-Mart as a substitute for a regulator who would try to improve efficiency by forcing imperfectly competitive producers to move down the demand curve.

The magnitude of the benefit is enormous. Hausman looked at food, and for that category alone Wal-Mart increases consumer welfare by 25 percent (I'm a bit worried that the theory behind his calculations holds only for much smaller differences, but I don't have an alternative.) Since food is about 12 percent of GDP, multiplying .25 by .12 gives a benefit of .03, or 3 percent of GDP from Wal-Mart.

[ . . . . ]

Oh, and by the way, Hausman finds that poor people get 50 percent more benefit from Wal-Mart than rich people.

What Is Government Good At?

RUSSELL ROBERTS:

"I was talking to some people last night about different approaches to government. A woman asked me if there was anything I thought government did better than the private sector. Sure, I replied. Killing people. That is the government's best thing and governments have had unparalleled success in killing people over the last 100 years. Start with the murder of innocents. Hitler and Stalin dwarf the worst serial killer. Even if you count 9/11 as a private act of murder, that's a few thousand versus many millions. No comparison.

Then there's war. Government is very good at war relative to the private sector. Some wars are better than others. Some are ghastly. But there is no disputing that government armies, regardless of the merits of the cause, are better at killing people than private armies.

Come on, someone else said, before I could lengthen the list with maybe the enforcement of contracts and the rest of a very short list. What about education and health care? We can't leave that to the private sector. That launched us into a long discussion of the current state of the public schools and whether the vigilance of the FDA in protecting us from dangerous drugs has been a net benefit or a net loss. . . .

This seems to me to be a very revealing conversation. I think there is one word that characterizes the essence of government, and that word is coercion. Government is inherently coercive. It seems to me that Russell Roberts' answer to the question about what government does better than the private sector is based upon this observation. Now, what about education and health care? Since government is inherently coercive, if I thought government did these things better than the private sector, then I would have to think that education and health care could be better done with coercion than without. I don't happen to think that.

Economies Are Long-Run Processes

Doon Boudreaux writes:

"Economies are long-run processes; they should be evaluated as such. What happens in any arbitrary time period - a month, a quarter, or even a year - typically is too filled with short-run distortions and lags to present a reliable picture of an economy's long-run trajectory."

This is a very important observation. Economies should be characterized as long-run processes. Of course, the "data" we use to measure and characterize our economy empirically are measured over short-run periods of time. However, we "slice" time to get a snapshot picture of our economy, we can't clearly understand from the snapshot much about the long-run processes of the economy.

Voting & Rational Ignorance

Economic analysis suggests that voters can be expected, in general, to be rationally ignorant about public policy issues as well as about candidates. There are many implications of this analysis that I think we observe in our politics. Greg Mankiw writes about an implication of this sort of analysis that might not be so obvious:

"So the next time a friend of yours tells you he's not voting, don't try to change his mind. It's a good bet that if he's not voting, he's not been following the election closely anyway. Maybe he watched a baseball game instead of the debates. Maybe he is bored silly with all the talk of targeted tax cuts, privatized social security, and campaign finance reform. Maybe he's as ignorant about public policy as those focus groups of undecided voters that are the media's latest darling.

So rather than pushing your friend to the polls, perhaps you should thank him for staying at home. He's making your vote count just a little bit more."

You should read his whole explanation.

Iraq Nukes & NY Times

JIM GERAGHTY:

"I'm sorry, did the New York Times just put on the front page that IRAQ HAD A NUCLEAR WEAPONS PROGRAM AND WAS PLOTTING TO BUILD AN ATOMIC BOMB?

What? Wait a minute. The entire mantra of the war critics has been 'no WMDs, no WMDs, no threat, no threat', for the past three years solid. Now we're being told that the Bush administration erred by making public information that could help any nation build an atomic bomb.

Let's go back and clarify: IRAQ HAD NUCLEAR WEAPONS PLANS SO ADVANCED AND DETAILED THAT ANY COUNTRY COULD HAVE USED THEM.

I think the Times editors are counting on this being spun as a 'Boy, did Bush screw up' meme; the problem is, to do it, they have to knock down the 'there was no threat in Iraq' meme, once and for all. Because obviously, Saddam could have sold this information to anybody, any other state, or any well-funded terrorist group that had publicly pledged to kill millions of Americans and had expressed interest in nuclear arms. You know, like, oh... al-Qaeda.

The New York Times just tore the heart out of the antiwar argument . . . "

[ via Instapundit which has more ]

Politics & Public Finance

An article in the Washington Times discusses what might happen with respect to national public finance if the Democrat party wins Congress:

But Republicans such as former House Majority Leader Dick Armey of Texas said that if the Democrats take over, 'they will try to find some way to raise taxes to finance their spending programs.'

Democrats gave voters a peek into the kind of spending proposals they want to enact in their election agenda titled 'A New Direction For America.' The campaign agenda does not say how much their proposals would cost, but an analysis by the National Taxpayers Union based in part on CBO estimates puts the price tag at more than $79 billion a year.

These legislative proposals include $16.2 billion a year for lower-interest college loans, nearly $1 billion more per year for scientific research, $4 billion in additional Pell Grants for college students and $28.8 billion more for health care, including increased subsidies for the Medicare prescription-drug program for the elderly.
Perhaps one of the biggest spending initiatives in the Democrats' agenda is a program called 'AmeriSave,' under which the government will match the first $1,000 contributed to an IRA, 401(k) or other investment retirement account. The program would cost taxpayers $37.5 billion in the first five years.

Another measurement of spending increases a Democratic Congress would seek can be found in amendments they have offered in the Senate in the past two years. According to an analysis by the Senate Republican Policy Committee, Senate Democrats proposed $95.2 billion in increased spending for fiscal 2006 and $74 billion for fiscal 2007.

Mr. Panetta blames both Republicans and Democrats for the sizable budget deficits of the past six years and does not see that changing dramatically anytime soon, despite this year's sharp decline in the deficits as a result of unexpectedly stronger federal tax revenues.

"This Congress has been the worst on borrowing and spending that I've seen in my lifetime, with record deficits. Responsibility for that rests with both parties. My theory is that they will continue to borrow and spend in the future," he said.

I thought that, perhaps, a discussion of national public finance would benefit from seeing these three charts which provide the larger context. When looking at that national government's public finance I think it is best to consider receipts, outlays, and the deficit in terms of the percent of GDP.

The chart of the deficit numbers suggests that the deficit during the Bush Administration has not been exceptional when compared to the period of the last 30 years. Certainly the deficit during the Bush administration makes quite a contrast with the budget surplus at the end of the Clinton administration. But budget surplus during the Clinton years does seem the exception since 1960.

The chart of outlays suggests that the lenth of the period during the Clinton administration during which outlays trended downward seems out of the norm since as long ago as 1930. Nonetheless, outlays as a percent of GDP seems to have stayed right around 20% since about 1950 or 1960. The experience during the Bush administration doesn't seem unusual when compared to the entire period depicted in the chart.

The chart of receipts suggests that receipts have been right around 17% or 18% since about 1950 or 1960. The recent experience during the Bush administration seems to fit that pattern.

