Quotulatiousness

December 30, 2012

“We Have Passed The Point Of No Return”

Filed under: Economics, Government, Politics, USA — Tags: , , , , , , — Nicholas @ 11:22

Zero Hedge recommends that everyone listen to outgoing Congressman Ron Paul’s analysis of the fiscal cliff negotiations:

In a little under three minutes, Ron Paul explains to a somewhat nonplussed CNBC anchor just how ridiculous the charade that is occurring in D.C. actually is. This succinct spin-free clip should be required viewing for each and every asset-manager, talking-head, propagandist, and mom-and-pop who are viewing the last-minute idiocy of the ‘fiscal cliff’ debacle with some hope that things will be different this time. “We have passed the point of no return where we can actually get our house back in order,” Paul begins, adding that “they pretend they are fighting up there, but they really aren’t. They are arguing over power, spin, who looks good, who looks bad; all trying to preserve the system where they can spend what they want, take care of their friends and print money when they need it.” With social safety nets available to rich and poor, there is no impetus for change and “the country loses,” but Paul concludes, the markets are starting to say “there is a limit to this.”

December 28, 2012

The new Zero-Sum era of American politics

Filed under: Economics, Government, USA — Tags: , , , — Nicholas @ 10:18

P.J. O’Rourke offers some mild congratulations to President Obama for a few accomplishments during his first term, then explains why the way he won his second term is a bad thing both for the United States and for the rest of the world:

You sent a message to America in your re-election campaign. Therefore you sent a message to the world. The message is that we live in a zero-sum universe.

There is a fixed amount of good things. Life is a pizza. If some people have too many slices, other people have to eat the pizza box. You had no answer to Mitt Romney’s argument for more pizza parlors baking more pizzas. The solution to our problems, you said, is redistribution of the pizzas we’ve got — with low-cost, government-subsidized pepperoni somehow materializing as the result of higher taxes on pizza-parlor owners.

In this zero-sum universe there is only so much happiness. The idea is that if we wipe the smile off the faces of people with prosperous businesses and successful careers, that will make the rest of us grin.

There is only so much money. The people who have money are hogging it. The way for the rest of us to get money is to turn the hogs into bacon.

Mr. President, your entire campaign platform was redistribution. Take from the rich and give to the . . . Well, actually, you didn’t mention the poor. What you talked and talked about was the middle class, something most well-off Americans consider themselves to be members of. So your plan is to take from the more rich and the more or less rich and give to the less rich, more or less. It is as if Robin Hood stole treasure from the Sheriff of Nottingham and bestowed it on the Deputy Sheriff.

But never mind. The evil of zero-sum thinking and redistributive politics has nothing to do with which things are taken or to whom those things are given or what the sum of zero things is supposed to be. The evil lies in denying people the right, the means, and, indeed, the duty to make more things.

The Military-Industrial Complex leads to “a bloated corporate state and a less dynamic private economy”

Filed under: Bureaucracy, Economics, Government, Military, USA — Tags: , , , , , — Nicholas @ 09:59

An older article from Christopher A. Preble, reposted at the Cato Institute website:

The true costs of the military-industrial complex, they explain, “have so far been understated, as they do not take into account the full forgone opportunities of the resources drawn into the war economy.” A dollar spent on planes and ships cannot also be spent on roads and bridges. What’s more, the existence of a permanent war economy, the specific condition which President Dwight Eisenhower warned of in his famous farewell address, has shifted some entrepreneurial behavior away from private enterprise, and toward the necessarily less efficient public sector. “The result,” Coyne and Duncan declaim, “is a bloated corporate state and a less dynamic private economy, the vibrancy of which is at the heart of increased standards of living.”

The process perpetuates itself. As more and more resources are diverted into the war economy, that may stifle — or at least impede — a healthy political debate over the proper size and scope of the entire national security infrastructure, another fact that Eisenhower anticipated. Simply put, people don’t like to bite the hand that feeds them.

