Miscellany: 6/28/12

Quote of the Day
Do not go where the path may lead, 
go instead where there is no path and leave a trail.
Ralph Waldo Emerson 

One-Off Post on SCOTUS Decision Earlier Today

I published my quick take on the ObamaCare decision earlier today. At some point, I'll review the decision first hand, but I'm already seeing some excellent articles in reaction.

Ilya Shaprio of Cato in "Supreme Court Unlawfully Rewrites Obamacare to Save It" makes a couple of good points which I'll rephrase as follows:

• Chief Justice Roberts sidestepped the real issue: even though he agrees that using the Commerce Clause to mandate the purchase of goods or services is unconstitutional, could Congress effectively tax the citizen up to the amount of the goods or services using unlimited taxing authority? Money is fungible.

[my point] Both Romney and Roberts raised the same point about higher-income people freeloading on the system: why aren't we talking about means-tested user fees/penalties and/or otherwise funding for relevant "free" services through broad-based medical services user transaction fees?

• In essence, Medicaid funding differences shift costs among governments, businesses and individuals.

Big lessons? States can do their part to end ObamaCare by refusing (1) to expand Medicaid via today's ruling and (2) to set up insurance exchanges.


From ACLJ this past Feb:

In defending the individual mandate in court, the Administration reversed course and began characterizing the penalty as a tax. Last month, DOJ again argued that the penalty is a tax when it filed its opening brief with the Supreme Court in the ObamaCare case the Court will consider this March.

Yesterday, Representative Scott Garrett (R-NJ) asked Director Zients whether the individual mandate penalty for failing to buy health insurance is a tax. Zients answered that it is not a tax.

And now for this week's episode of Dancing with the Stars, we have ABC's George Stephanopoulos leading one President Barack Obama:....

STEPHANOPOULOS:  You were against the individual mandate…
OBAMA:  Yes.
STEPHANOPOULOS:  …during the campaign.  Under this mandate, the government is forcing people to spend money, fining you if you don’t. How is that not a tax?

STEPHANOPOULOS:  That may be, but it’s still a tax increase.
OBAMA:  No.  That’s not true, George.  The — for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.

STEPHANOPOULOS:  I — I don’t think I’m making it up. Merriam Webster’s Dictionary: Tax — “a charge, usually of money, imposed by authority on persons or property for public purposes.”
OBAMA:  George, the fact that you looked up Merriam’s Dictionary, the definition of tax increase, indicates to me that you’re stretching a little bit right now.

(And I thought I was funny...)







Attorney General Holder In Contempt of Congress: 
Thumbs UP!

According to the Washington Times:

The House voted 255-67 to hold Mr. Holder in criminal contempt in a vote that amounted to a political spanking for the attorney general and President Obama, underscored by the 17 Democrats who joined Republicans.

The vote marks the first time an attorney general has been held in contempt by a chamber of Congress.

I normally don't like to cover with what I consider partisan squabbling, but in this case of a President whom had run for office on grounds of transparency, it's not just that the Attorney General is holding himself above the law in withholding Fast and Furious documentation from the people's House, but we have a President whom has absurdly asserted executive privilege, probably the most unconscionable, deliberate stonewalling I have seen since Nixon was in office. I myself have not covered the Fast and Furious issue that much in this blog, but I've been watching Chairman Issa for weeks on weeks getting nowhere with the Attorney General.

Free Preventive Care
Free Education
Free Housing
Free Food (Stamps)
Free.....
(with a minimum 2-, 4- or 6-year term commitment to a Democratic officeholder.
All votes are final. Campaign promises are not indicative of future votes.)

Mark J. Perry has an interesting post about the DC public school system. Most of us know the President, unlike Jimmy Carter, has his daughters attend a private school Sidwell Friends (a modest $33K/student). Here are a few takeaways:

• "The cost to educate students in D.C. school ($29,409) is comparable to the tuition of some of the most elite, D.C.-area private-schools, and 2-3 times the tuition of some of the area's private Catholic high schools."
• "The graduation rate of D.C.'s public high schools of only 58.6% for the Class of 2011 (compared to the national average of 75.5% for public schools)"
• "This spending figure ($29,409) is about triple what the DC voucher program spends per pupil—and the voucher students have a much higher graduation rate and perform as well or better academically."

Political Humor

Yesterday in New Hampshire, President Obama said Americans need someone who will wake up every single day and fight for their jobs. Then he said, "But until we find that guy, I'm still your best choice." - Jimmy Fallon

[Obama announced that in the first Presidential debate, Romney will go up against Mike Tyson.]