It seems that public debate tends to attribute national public finance to the President, and following that practice I've referred to the experience reflected by the years of the Clinton presidency and the Bush presidency. But, perhaps focusing on the President presents not quite the right target. After all, the President does not have the power to tax, nor does the President have the power to fix the amount of appropriations. These powers reside in Congress. Perhaps the charts suggests that it doesn't much matter which party controls Congress, the public finance of Congress has pretty much been in the same neighbor relative to national output since about 1950 or 1960.

Social Security -- Back Again

OpinionJournal - Featured Article:

"Social Security was supposed to be a killer issue for Democrats this election year after they defeated President Bush's reform plans in 2005. But suddenly the tables are turning on several Democratic candidates because of their endorsement of the tax-increase agenda of the American Association of Retired Persons, or AARP.

The liberal entitlement lobby has asked candidates around the country to fill out a questionnaire asking, 'Will you support a balanced Social Security plan to continue the program's guaranteed benefits for future generations?' That may sound innocuous, but here's how AARP defines its balanced plan on its Web site near the above question: 'AARP believes that a bipartisan plan that balances additional contributions from high income workers with modest adjustments in future benefits can maintain guaranteed Social Security benefits for future generations.'

Those italics are ours, because in Washington 'additional contributions' means a tax increase. And by 'high income workers,' AARP can only mean anyone earning more than $94,200, which is the 2006 income level above which the 12.4% Social Security portion of the payroll tax no longer applies. Employers and workers each pay half of the payroll levy, and the income cap already rises each year with inflation."

Of course I written about social security here before. Increasing taxes for social security is, plain and simple, a bad idea. I think one of the most serious problems with social security is that it is a program built on dishonesty. The program is called an insurance program, but it is not an insurance program. It is often talked about as something akin to a government retirement or pension program, but it is not that either. Plain and simple, social security is a program that redistributes income from today's workers to those who are retired. Increasing taxes is a good way to continue to be dishonest about this program, and in the meantime increasing taxes means more money for government to spend today under the camouflage of "fixing social security." Increasing taxes today means the payroll tax will general more EXCESS tax revenue today, while at the same time committing future workers to greater tax payments (or budget reductions) in the future to "pay off" the Treasury securities "purchased" with the EXCESS payroll tax revenue. Increasing taxes continues the lie that is social security.

There is a second significant problem with social security, in my opinion. Social security is intergenerationally unjust. Increasing the social security payroll tax today also makes this intergenerational injustice more severe. Why? Because increasing the payroll tax today is not just a tax on today's workers, it is also a commitment to an increased tax on future workers. Many of those future workers aren't workers today, many aren't yet voters, and many haven't even been born yet. It is unjust, it seems to me, to have a government program that forces people to pay when they cannot even vote to say no we don't want that.

I don't want my son and my grandchildren to be paying for my golf when I retire, and I certainly don't want to vote for a program that forces my son and grandchildren, as well as your children and grandchildren, to pay for my golf when I retire. I want the social security program to really be fixed by changing it from an intergenerational income redistribution program to a program that truly can be called INSURANCE against the risk of living in retirement beyond a person's assets. Raising the payroll tax does not do this. It is a bad idea. It would continue the lie and the injustice.

War

Ahmadinejad speaks (WSJ commentary $):

"And so, with his usual sense of timing, the Iranian President issued the following public warning to Europe last Friday: 'We have advised the Europeans that the Americans are far away, but you are the neighbors of the nations in this region. We inform you that the nations are like an ocean that is welling up, and if a storm begins, the dimensions will not stay limited to Palestine, and you may get hurt. It is in your own interest to distance yourself from these criminals (Israel). . . . This is an ultimatum.'"

Political Issues

I would like to ask my students, as well as others, to add comments here that identify the three most important political issues in this campaign season. I'm not really interested in encouraging a partisan discussion of the issues, but I would like to have those who comment also add a few words about why the issues are important and even about how the issues might be best resolved.

After seeing the issues, I then hope to look at them from both the perspectives of economics and liberty.

A Lousy Political Class

Instapundit:

"As I've said before, the Republicans deserve to lose, though alas the Democrats don't really deserve to win, either. I realize that you go to war with the political class you have, but even back in the 1990s it was obvious that we had a lousy political class. It hasn't improved, but the challenges have gotten greater. Can the country continue to do well, with such bad political leadership? I hope so, because I see no sign of improvement, no matter who wins next month."

It seems hard to disagree.

Corruption: Just A Little Here, A Little There

John Solomon:

"Senate Democratic leader Harry Reid has been using campaign donations instead of his personal money to pay Christmas bonuses for the support staff at the Ritz-Carlton where he lives in an upscale condominium. Federal election law bars candidates from converting political donations for personal use.

Questioned about the campaign expenditures by The Associated Press, Reid's office said Monday he was personally reimbursing his campaign for $3,300 in donations he had directed to the staff holiday fund at his residence.

Reid also announced he was amending his ethics reports to Congress to more fully account for a Las Vegas land deal, highlighted in an AP story last week, that allowed him to collect $1.1 million in 2004 for property he hadn't personally owned in three years.

In that matter, the senator hadn't disclosed to Congress that he first sold land to a friend's limited liability company back in 2001 and took an ownership stake in the company. He collected the seven-figure payout when the company sold the land again in 2004 to others.

Reid portrayed the 2004 sale as a personal sale of land, making no mention of the company's ownership or its role in the sale."

Libertarian Democrats v. Libertarian Republicans?

CATO UNBOUND is hosting an interesting debate this month that began with an essay by Markos Moulitsas on libertarian democrats.

I like JANE GALT'S response to the idea of libertarian democrats:

"For most people, the economic areas of life dominate their contact with the government. And the powers granted to the tax authorities are broader and more abusive than any other civil authority that deals with US citizens. They have their own special, and opaque, court system in which their cases are tried. The rules for criminal acts are, by and large, clear and commonsensical; most people have a pretty good idea of what constitutes assault with a deadly weapon, murder, burglary, criminal trespass, and so forth. People may be falsely accused of being involved in a terror plot, but at least they have a solid notion of what 'conspiracy to commit terrorist acts' means. Tax law, on the other hand, is incomprehensibly complex, and the courts tend to make their decisions based less upon what is just than upon what maximises revenue collection for the government. Securities law, environmental law, zoning questions, building codes, and so forth, are similarly flawed.

Democrats say: but look at all the goodies we get! And that's a fair argument–but not a convincing one to libertarians, who want to maximise freedom of action and minimise interference of government, not maximise security and minimise white collar crime. That's why they tend to vote Republican: they disagree with the Republicans on many issues, but if you want to minimise the power of the state, you need to hack deep into the apparatus limiting economic freedoms, because that is where there is the most state to minimise. The Democrats will, I expect, get a fair number of libertarian votes this election, including mine. But it will be a vote of protest against the various sins of the Republican party, not a conversion to the notion that sexual freedoms are the only ones that really matter"

Of course I like the emphasis here on economic freedom. It is my sense that the Democrat party is, in general, relatively little interested in protecting economic freedom. Both parties, in general, are subject to the same sorts of criticisms when they govern. Corruption and abuse of power, as well as the interest to accommodate rent seeking, seem to me pretty equally found on both sides of the political isle. The constitution, as written, seems to me a fine document for protecting economic freedom, and at least with the Republican party I see a larger chance of Supreme Court justices who will read the constitution as written.