And that hand feeds a lot of people. The Department of Defense is the single largest employer in the United States, with 1.4 million uniformed personnel on active duty, and more than 700,000 full-time civilians. The defense industry, meanwhile, is believed to employ another 3 million people, either directly or indirectly.

What’s more, these are high paying jobs. In 2010, when the average worker in the United States earned $44,400 in wages and benefits, the average within the aerospace and defense industry was $80,100, according to a study by the consulting firm Deloitte. And 80 percent of that industry’s revenue comes from the government.

December 26, 2012

QotD: Those who have given up liberty for “security”

Filed under: Government, Liberty, Quotations, USA — Tags: , , , , , — Nicholas @ 11:13

Furthermore, do we really want to live in a world of police checkpoints, surveillance cameras, metal detectors, X-ray scanners, and warrantless physical searches? We see this culture in our airports: witness the shabby spectacle of once proud, happy Americans shuffling through long lines while uniformed TSA agents bark orders. This is the world of government provided “security,” a world far too many Americans now seem to accept or even endorse. School shootings, no matter how horrific, do not justify creating an Orwellian surveillance state in America.

Do we really believe government can provide total security? Do we want to involuntarily commit every disaffected, disturbed, or alienated person who fantasizes about violence? Or can we accept that liberty is more important than the illusion of state-provided security? Government cannot create a world without risks, nor would we really wish to live in such a fictional place. Only a totalitarian society would even claim absolute safety as a worthy ideal, because it would require total state control over its citizens’ lives. We shouldn’t settle for substituting one type of violence for another. Government role is to protect liberty, not to pursue unobtainable safety.

Our freedoms as Americans preceded gun control laws, the TSA, or the Department of Homeland Security. Freedom is defined by the ability of citizens to live without government interference, not by safety. It is easy to clamor for government security when terrible things happen; but liberty is given true meaning when we support it without exception, and we will be safer for it.

Ron Paul, “Seeking Total Security Leads to a Totalitarian Society”, Eurasia Review, 2012-12-26

December 25, 2012

The market failure of Christmas

Filed under: Economics, Government — Tags: — Nicholas @ 09:44

Not to encourage miserliness and general miserability at Christmastime, but here’s a realistic take on the deadweight loss of Christmas gift-giving:

In strict economic terms, the most efficient gift is cold, hard cash, but exchanging equivalent sums of money lacks festive spirit and so people take their chance on the high street. This is where the market fails. Buyers have sub-optimal information about your wants and less incentive than you to maximise utility. They cannot always be sure that you do not already have the gift they have in mind, nor do they know if someone else is planning to give you the same thing. And since the joy is in the giving, they might be more interested in eliciting a fleeting sense of amusement when the present is opened than in providing lasting satisfaction. This is where Billy Bass comes in.

But note the reason for this inefficient spending. Resources are misallocated because one person has to decide what someone else wants without having the knowledge or incentive to spend as carefully as they would if buying for themselves. The market failure of Christmas is therefore an example of what happens when other people spend money on our behalf. The best person to buy things for you is you. Your friends and family might make a decent stab at it. Distant bureaucrats who have never met us – and who are spending other people’s money – perhaps can’t.

So when you open your presents next week and find yourself with another garish tie or an awful bottle of perfume, consider this: If your loved ones don’t know you well enough to make spending choices for you, what chance does the government have?

December 24, 2012

What is the French for “voting with your feet”?

Filed under: Europe, Government, Media, USA — Tags: , , , — Nicholas @ 10:03

Put your tax rates up too high and people start to look at alternative living and working arrangements:

Actor Gérard Depardieu’s decision to flee France for Belgium to avoid a 75 percent marginal tax rate on incomes above $1.3 million sends a message we here in America should heed: Those who are singled out for tax increases are not stationary targets. The means of avoiding and evading the taxman are legion.

U.S. government agencies routinely issue estimates of how changes in the tax code will affect the flow of revenues to the treasury. President Obama says the tax changes he has been seeking will bring in $1.6 trillion over a decade. But such estimates assume taxpayers are something other than human beings who engage in purposive action. People like to keep the money they make — why shouldn’t they? — and they typically avail themselves of every legal (and not-so-legal) strategy to do so. Change the tax environment by raising rates or adversely modifying the rules, and taxpayers, especially those in the upper echelons of earners, can be counted on to modify their conduct accordingly; there’s no reason to think their wish to hold on to their money has diminished just because the tax code has changed.

Economists as far back at J. B. Say and Gustave de Molinari in the 19th century understood this. As Molinari wrote in his 1899 book, The Society of To-morrow, “The laws of fiscal equilibrium set a strict limit to the degree within which it is possible to impose new taxes, or to increase the rates of those already in force. The relative productivity of taxes soon shows when this point has been overstepped, for then returns not only cease to rise, but immediately begin to fall.”

December 22, 2012

After so long under minority governments, a majority can feel like a dictatorship

Filed under: Cancon, Government — Tags: , — Nicholas @ 10:21

Andrew Coyne pinpoints the day that Stephen Harper started governing as if he actually had a majority:

Calendar years have no particular significance in the political or electoral cycle — except when they do. Though the Conservatives won the majority they had been three times denied in May of 2011, they did not begin to govern as a majority until this year.

Indeed, the date can be fixed with precision. It was Jan. 26, a Thursday. Until that time the government had been preoccupied with leftover items from the minority years: the crime bills, the Wheat Board, the gun registry, and so on. On that day, Stephen Harper gave a speech in which he at last began to sketch out the broader agenda he had been at such pains to disavow until then.

This, it might be said, was the real Speech from the Throne (the one from the previous June being remembered mostly for a piece of performance art by an impossibly self-involved page), the occasion for the government to lay out before Canadians and their representatives “the unfinished business of the nation.” And so, naturally, it took place thousands of miles away, in Davos, Switzerland.

[. . .]

Last, there are the omnibus budget bills, I and II: the point at which the government’s emerging policy ambitions and continuing contempt for Parliamentary democracy converge. I’ve said my fill about these earlier, so I’ll be brief here. When much of the government’s legislative agenda can be pushed through in a single bill, or two; when “debate” on these hydra-headed monstrosities is itself cut short by government fiat; when these arrive on top of the whole long train of abuses to which Parliament has already been subjected, starting under past governments but with conspicuous enthusiasm under the present – then the question for next year, and for years to come, is clear. It is whether we will still live under a Parliamentary system of government, or something else.

December 20, 2012

Borking, in retrospect

Filed under: Government, History, Law, USA — Tags: , , , , — Nicholas @ 10:14

Walter Olson on the historically nasty confirmation battle that kept Robert Bork off the US Supreme Court:

Of course the confirmation critique that makes it into every Bork obituary isn’t Heflin’s or Johnston’s. It’s Ted Kennedy’s blowhard caricature, intended for northern liberal consumption, of “Robert Bork’s America” as “a land in which women would be forced into back alley abortions, blacks would sit at segregated lunch counters, rogue police could break down citizens’ doors in midnight raids, school children could not be taught about evolution,” and so on.

Never in memory had a judicial nomination been fought in such language. Why?

As a constitutional law scholar, Bork had distinguished himself even among conservatives for his scathing critique of the Warren Court, which he accused essentially of having made up constitutional law as it went along.

To organized liberal groups, on whose behalf Kennedy was acting, this was the next thing to a declaration of war. Yet they couldn’t exactly come out and defend making up constitutional law as you went along as their own vision for the high court.

Instead, they served up a steady diet of vitriol and wild oversimplification, especially in TV ads and other messages delivered outside the confirmation hearings.

The Washington Post itself opposed Bork’s confirmation, yet nonetheless editorialized against the “intellectual vulgarization and personal savagery” to which some of his opponents had descended, “profoundly distorting the record and the nature of the man.”