While Jane Galt may see value in a protest vote in this election, I see little value in protest votes in general, and especially in this election. The inherent nature of any legislature encourages rent seeking. It seems to me the only chance to constrain government's intrusions on economic freedoms is for the Judicial branch of government to see it's job as protecting individual economic freedoms. Over the course of the final two years of the Bush Administration, there may well be at least one or two more Supreme Court justices that retire. If there is any hope of moving government in ways that increase and enhance individual economic freedom, I think it is very important to replace those retiring justices with justices who believe the constitution protects economic freedom. This will not happen if Democrats can filibuster in the Senate. It seems to me a protest vote in this election weakens the chances of increasing the realm of economic freedom in our system of political economy.

Microfinance & Peace Prize

MUHAMMAD YUNUS, recently awarded the Nobel Peace Prize, suggests ($$ WSJ) that microfinance might be useful in the United States:

"Many people ask, Why not just give free cash, especially under such dire circumstances? In Bangladesh, we've learned that when aid is free, not only do the poor get the least of it, but everyone inflates their needs. While some handouts are clearly necessary in such times, we focus on lending small amounts of money. This lets us keep costs down and rebuild funds for the next disaster. Most importantly, our Grameen banks are ready to act at a moment's notice. They can respond to a disaster without waiting for anyone's permission, immediately becoming like humanitarian agencies by suspending loan payments, and providing cash, food and medicines. Once rebuilding starts, the bankers keep detailed records of the money lent, and people are allowed to repay bit by bit.

That is the strategy we followed after the 1998 flooding, which covered 50% of Bangladesh's land and affected customers at about 70% of our branches. More than 700 Grameen borrowers or their family members were killed and just over half (a million borrowers) were affected by the flooding. That represents a small percentage of the overall population affected, but the Bank and its staff where there right away to help with immediate needs. Later, microlenders helped people restructure their loans or gave out new loans on more favorable terms.

Microlending has already helped millions reach a better life through their own initiative. It has also given them valuable skills as well as crucial financial back-up in case they ever face a natural disaster like Katrina. So it might be time to think about another type of support for Katrina's victims: the microloan. As our small, flood-battered country has learned, giving someone a hand up doesn't always require a handout. The most important thing is to help people get back to work while letting them hold on to their self-respect. Microloans can do just that."

PETER BOETTKE offers an interesting insight:

"I have long thought that the discipline of economics should be given the Nobel Prize for Peace in recognition of the demonstration of how social cooperation under the division of labor results in a regime of private property and freedom of trade. From David Hume and Adam Smith to J. B. Say and Frederic Bastiat to Ludwig Mises and F. A. Hayek, the demonstration of how the harmony of interest can emerge on the market through the pursuit of mutually advantageous exchange is the core message of the discipline of economics and the foundation for peaceful coexistence among all people.

Well the committee got it right this year when they gave the award to Muhammad Yunus for his work with micro-lending and the positive impact it has had on the world's poor.

Work at GMU has long addressed the issue of micro-lending and economic development. Emily Chamlee-Wright's thesis work under the late Don Lavoie was based on field work on micro-lending among female entrepreneurs in Ghana. Emily's work was subsequently published as The Cultural Foundations of Economic Development and is an excellent work. More recently, Steve Daley and Frederic Sautet have published a study of micro-finance in the Philippines, which raises several very critical issues that go to establish the limits of micro-finance as a panacea for economic development. Micro-lending can get people started, but the crucial issue is the graduation into the commercial market."

Department of Interior

BRIAN BODISSEY has a post that indicates the Department of Interior has blocked certain weblogs:

"Here’s a quick runthrough of what I’ve found so far at work. You’ll see that its pretty one-sided.

Blocked Blogs:
Captain’s Quarters
Cox and Forkum
Gates of Vienna
Little Green Footballs
Michael J. Totten
Michelle Malkin
Power Line
Protein Wisdom
Rantings of a Sandmonkey
Roger L. Simon
The Adventures of Chester
The American Thinker
The Belmont Club
The Doctor is In
Wizbang

Blogs not blocked
DailyKos
Democrat Underground
America blog
Atrios.blogspot.com
JuanCole.com
The Huffington Post
Talkingpointsmemo.com

In fact, every blog linked to off of DailyKos seems to work."

Assuming this is the case, why in the world would a government agency want to do this?

[via Instapundit]

More Congressional Corruption?

Captain's Quarters:

"Once again, we discover why the Democrats quietly dropped their 'culture of corruption' theme for the upcoming midterms. The AP catches Harry Reid without a disclosure on real-estate deals that netted him $700,000 in profit:"

Rent Seeking Kills

ALEX TABARROK WRITES:

"It's illegal to offer compensation for a transplantable human organ. As a result of the price control there is a shortage of organs and thousands of unnecessary deaths. None of this is news to readers of this blog. The price control on organs, however, kills in another less well recognized manner. The reduced supply of organs raises their value. Organ donors can't capture that value so who does? Transplant centers.

Transplant centers are artificially high profit centers because they capture some of the rents generated by the shortage of organs. As a result, there are too many transplant centers in the United States and each center performs too few transplants. Practice makes perfect so when a transplant center performs only a few operations a year lives are lost."

War Or Not?

DAVID RIVKIN AND LEE CASEY write in today's WSJ ($$):

"The national 'dialogue' over how the U.S. should respond to the threat of radical Islam is replete with claims and counterclaims about whether the Bush administration has violated the law by holding captured jihadist prisoners without trial, by intercepting al Qaeda communications without judicial warrants, by subjecting detainees to stressful interrogations, and so forth. In fact, almost all of this clamor arises from a basic dispute over whether the U.S. is -- or should be considered -- at war with al Qaeda and its allies, or whether it should address the threat of transnational terrorism as a law-enforcement matter -- as most of its European allies have done."

I think this is right. Is our country at war? Even though many (and many more than a simply majority) in Congress voted in support of a yes answer to this question, for some reason many of our political leaders continue to hold forth in public as though we are not at war. The news industry, on the whole, seems to also act as though the country is not at war. As Rivkin and Casey argue, our political debate simply seems to avoid a serious discussion of this basic question. After our country was attacked it seems most of us understood the attack as an act of war and agreed the response was to be at war from our side as well. Should our country now call our war off? If any of our political leaders have decided we should call our war off, then I think they should be leaders and raise their voices for a debate of precisely that quesion. If instead the debate in our public square continues as it has, then my conclusion is that many are simply playing politics with questions of our national security, and while our armed forces are in harm's way. I suppose this should be expected since we are, after all, at the height of another political season.

I suspect, in this political season, that the voices of criticism and opposition understand we are indeed at war because others have declared war on our country and on us as individuals. I also suspect we would be much more effective in our war efforts if our political debate was simply more honest at this time. But, perhaps, such an honest debate is simply not an attribute, in general, of our system of political economy.

The Causes of Poverty?

DON BOUDREAUX POINTS OUT that asking what causes poverty puts things backwards:

". . . . But writing after the fruits of the wealth explosion began raining down widely, even as astute a mind as Marshall missed the fact that poverty has no causes. Poverty is humankind’s default mode. It’s what exists if we do nothing. “Creating” poverty -- causing poverty -- is no challenge whatsoever.

Escaping poverty has causes – that is, wealth has causes.