December 19, 2012

ARA Libertad finally free to sail home from Ghana

Filed under: Africa, Americas, Government, Military — Tags: , , , , , — Nicholas @ 15:05

If you’ve been following the debt-related travails of the Argentine navy’s flagship, you’ll recall that the ship was impounded on a visit to Ghana back in October. The BBC is now reporting that the ship has been released, and Argentinian sailors will be able to take the frigate home after a UN court decision:

The Libertad set sail from Ghana’s main port of Tema after a United Nations court last week ordered its release.

Argentina sent almost 100 navy personnel to man the three-masted training ship.

It was impounded after a financial fund said it was owed money by Argentina’s government as a result of a debt default a decade ago.

[. . .]

In November, sailors on board the Libertad reportedly pulled guns on Ghanaian officials when they tried to board the vessel to move it to another berth.

The lengthy diplomatic row began when the ship was prevented from leaving Ghana on 2 October, after a local court ruled in favour of financial fund NML Capital. The fund is a subsidiary of US hedge fund Elliot Capital Management which is one of Argentina’s former creditors.

Initial report on the seizure here and here.

December 18, 2012

The real reason it’s so hard to cut military spending

Filed under: Bureaucracy, Government, Military, USA — Tags: , , , — Nicholas @ 11:00

From the January issue of Reason, Veronique de Rugy explains how the system is set up to protect military spending from even the most determined spending cuts:

The Department of Defense, with its 2.3 million workers, is the single largest employer in the United States. The defense industry, which is the main private-sector recipient of defense dollars, directly or indirectly employs another 3 million people. This, in a nutshell, is why it’s so hard to cut government spending in general and military spending in particular.

The scope and reach of the government are far bigger than we think, explains John J. Dilulio of the National Academy of Public Administration in the Spring 2012 issue of National Affairs. It’s more than just the money Washington spends or the people it employs. It’s also the people in the private sector who live off that spending. It’s the nonprofit organizations paid to help administer government programs. It’s the contractors who run the programs, the contractors’ sub-contractors, and so on.

[. . .]

Even when military contractors’ profits have reached an all-time high, Congress seems committed to sheltering the companies from any budget cuts. Industry lobbying probably plays a role here. According to the Center for Responsive Politics, the U.S. defense and aerospace lobby doled out $24 million to political campaigns and committees during the 2008 campaign cycle and spent nearly $60 million on lobbying in 2011. Lockheed Martin alone spent $15 million in 2011 on its lobbying efforts, plus $2 million in political contributions. Boeing spent $16 million on lobbying the same year.

In his seminal 1971 article “The Theory of Economic Regulation,” the Nobel-winning economist George Stigler noted that agencies eventually become captive of the very interest groups they were ostensibly designed to police. Writing regulation or even spending legislation requires in-depth industry knowledge, so federal agencies and lawmakers tend to hire directly from the very companies they must oversee or spend money on.

The reverse is true too. In order to gain better access to their regulators and government funds, companies hire lobbyists who used to work for Congress or government agencies. Of the 408 lobbyists employed by the military industry to apply pressure on Congress, 70 percent used to work on Capitol Hill.

Don’t expand the Canada Pension Plan: reform it

Filed under: Cancon, Economics, Government — Tags: , , , — Nicholas @ 10:52

Andrew Coyne briefly praises the CPP before advancing a plan to (eventually) supplant it entirely:

By most measures, Canada’s retirement income support system is an outstanding success. The poverty rate for Canadian seniors, with just 4.4% living below half the median income, is among the lowest in the world. The Canada Pension Plan, once careening towards insolvency, is now on a sounder footing. Millions of Canadians contribute to their Registered Retirement Savings Plans every year, with a view to replacing more of their income than the 25% covered by the CPP; Tax-Free Savings Accounts are a fast-growing alternative. For most people, then, the pension system works well. There is no evidence of a generalized pension “crisis.”

[. . .]

Suppose an additional levy were tacked onto CPP premiums. Only instead of going into the regular CPP pot, the funds would accumulate in the contributor’s own personal fund — like an RRSP, only compulsory. To avoid wasting money on management fees, funds would be invested strictly passively (ie buying the indexes), with the particular asset mix varying as the investor aged: more stocks when younger, more bonds when older.

Any increase in benefits would thus have to be fully funded; at the same time, since legal title to the funds would rest with the contributor, there would be no way politicians could raid the kitty. Moreover, with such a direct link between contributions and the size of their nest egg, contributors would be less likely to see the rise in premiums as a tax increase, and more as savings, mitigating labour market effects, at least on the supply side.

On its own, this would be vastly preferable to CPP expansion. If we liked the results, we might even think of going further. Over time, one could imagine migrating more and more of the regular CPP over to these mandatory personal accounts, allowing the CPP fund to be slowly wound down. Rather than simply expanding the CPP, the challenge of population aging presents an opportunity to reform it.

December 14, 2012

Once upon a time, ministers of the crown would resign over cock-ups as blatant as the F-35 project

Filed under: Cancon, Government, Military — Tags: , , , — Nicholas @ 08:57

In Maclean’s, John Geddes illustrates why we are not as mature a society as we think:

It was painful to listen to Defence Minister Peter MacKay this afternoon as he faced repeated questions from reporters about whether he has any regrets about his handling of the government’s program to buy F-35 fighter jets.

Today’s news, not surprisingly, is that the problem-plagued Lockheed Martin fighter is only one of several jets whose costly tires the government will soon be kicking. And so pretty much everything MacKay has ever said about the necessity and inevitability of the F-35 procurement has proven to be dead wrong.

He might have made it easier to hear his answers without wincing had he just admitted to past mistakes. Failing that mature, obvious response, he might have clung to a fragment of dignity by resolving at least not to drag Canadian men and women in uniform into it.

But no. His couldn’t restrain himself. He couldn’t resist bringing up his concern for the troops when pointedly asked if he had any regrets about his past harsh words toward critics who raised what turned out to be entirely valid concerns about the F-35 program.

And another article from earlier this week from Andrew Coyne:

Yet, even now, MacKay and his officials are still trying to claim operating costs should not really be included, because “we’d have to spend that money anyway,” i.e. regardless of which plane was purchased, or even if we somehow hung onto the old CF-18s. This is interesting, but irrelevant. It’s useful to know how much more one plane would cost than another. But we also just need to know the cost, period. We don’t just need to compare the cost of one fighter jet with another. We also need to compare the benefits of spending a given sum on fighter jets, as a budget item, versus the other purposes to which the same money could be put: tanks, or health care, or cutting taxes.

And this brings us to the second reason this matters: because whatever the rules are, the government is obliged to follow them; because it knew what the rules are, and didn’t. I can understand why, in a way. There’s no doubt life-cycle costs can be misunderstood, or misrepresented, as if that $45.8-billion were just the acquisition cost, or as if it all came out of one year’s budget. But just because a rule is inconvenient does not entitle you to ignore it.

And even if one were inclined to excuse the initial deception, what is really inexcusable is the government’s subsequent refusal to back down, even when it was called on it, but rather to carry on spinning — as it did after the Parliamentary Budget Officer’s report, as it did after the (current) Auditor General’s report, as it is doing even today.

Update: Paul Wells in Maclean’s:

It has been that kind of month. More or less explicit repudiation of previous acts and stances has been the theme of the year-end for Stephen Harper and his colleagues. One of the questions we are left with is how Harper, notoriously a risk-averse, control-freak incrementalist, managed to leave hundreds of feet of skid marks around a bunch of big files.

[. . .]

Of course what happened is that times changed. The government’s costing of the F-35 was optimistic and short-term to begin with. Optimism worked out the way it usually does when you’re buying something big and untested. The old talking points grew stale, then ludicrous, and the government stuck with them until the government looked stale and ludicrous, and now it denies saying what it once said. None of this is a tragedy: the jets haven’t been bought, no purchase order has been cancelled, there is still time to choose a more realistic course. But it’s all been a bit awkward.