This point bears repeating. Poverty has no causes. Wealth has causes.

But capitalism has been so enormously successful at producing widespread material abundance that we today -- like Alfred Marshall in 1890 -- regard wealth as innate to our existence, as our default mode. It is not. The set of institutions that will promote the creation of widespread prosperity is minuscule in number compared to those that prevent people from creating material prosperity. "

I had not thought in terms of the "default" position before. This seems tremendously important to take note off. A world characterized by "poverty" as we think of this term today really is the default position, or it really can be thought of as the starting point. It is the creation of wealth that means people can escape from poverty. People will make the choices that create wealth if government acts to enforce private property rights and contracts, and further if government avoids supporting predatory activities, people will prosper all that much more.

Oh Boy . . . . Wal Mart

RUSSELL ROBERTS POINTS to news that Wal Mart has opened in Chicago. He quotes several comments by Julie Edwards, one of the first shoppers at the new store:

"'I love this store,' Edwards said. 'It's about time we get nice stores in this neighborhood.'"

And also:

"I want to see them make $10 an hour, but if they can't, at least they can make something," Edwards said. "They're creating jobs for our community."

I agree with Roberts:

"FIFTEEN THOUSAND people applied for the 400 jobs. Only an econometrician unconstrained by economics could conclude that somehow the increase in demand for workers by Wal-Mart can somehow lower wages in the Chicago area. I'll stick with Julie Edwards's assessment."

When Terrorists Talk

John Schmidt:

"In a Sept. 13 vote along party lines, the Senate Judiciary Committee moved Chairman Arlen Specter’s wiretap bill to the Senate floor. The bill would provide for a court review of the National Security Agency’s terrorist surveillance program. Yet many critics are still fighting the legislation.

They are vigorously protesting the bill’s elimination of the “exclusivity” provisions of the Foreign Intelligence Surveillance Act of 1978, which make it a crime for the president (or anyone acting under his direction) to carry out electronic surveillance on a foreign terrorist group or other foreign power in this country except in accordance with FISA’s statutory procedures. They claim the bill introduced by Sen. Specter (R-Pa.) is an “abandonment” of the principle that even presidents are subject to the rule of law.

In fact, the history of FISA’s exclusivity provisions demonstrates that they were a mistake from the beginning. Far from protecting the rule of law, they ignore the law of the Constitution. Eliminating them now would help end confusion about the president’s authority in this critical area of national security. "

Earmark Corruption & the President

JOHN FUND has a very interesting insight on earmarks:

"President Bush could also do more. Republican Sen. Jim DeMint notes that the Congressional Research Service has found that 95% of recent earmarks were slipped into committee reports and not written into law. 'These non-legislated earmarks are not legally binding,' he says. 'President Bush could ignore them. He doesn't need a line-item veto.'"

If there is true, then the President should do just that.

Gore On Taxes & Pollution

"Former U.S. Vice President Al Gore on Monday suggested taxing carbon dioxide emissions instead of employees' pay in a bid to stem global warming.

'Penalizing pollution instead of penalizing employment will work to reduce that pollution,' Gore said in a speech at New York University School of Law.

The pollution tax would replace all payroll taxes, including those for Social Security and unemployment compensation, Gore said. He said the overall level of taxation, would remain the same.

'Instead of discouraging businesses from hiring more employees it would discourage business from producing more pollution,' Gore said."

Wow, sounds like one of my classes.

[Hat Tip: Tim Haab]

Suicidal Hand-Wringing

Tom Sowell:

"If this was just a case of a handful of headstrong senators, who want us to play by the Marquis of Queensbury rules while we are being kicked in the groin and slashed with knives, that would be bad enough. But the issue of applying the Geneva convention to people who were never covered by the Geneva convention originated in the Supreme Court of the United States.

Article III, Section II of the Constitution gives Congress the power to limit the jurisdiction of federal courts, and Congress has specifically taken away the jurisdiction of the courts in cases involving the detention of illegal combatants, such as terrorists, who are not -- repeat, not -- prisoners of war covered by the Geneva convention.

The Supreme Court ignored that law. Apparently everyone must obey the law except judges. Congress has the power to impeach judges, including Supreme Court justices, but apparently not the guts. Runaway judges are not going to stop until they get stopped.

In short, the clash between Senator McCain, et al., and the President of the United States is more than just another political clash. It is part of a far more general, and ultimately suicidal, confusion and hand-wringing in the face of mortal dangers.

The argument is made that we must respect the Geneva convention because, otherwise, our own soldiers will be at risk of mistreatment when they become prisoners of war.

Does any sane adult believe that the cutthroats we are dealing with will respect the Geneva convention? Or that our extension of Geneva convention rights to them will be seen as anything other than another sign of weakness and confusion that will encourage them in their terrorism?

No one has suggested that we disregard the Geneva convention for people covered by the Geneva convention. The question is whether a lawless court shall seize the power to commit this nation to rules never agreed to by those whom the Constitution entrusted with the power to make international treaties.

The much larger question -- the question of survival -- is whether we have the clarity and the courage to go all-out in self-defense against those who are going all-out to destroy us, even at the cost of their own lives.

[ . . . ]

Squeamishness about how this is done is not a sign of higher morality but of irresponsibility in the face of mortal dangers."

I think he's right.

The liberal case for pork

BRADFORD PLUMER:

". . . there's a liberal case for supporting pork. It's not because pork projects are defensible on the merits, although they sometimes can be. It's not because they create jobs, although they can do that, too. Rather, it's because, without pork, activist government would wither and die."

I'm thinking the pork projects in question are not defensible in general, because the pork projects in question are the projects that our fearless leaders are choosing to hide from public view, and from the view of their fellow fearless leaders.

I'm also not signing on in support of the justification that these pork projects create jobs. After all, if the money isn't spent on these hidden pork projects, then at least one thing that could have been done with the money was leave it in the pockets of the citizens it was taken from. What would you do with more money? Spend some of it? Sure. Save some of it? Probably. Either way that money is part of the economic activity that has jobs.

And what about the "activist government would wither and die" idea? One illustration he gives involves a tax bill during the Reagan administration:

The problem was that the reform bill faced a daunting uphill battle through the Senate. A multitude of corporations and special interests risked losing their much-cherished tax breaks, and they lobbied hard against several provisions in the bill. The only way to ensure that the bill survived was to grease it up with pork fat. A large number of temporary tax preferences--known as "transition rules"--were added to the bill, at the behest of individual Senators, for over 174 beneficiaries, including a variety of cities and municipal facilities. Senate Majority Leader Bob Dole worked to get his party behind the reform, and for his efforts received a tax preference for the redevelopment in his home state of Kansas. Even Ohioan Howard Metzenbaum, a longstanding opponent of narrowly-tailored corporate tax breaks, secured exemptions for convention centers in his home state.

Now, I'm not sure this story is one we should hold up as an illustration of what is good about our political system, but I think this illustration does not really fit today's issue. Today's issue is not just about pork. Rather today's issue is about hiding personal choices by our fearless leaders to spend government money on others. These choices are hidden from public view, and the illustration involves choices that were written into law for all to see.

He offers a second illustration from the Clinton era, and again the illustration includes items that would appear in public view, even though the vote trading of course took place away from public view. Then he offers:

The point is this: Any big-government program on the progressive wish list will likely prove even more difficult to pass than the 1986 tax reform or 1993 budget. Single-payer health care? Card check for unions? Reductions in carbon emissions? It won't get done without an orgy of earmarks to entice the inevitable skeptics in Congress. That won't be pretty, but if the price of, say, universal insurance is a bit of borderline corruption here and there, it's a tradeoff worth making. And, while it's also true that conservatives can use earmarks to pass their own massive spending programs--the prescription-drug benefit comes to mind--in the long run, institutional mechanisms that are biased toward activist government will favor liberals.

I think these illustrations involve logrolling or vote trading, and clearly such logrolling occurs frequently in our system of political economy. I think government would be better government if the number of instances of logrolling could be reduced. Our entire system of political economy would be better if government participation in rent seeking could be reduced. But, these weaknesses in our system of political economy seem to me much different than the practice of earmarking, whereby an individual Congressman or Senator can say which project is to get government monies. And earmarking is, it seems to me, an abhorent practice by our government when the politician can keep his or her name hidden from the public. Earmarking, as I've written here before, seems to me nothing less than corruption.

Asymmetric Paternalism

RUSSELL ROBERTS DRAWS ATTENTION to a newly found source of "market failure" being asserted by some. I'm not convinced and neither is he:

I guess I'm not part of the political specturm. Asymmetric paternalism has no appeal to me whatsoever.

This asymmetric paternalism is supposed to be the policy answer to the new market failure. Roberts explains the market failure and policy response by quoting from a piece by John Cassidy. Here is the market failure explanation:

Today, most economists agree that, left alone, people will act in their own best interest, and that the market will coördinate their actions to produce outcomes beneficial to all.

Neuroeconomics potentially challenges both parts of this argument. If emotional responses often trump reason,there can be no presumption that people act in their own best interest. And if markets reflect the decisions that people make when their limbic structures are particularly active, there is little reason to suppose that market outcomes can’t be improved upon.

And, here is the policy answer:

Laibson and Brigitte Madrian, an economist at the Wharton School, have studied one such “pre-commitment device” for 401(k) plans, which deduct part of an employee’s earnings each month and invest them in stocks and bonds. Because the plans are often optional, many people fail to join them, even when their employers offer to match a portion of their contributions. Laibson and his colleagues have called for people to be automatically included in the plans unless they choose to opt out. At companies that have adopted such a policy, enrollment rates have increased sharply.

Reforming 401(k) plans is an example of “asymmetric paternalism,” a new political philosophy based on the idea of saving people from the vagaries of their limbic regions. Warning labels on tobacco and potentially harmful foods are similarly intended to keep subcortical structures in check. Neuroeconomists have suggested additional policies, including warning buyers of lottery tickets that their chances of winning are practically nonexistent and imposing mandatory “cooling off ” periods before people make big-ticket purchases, such as cars and boats. “Asymmetric paternalism helps those whose rationality is bounded from making a costly mistake and harms more rational folks very little,” Camerer, Loewenstein, and three colleagues wrote in a 2003 issue of the University of Pennsylvania Law Review. “Such policies should appeal to everyone across the political spectrum.”

I think this is chock full of normative nonsense. The market failure concept is used to describe conditions under which we expect the market to fail to allocate resources efficiently. There seems to me no relevance to asking whether people act in their own best interest or not. The normative foundations of efficiency economics make the value judgment that we economists take the preferences of others as our given data. I think there are few other options for our normative foundations when we evaluate policy alternatives. I do not want economists to be in the business of judging good and bad preferences, and I don't think many economists want to either. Nor do I think a credible normative position for economics involves us trying to figure out whether people can or cannot pursue their own interests and preferences.

It seems to me that this so called market failure, which is then solved by asymmetric paternalism, really comes down to saying that people make mistakes, and therefore their mistakes will lead to an inefficient allocation of resources. Okay so far, eh? So what should we do about these mistakes? Well, we should have government force people to act so they don't make mistakes with respect to their own best interests. Of course, what shall we suggest to government about identifying these mistakes, that people don't know they are going to make until the mistakes have been made? After all, if I figure out my choice is going to turn out to be a mistake, I'm sure not going to make that choice after all.

This seems to me simply a new way to talk about that ages old economic concept of merit goods. This "new" market failure amounts to the old merit goods, just juiced up with a new "neuroeconomics" scaffolding. Paternalism, asymmetric or soft or the old traditional variety, is paternalism, and it is not consistent with efficiency economics. I simply cannot agree that paternalism of any variety should be part of the normative foundations we economists use to evaluate government and public policy.

Get Wal-Mart Out of the Public Trough

WARREN MEYER at Coyote Blog has some interesting ideas about Wal-Mart:

If Wal-Mart wants to seek public funding for its business and impose regulation on its competitors, and thereby make itself a semi-governmental entity, then I am no longer going to have any sympathy for them when governments want to single them out for special regulation, no matter how bone-headed the regulation may be.

I have a couple of thoughts. First, I like his point of view. If Wal-Mart is able to borrow government's powers of eminent domain and if Wal-Mart is attempting to thwart potential competitors with support of public policies, then supporting Wal-Mart in general would appear to be to support more rent seeking in our system of political economy. Second, I suspect the sorts of things Meyer points to with respect to Wal-Mart can be said about many others in our economy. I suspect it is very difficult today to find an illustration of true market activity by which I mean economic activity neither constrained nor aided by some government policy.

Virginia Declaration of Rights

I think the Virginia Declaration of Rights has many interesting ideas. Although adopted way back on June 12, 1776, I find it to have many principles of value today. It is worth a look once in a while, especially since this declaration of rights reminds me of our Constitution.

Consider the statement in this declaration concerning religious freedom:

That religion, or the duty which we owe to our Creator and the manner of discharging it, can be directed by reason and conviction, not by force or violence; and therefore, all men are equally entitled to the free exercise of religion, according to the dictates of conscience; and that it is the mutual duty of all to practice Christian forbearance, love, and charity towards each other.

I think we can see in this statement a declaration concerning religious freedom that is closely related to the declaration written into the First Amendment to our Constitution. There is a bit more detail in the statement here than we find in the Constitution, but perhaps the greater detail or depth of expression can be interpreted as one way to inform our understanding of the First Amendment?

Now, one of the ideas expressed here worth some contemplation is the last idea about the "mutual duty of all." A mutual duty is certainly not an argument for the use of government's coercive power to see that the duty is carried out. It is apparently a duty that many in our country in 1776 thought to be a personal responsibility. There was indeed a significant Christian (and protestant) influence on the views about the purpose of government at our nation's founding. Unlike what some seem to assert about Christian views of government these days, back at the founding the Christian views about government expressed in this declaration of rights specifically rejected force and violence in support of such religious views. Further, it seems to me likely that the specific view of government written into our Constitution, and our specific understanding of individual liberty vis a vis government, has much to do with the influence of Christian religious views on the people who fought for and founded our system of political economy.