December 12, 2012

Do Republicans believe in federalism?

Filed under: Government, Law, Politics, USA — Tags: , , , — Nicholas @ 11:34

Jacob Sullum on the rising tide of liberalization at the state level — gay marriage and marijuana legalization — and whether the Republicans will support federalism in these cases:

Nationwide support for marijuana legalization, like nationwide support for gay marriage, has increased dramatically, although not quite as swiftly, rising from 12 percent in a 1969 Gallup poll to a record 50 percent last year. While support for legalization dipped a bit during the anti-pot backlash of the Just Say No era, it began rising again in the 1990s. Public Policy Polling recently put it at 58 percent, the highest level ever recorded.

[. . .]

Just as an individual’s attitude toward gay people depends to a large extent on how many he knows (or, more to the point, realizes he knows), his attitude toward pot smokers (in particular, his opinion about whether they should be treated like criminals) is apt to be influenced by his personal experience with them. Americans younger than 65, even if they have never smoked pot, probably know people who have, and that kind of firsthand knowledge provides an important reality check on the government’s anti-pot propaganda.

Another clear pattern in both of these areas: Republicans are much more likely than Democrats to oppose legalizing gay marriage and marijuana. Yet Republicans are also more likely to oppose federal interference with state policy choices. In light of DOMA’s disregard for state marriage laws and the Obama administration’s threats to prevent Colorado and Washington from allowing marijuana sales, now is put-up-or-shut-up time for the GOP’s avowed federalists.

December 11, 2012

Reason.tv: James Payne on Six Political Illusions

Filed under: Books, Economics, Government, Liberty, Media — Tags: , , — Nicholas @ 09:27

“The first thing [children] think about of government is that it is like a super parent,” says author and Reason Magazine contributor James Payne. Payne points out that seeing government as having the virtues of a parent — wisdom, responsibility, money, unlimited funds for whatever you need — has lead to illusions about what role the government should be playing in our lives.

Payne sat down to talk with Reason TV at Libertopia 2012 in San Diego, Calif. to discuss his book, Six Political Illusions: A Primer on Government for Idealists Fed Up with History Repeating Itself.

December 9, 2012

Sheldon Richman decries “Romanticizing Taxation”

Filed under: Government, History — Tags: , — Nicholas @ 12:25

Of all the topics you might try to romanticize, taxation would certainly be at the bottom of the list:

In the debate over avoiding the “fiscal cliff” — especially over whose taxes should and shouldn’t be raised — I detect an annoying attempt to romanticize taxation. I read this as an act of desperation on the part of those who want higher taxes on the wealthy, for there is nothing romantic about taxation.

The other day MSNBC’s Chris Hayes invoked Franklin Roosevelt in support of higher taxes on the top 2 percent. Pulling out all the stops, Hayes quoted from one of FDR’s October 1936 campaign speeches […]

Roosevelt’s claim that we can judge the social conscience of the government by how it collects taxes is true in a way he could not have imagined. Contrary to FDR and Justice Holmes, taxes are neither a price (in the voluntary-transaction sense) nor club dues. On the contrary, they are exactions by threat of violence. Some social conscience! How ironic that organized society and civilization itself are said to depend on the government’s threatening peaceful people if they fail to surrender their property as demanded by politicians who presumptuously and self-servingly claim to “represent” all the people.

Far from some enlightened institution, taxation began when conquerors realized that formal and continuing appropriation of a subject population’s wealth was preferable to hit-and-run pillaging. For this to work, however, the rulers needed to convince the peasants that the regime would protect them from predators in return for their regular remittances. That’s right: It was a protection racket, from which the racketeers and their cronies profited handsomely. For the taxpayers, there was little choice in the matter. They weren’t buying protection as people buy insurance in the market, and they weren’t paying dues as they would later pay dues to mutual-aid societies. They paid or they were punished. The ideology of benevolent state protection reduced enforcement costs because the ruled outnumbered the rulers and widespread tax resistance would have doomed the regime. Things have changed little in our time.

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