I don't think that in a free system of political economy one need be terribly concerned about whether a person's views on government and policy are motivated by religious belief or belief in mother nature or belief in Newtonian physics or belief in quantum physics. In a system of government founded on liberty the key issue is really what we think is and is not a legitimate use of force and violence in our daily lives. As George Mason wrote in the Virginia Declaration of Rights it is not legitimate to use force and violence in the service of religious belief. Nor, does it seem to me legitimate to use force and violence in the service of belief in science, or belief in an environmental ethic, or belief in a witch's brew. But, in our system of political economy, there is seldom any real threat that force and violence will be used by government for any such personal beliefs. We each have our personal beliefs and motives for supporting this policy or that policy, and in the end the policy that is chosen is seldom, if ever, the policy that is supported by merely one type of belief. Liberty requires that government leave us free to believe what we will, and this principle even applies to the reasons we have for supporting our personal views of good and bad public policy.

What Are the 'Dynamics of Economic Well-Being'?

DAVID HENDERSON:

"Recently, the Census Bureau reported its findings on 2005 household income for the United States. The August 30 Wall Street Journal's headline for its story on these findings was, 'Median Household Income Rises 1.1%.' The line underneath (what journalists called 'the deck line,' which many people read without reading the whole story) stated, 'Gap Between the Richest and the Poorest Widens; Middle Class Feels Squeezed.'

The article reads as if the reporter, Robert Guy Matthews, had simply read the press releases of the Census Bureau and then called liberal and conservative commentators to get their take. It didn't read as if he had actually downloaded the Census Report and looked at the tables. The New York Times article the same day was headlined 'Census Reports Slight Increase in '05 Incomes' and then went on to cite the findings of the sociology department of Queens College that median income was still not as high as its level in 2000. The Times' reporter, Rick Lyman, seems not to have studied the report's findings either.

That's too bad. Because hidden in plain sight in the report are some data that help one understand the household-income picture in the United States. These data show what it takes to be middle class or above. And they show that staying out of, or getting out of, the lowest quintile is not rocket science.

This ought to be interesting. What does it take to have an income that puts a person above the lowest 20% in the income distribution?

The message is clear: if you want to have an extremely high probability of avoiding the lowest quintile, get a job, ideally a full-time job, and live with someone who has a job.

Wow. Amazing.

Political discussions of poverty tend to assume that many households with the lowest incomes are always households with the lowest incomes. It may even be imagined that the poorest households have both mother and father working, and perhaps it is imagined that father is working two jobs instead of just one. The Census data seems inconsistent with such imaginings for most of the households in the lowest quintile when the data seem to suggest that one full time job is mostly likely going to take the household above the lowest quintile, not to mention the two or three jobs the might be imagined for "the working poor."

Notice that Mr. Henderson suspects the reporters aren't reading the reports they report on. I often tell my students and others that they can't trust what they read and hear from the news industry, and they can't count on those in politics to know or to act on what is really going on. I think these cautions are especially important to heed when the news industry tells us about either the law or the economy. Mr. Henderson offers the same advice:

So next time you see a report on Census data on household incomes, if you want to know what really happened, download the report and actually peruse the tables.

So, if you are interested in seeing for yourself, then here is the link to the Census report Mr. Henderson is discussing.

Alice In Wonderland?

This note from GLENN REYNOLDS makes me think we are living in an Alice in Wonderland world:

MESSAGE: EVERYTHING SUCKS! The teaser for my local news was 'Concern over falling oil prices -- what this could mean for you!'

Uh, cheaper gas? Yeah, I'm really concerned.

Today: Wealthier (maybe not wiser)

DON BOUDREAUX:

. . . . But I ask: would you prefer to live in 1967 with today’s real median household income ($46,326) or live today with 1967’s real median household income ($35,379)? (These figures are expressed in 2005 dollars, by the way.)

Given these two options, I’d choose to live today with only 1967’s real median household income. The reason is that the economy today offers so very many more options than did the economy in 1967 – or even the economy of that halcyon year, 1973. Today I can buy cell-phone service; today I can buy cable television with hundreds of channels, including ones that specialize in sports, cooking, history, and science; today even the cheapest automobiles are safer and more reliable than were the finest cars for sale in 1967; today I can buy telephone answering machines (with caller-ID), microwave ovens, CDs, personal computers, Internet service, and MP3 players.

[ . . . . ]

Read all of his observations about today and see if you don't agree with him.

Why Do Americans Hate their Fabulous Economy?

I often tell my students and others that they shouldn't trust "the news." "News" of the economy over the course of the tenure of President Bush seems mostly to have portrayed a bad economic situation. There is a post by an ECONOMIST AT BACK TALK that illustrates why you should not trust "the news":

Polls consistently show that Americans are rather negative about the economy, and many have wondered why that might be considering that our economy is the envy of the world (as well it should be). The source of our pessimism is a bit of a mystery, and it is one that I am going to pursue. For the moment, I'll simply note that I have identified what may be a contributing factor to our unwarranted despair: reporters rarely use charts, and that allows them to wax poetic about the 'jobless recovery,' 'worrisome signs of inflation,' 'record setting deficits,' and other such nonsense. Charts anchor the mind to the raw data, which makes it hard to use bumper-sticker slogans that mislead (and demoralize) more than they clarify. In any story about the economy, there is never an excuse not to use a chart, but reporters almost never do.

You should read the entire piece, and pay attention to the charts which lead to conclusions such as:

What you can see is that unemployment has been relatively low all throughout the Clinton and Bush administrations. Thus, all of the obsessing about the "high" unemployment rate during the last presidential campaign was so much nonsense. It was made possible because reporters avoided using charts like this one.

I also recently posted another illustration here.

[Via Instapundit -- Via Powerline]

Germany & Economic Liberty

An article at Bloomberg.com tells of Germans fleeing unemployment:

Thomas Koerber, an engineering technician from Viernheim, Germany, was looking for a new job. He found it -- 4,700 miles away, in Canada.

``I looked around, found a job I liked in Canada, and left Germany within two months,'' Koerber, 39, said in a telephone interview from Calgary. ``If I can get a better job abroad, and if I'm being treated better, I'm gone.''

Koerber is one of 145,000 Germans who fled the fatherland last year amid record postwar unemployment, pushing emigration to its highest level since 1954 . . .

Why the exodus?

For Koerber, the decision to leave was largely one of taxes. In Germany, where the highest tax bracket starts at 52,152 euros ($66,600), he would have to pay 42 percent of every euro above that level. In addition, the German value-added tax -- a kind of national sales levy -- is 16 percent, which is scheduled to rise three percentage points next year.

``I only get 25 percent deducted from my salary and that includes everything,'' said Koerber of his pay packet in Canada. ``And I'm in the highest tax bracket!'' The goods and services tax in Alberta is 6 percent, cut from 7 percent in July, he said.

[ . . . ]

Other German expatriates cite what they say is the over- regimentation of the labor force. ``Life in Germany is totally over-regulated,'' said Christian Kaestner, 38, an attorney who moved from Munich to Cape Town, South Africa, in 1997. ``There are hardly any freedoms left, and you keep bumping into regulations and prohibitions.''

Plamegate's ridiculous conclusion

Plamegate began many months ago. So long ago now that I suspect relatively few will pay attention to what is now known to be true about the whole deal. And, what is now known to be true is nothing at all like what was asserted early on in order to wage political war against the President. Christopher Hitchens has continued to watch the unfolding truth for us:

As most of us have long suspected, the man who told Novak about Valerie Plame was Richard Armitage, Colin Powell's deputy at the State Department and, with his boss, an assiduous underminer of the president's war policy. (His and Powell's—and George Tenet's—fingerprints are all over Bob Woodward's 'insider' accounts of post-9/11 policy planning, which helps clear up another nonmystery: Woodward's revelation several months ago that he had known all along about the Wilson-Plame connection and considered it to be no big deal.) . . .

[ . . . ]

What does emerge from Hubris is further confirmation of what we knew all along: the extraordinary venom of the interdepartmental rivalry that has characterized this administration. In particular, the bureaucracy at the State Department and the CIA appear to have used the indiscretion of Armitage to revenge themselves on the "neoconservatives" who had been advocating the removal of Saddam Hussein. Armitage identified himself to Colin Powell as Novak's source before the Fitzgerald inquiry had even been set on foot. The whole thing could—and should—have ended right there. . . .

Campaign Finance Reform? NOT

Mark Tapscott:

With a 3-3 vote featuring Democrat commissioners supporting the silencing of political speech against congressional incumbents and Republican commissioners in favoring of allowing it, the Federal Elections Commission has now made it official - As required by the McCain-Feingold Bipartisan Campaign Finance Reform Act of 2002, there can be no paid political broadcast ads criticizing incumbent Members of Congress for the two months prior to the Nov. 7 election.

This is the ultimate form of Incumbent Protection Act, short of repealing elections.

I'm with Tapscott. Either you believe in freedom with respect to political speech or you don't. I DO!

In defense of secret holds

Tim Chapman:

"More often than not it is conservatives — anti pork, limited government types — who employ the secret hold. They use the hold to slow down legislation that is incessantly offered by liberals in the Senate. Legislation that would appropriate x amount of billions of dollars to this or that socially acceptable and politically popular cause is often the target of these holds. Why? because without a hold the bill goes to the Senate floor and passes with unanimous consent for fear of opposing a politically popular piece of legislation that is often either not constitutional or further bloats the federal government. In this case, unamous consent is often anything but…it is more like unanimous ignorance."

I'm not buying it. One member of the Senate should not have the power to stop or delay deliberation and approval or denial of proposed legislation. Recalling the practice of holds with respect to Presidential appointments, neither should one Senator be allowed to prevent the entire Senate from voting for or against (and in public for all to see) a presidential appointment. Don't we elect responsible leaders? If we do, and if they have staffs, then why would we think a secret hold is necessary to shine a public light on the legislation? Why would we think our elected representatives would cast an ignorant and uninformed vote? I'm not buying it.

The News Industry & The Economy

Russell Roberts tears apart a front page NY Times story on the economy. He starts with this assertion found in the story:

"The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period."

Read the whole critique. You will discover, contrary to the Times story, that real hourly compensation has increased since the recession of 2001. The Times story says labor's share of the economic pie has been decreasing, but this share has actually been about 70% of national income since World War II. Since real hourly compensation has been increasing since 2001, the Times assertion that workers can't keep up with inflation makes no sense.

Does the news story reflect economic illiteracy? Perhaps. Or, as Roberts notes only one economist, Jared Bernstein, is quoted in the article, and Bernstein is employed by the Economic Policy Institute. Here is what Roberts points out about the Economic Policy Institute:

There's a chart accompanying the article. It tells the reader that the median hourly pay data are from the Economic Policy Institute. The Economic Policy Institute has a policy agenda. Their main issue is the stagnant or falling standard of living of American workers. They support a higher minimum wage and the strengthening of labor unions.

What is the moral of this story? Be very, very careful when you read the news.

Self-Service Gasoline

I ran across the following in a piece by Don Boudreaux:

"Consider the response of a New Jersey woman to my suggestion that the Garden State's prohibition on self-service gasoline stations be lifted. 'Oh, no!' she cried, 'that would be disastrous! People here don't know how to pump their own gasoline. They'd spill it all over the place!'"

I just can't imagine why anyone would think there were legitimate reasons for government to ban self-service gasoline stations. Could it really be because politicians said customers would spill gasoline all over the place? There must be some rent-seeking explanation for government to force a prohibition on self-service gasoline stations. Would we also expect such a prohibition to suggest government is corrupt? I've heard others assert that New Jersey government was the most corrupt in the country. Or is this just a law that is oppressive?

Sowell Insight on Global Warming

Tom Sowell:

"Climate statistics show that, with all the 'global warming' hysteria today, our temperatures are still not as high as they were back in medieval times. Those medieval folks must have been driving a lot of cars and SUVs."

More Senate Corruption

GLYNN REYNOLDS is wathcing the Senate hold on the porkbuster legislation. It is worth taking a look at his post this morning. He points out a few things from articles by others. Here are a couple of things I think worth noting:

"It could be anyone -- Democrat or Republican -- Darling said. To place a hold, senators merely have to inform their leader that they don't want the legislation to move forward," he said.

AND

The same Senate rules prohibit those party leaders from disclosing which of them did this dirty deed, and at which senator's behest. It's treated like classified information.

It seems to me patently wrong in our system of political economy for an elected representative, in this case a Senator, to be able to act in an official way in secret. Even when issues concern national security, in general, I think the actions of those we elect (as well those in the bureaucracy) should simply be publicly announced and identified.

Further, in this case, we see that in our Senate it is apparently the case that one person is allowed the power to veto legislation. It simply makes no sense to me that one person can say legislation cannot move forward. Of course, it is even worse that this power is allowed to be exercised in secret. I suggest this is an enormous corruption of our system of government. I suppose it is ironic that this sort of corruption is being exposed because of a bill that would end the corrupt practice of allowing individual senators to secretly earmark government monies for expenditures directed at very specific projects and very specific people and businesses.

Threats To Liberty

CHRISTOPHER HITCHENS was on the Bill Mayer show last night. He was jeered by the audience because of the following:

"Christopher Hitchens: “Who wants a Third Word War? The Iranian President says that one member state of the United Nations should be wiped physically from the map with all its people. He says the United States is a Satanic power. Members of his government, named members of his government have been caught sponsoring deaths squads. He's lied, he's lied to the European Union about his nuclear program-”"

The interchange between Mayer and Hitchens, as well as with the audience, suggests that many disagreed with Hitchens that Islamo-fascism is a serious threat, and Hitchens asserted the audience was frivolous. Hitchens said:

“Cheer yourself up like that. The President has said, quite a great contrast before the podium of the Senate, I think applauded by most present, in his State of the Union address, that we support the democratic movement of the Iranian people to be free of theocracy -- not that we will impose ourselves on them, but that if they fight for it we're on their side. That seems to be the right position to take, jeer all you like.”

I agree with Hitchens.

Glynn Reynolds comments on the incident:

. . . Should things go badly with the war, Maher's audience -- and, for that matter, Maher himself -- will be cited by historians as evidence of the American opposition's unseriousness.

UPDATE: Rand Simberg emails: "I suspect that historians will judge Democrats unserious regardless of the war's outcome. In fact, if it goes badly enough, history of the era will be written in Arabic." And even those historians won't respect Maher and his audience, though they may be grateful for their petty Bush-hatred.

Is there a serious threat to liberty today? Is Iran and Islamo-fascism a serious threat? It seems to me the answer is yes. The worldwide nature of the attacks against freedom seems obvious to me, but apparently not to many others.

Could it be that there is a grave threat to liberty right here in our system of political economy? As I think Hitchens and Reynolds comments suggest, those in our country who are frivolous with their petty Bush hatred may pull our system of political economy away from confronting the challenge to liberty posed by Iran and Islamo-fascism.

Lebanon

AMIR TAHERI explains that Hezbollah lost:

Far from representing the Lebanese national consensus, Hezbollah is a sectarian group backed by a militia that is trained, armed and controlled by Iran. In the words of Hossein Shariatmadari, editor of the Iranian daily Kayhan, 'Hezbollah is 'Iran in Lebanon.' ' In the 2004 municipal elections, Hezbollah won some 40% of the votes in the Shiite areas, the rest going to its rival Amal (Hope) movement and independent candidates. In last year's general election, Hezbollah won only 12 of the 27 seats allocated to Shiites in the 128-seat National Assembly--despite making alliances with Christian and Druze parties and spending vast sums of Iranian money to buy votes.

Hezbollah's position is no more secure in the broader Arab world, where it is seen as an Iranian tool rather than as the vanguard of a new Nahdha (Awakening), as the Western media claim. To be sure, it is still powerful because it has guns, money and support from Iran, Syria and Hate America International Inc. But the list of prominent Arab writers, both Shiite and Sunni, who have exposed Hezbollah for what it is--a Khomeinist Trojan horse--would be too long for a single article. They are beginning to lift the veil and reveal what really happened in Lebanon.

Having lost more than 500 of its fighters, and with almost all of its medium-range missiles destroyed, Hezbollah may find it hard to sustain its claim of victory. "Hezbollah won the propaganda war because many in the West wanted it to win as a means of settling score with the United States," says Egyptian columnist Ali al-Ibrahim. "But the Arabs have become wise enough to know TV victory from real victory."

The rest of his commentary fills in many more details. I think it is important to understand Iran's part in Lebanon, and perhaps it is encouraging that Taheri can point to so many in Lebanon who do not seem to want to follow Iran.

Even so, it seems that removing Hezbollah and the meddling of Iran will require a force, and unfortunately the government of Lebanon may not be able to do this by itself. Of course, that seems to be the reason for the UN force. But given the delays, we can't expect the removal of Hezbollan and Iran from Lebanon any time soon.

Minimum Wage

There is an interesting story in the Vallejo Times Herald:

"'Maybe this will mean I'll be able to get my own place.'

That's what Jason Thomas of Vallejo said California's $1.25 per hour minimum wage increase could mean for him and his fiance, Alize Valintinno. The couple is living in the Christian Help Center and expecting a baby in about five months. Both are unemployed now, working for room, board and a small stipend at the center while they search for regular jobs, they said.

California's minimum wage will increase by $1.25 an hour over the next two years, under a deal struck by state officials Monday.

'My last job was for minimum wage at Pizza Hut,' Valintinno said. 'It's not enough. It was hard. I have two kids I had to help support.'

A raise - to $8 per hour by 2008 - will help Valintinno feel more secure, she said.

'People have medical bills, housing, utility bills. It's too much on $6.75 per hour,' Valintinno said." [Emphasis added]

Yes, of course $8 for an hourly wage is better than $6.75. But, if you are one of the people who will become unemployed, or unemployable, at the hourly wage of $8, it can't be any easier to make ends meet. No work means your hourly wage is decreased from $6.75 to $0. Do you suppose waiting for the minimum wage increase will improve their chances of leaving the rolls of the unemployed?

Budget Secrets & Senate Corruption

SENATE BUDGET CORRUPTION in the news:

"In an ironic twist, legislation that would open up the murky world of government contracting to public scrutiny has been derailed by a secret parliamentary maneuver.

An unidentified senator placed a 'secret hold' on legislation introduced by Sens. Tom Coburn, R-Okla., and Barack Obama, D-Ill., that would create a searchable database of government contracts, grants, insurance, loans and financial assistance, worth $2.5 trillion last year. The database would bring transparency to federal spending and be as simple to use as conducting a Google search.

The measure had been unanimously passed in a voice vote last month by the Senate Homeland Security and Governmental Affairs Committee. It was on the fast track for floor action before Congress recessed Aug. 4 when someone put a hold on the measure.

Now the bill is in political limbo. Under Senate rules, unless the senator who placed the hold decides to lift it, the bill will not be brought up for a vote.

'It really is outrageous to do this in the dead of night as Congress is recessing,' said Gary Bass, executive director of OMB Watch, a budget watchdog group based in Washington. 'The public has a right to know how the government spends money.'"

Be sure to check out Porkbusters where you can find photos of all the Senators who have been "cleared" of placing the hold and of all those Senators who are still suspects.

One of my Senators has cleared himself, but the other is still a suspect.

More on the NSA Opinion

ORIN KERR has an interesting essay on the NSA opinion:

"So imagine you're a Sixth Circuit judge, and imagine (to make the case interesting) that you agree with Judge Taylor that the state secrets privilege should not block the suit. What then? It seems to me that it's way too early to just resolve all of the legal issues in the case without briefing; presumably you would want to send it back to the district court for discovery and fact-finding, or for resolution of the many difficult procedural issues in the case.

What are those procedural matters? Well, a few come to mind. For example, does FISA permit injunctive relief? If not, does the Administrative Procedure Act permit courts to make an end-run around this failure to provide for injunctive relief? Article III standing aside, can a court grant injunctive relief for Fourth Amendment violations without first finding that the plaintiffs' own Fourth Amendment rights were violated? What about FISA and the Wiretap Act, which all incorporate the same 'aggrieved person' standard designed to mirror the Fourth Amendment standing inquiry rather than the Article III standing inquiry? If an injunctive remedy is permissible and merited, what is the proper scope of that remedy -- should the injunction stop the illegal parts of the program, or the program as a whole that happens to have some illegal parts? It seems to me that there were lots and lots of legal issues like this that had to be answered before Judge Taylor could reach the merits and (potentially) enjoin the program, even assuming that DOJ's defense on the merits is weak and the states secrets privilege doesn't apply.

What does this suggest about what the Sixth Circuit will or should do on appeal? Well, to me in suggests that the Sixth Circuit should reverse, whether on the state secrets privilege (if the judges agree with DOJ on that) or simply on the procedural impropriety of bypassing discovery and briefing on the law and all of the procefural and substantive issues raised (if the judges don't). Even assuming that DOJ's arguments are weak, there are still a lot of procedural hurdles to jump through in this case."

Of course, I'm not an attorney, and that means I can't claim any expertise concerning his essay or his questions and intuition. I'm struck by the nature of his questions when considered next to the press reports about the NSA program in question. My intuition is that his questions are relevant. This leads me to think it is likely that the opinion is premature and that it is pretty likely the next court down the line will return the case for discovery and determination of the relevant facts of the case. I add to this that I have read or heard at least 2 other commentators on this opinion point out that the judge in this opinion did not once mention the opinions they believe are precedent suggesting a different opinion than that written in the present opinion. In contrast, I think the press reports on the opinion leave the average citizen (and voter) with the impression that the NSA program has been determined to be unconstitutional, and this is end of story for the President. Yet, my sense, after reading Kerr and some others is that there is a very good chance the next court in line will say, not so fast, there is still much work to be done in court before we tackle the issues.

Could it be the recent opinion was written with a political agenda in mind?