The latest rumor is that Mitt Romney's running mate will be a white male from Ohio. Or as Romney refers to him, "a person of color." - Conan O'Brien

[..."a person of pallor"]

Musical Interlude: My Favorite Groups

Tom Petty & the Heartbreakers, "Into the Great Wide Open"

SCOTUS on ObamaCare: A Quick Appraisal

THUMBS DOWN!

I anticipated the 5-4 Roberts-led decision upholding ObamaCare, although I did not publish my prediction, and I strongly disagree with the decision; I believe in the long run that the decision is irrelevant because the federal involvement in health care is unsustainable. 

From a political perspective, I don't think that it is nearly the victory that Obama and others think it is. Let me be clear: I am not in a state of denial. There is no doubt that economic liberty has suffered a major setback. a 5-4 ruling for ObamaCare is worse than a 5-4 ruling against ObamaCare. I predict that the House will vote to repeal ObamaCare, but it's more to set up the election this fall. Even if somehow a repeal would survive the Senate (unlikely because the Democratic votes that put ObamaCare into law are still there and I'm not sure that the GOP can force Senate Majority Leader Harry Reid to put it on the floor), Obama would veto it, and either chamber would sustain the veto. So what we'll see, through the election, is mostly political posturing.

Now what do I mean I anticipated the ruling, and why didn't I publish my prediction? I had noted on Drudge Report a day or two ago a link referencing a rumor (now confirmed) that Chief Justice Roberts would be writing the majority opinion. I knew within a split second of seeing that its implications: (1) that meant that Anthony Kennedy was not the swing justice, as has been the case on a number of narrow "conservative decision" rulings; (2) John Roberts wanted to shape the majority opinion, which likely meant that he was siding with the socially liberal wing of the Court; (3) it would be a comprehensive ruling. It was an INFERENCE, not a proof. Did others interpret the rumor the same way? Perhaps, but I don't recall seeing any such speculation published at the relevant source pages, and I didn't troll various legal forums or search the Internet.

Why didn't I publish my speculation? The answer is that I gave it serious consideration; the leak was unexpected and unusual. I wasn't sure if the source was reliable, and I didn't want to play whack a mole on Internet rumors. I think that most people, including myself, up to that point expected a mixed ruling, like the mandate would be struck but the rest of ObamaCare would be spared.

My analysis of the decision? All things considered, despite the fact the decision went against my preference, it could have been worse and was, in a sense, BETTER THAN I EXPECTED:

• Chief Justice John Roberts explicitly rejected the concept of a mandate; along with the 4 dissenting justices also rejecting the mandate. 

Here are relevant CNN alerts about the garbled information on the health insurance mandate. The Court DID say you cannot force someone to buy health insurance, :

"The Supreme Court has struck down the individual mandate for health care - the legislation that requires all to have health insurance"; "The court decided that the individual mandate that requires all Americans to have health insurance will stand and is considered a tax by the court, making it constitutional. Chief Justice John Roberts wrote about the individual mandate, citing the taxing clause: “It is reasonable to construe what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without insurance. Such legislation is within Congress’ power to tax."

The news services are also misrepresenting (e.g., notice the contradiction of the first CNN alert and then the next): what he's saying here is the "health care mandate" isn't really a mandate because you can opt out by paying a tax/penalty: Congress is assessing a tax that you can be exempt from by buying health care insurance. Let me be clear that that I don't buy this; I think Roberts is buying into a post hoc sham rationalization. (See the highlighted hedge made by the government in the IMCitizen excerpt below.)

In legalese, the social liberals were trying to argue this was mandatory under the Commerce clause; Roberts specifically  rejected it.

Let's recall what the socially liberal justices said at the hearings (tax or penalty, i.e., Commerce Clause):

No way, said Justice Ruth Bader Ginsburg. “This is not a revenue-raising measure,” she noted, referring to the Affordable Care Act. “If it’s successful, nobody will pay the penalty, and there will be no revenue to raise.”

This falls under the jurisprudential category of “if it don’t quack like a tax, it ain’t a tax.” Justice Stephen Breyer made the pithy observation that Congress “did not use the word ‘tax’” in enacting the health-care law. 

From IMCitizen.net (my edits):

Chief Justice Roberts actually ruled the mandate, relative to the commerce clause, was unconstitutional. That’s how the Democrats got Obama-care going in the first place. This is critical. His ruling means Congress can’t compel American citizens to purchase anything. Ever. The notion is now officially and forever, unconstitutional. 

Next, he stated that, because Congress doesn’t have the ability to mandate, it must, to fund Obama-care, rely on its power to tax. Therefore, the mechanism that funds Obama-care is a tax. This is also critical. Recall back during the initial Obama-care battles, the Democrats called it a penalty, Republicans called it a tax. Democrats consistently soft sold it as a penalty. It went to vote as a penalty. Obama declared endlessly, that it was not a tax, it was a penalty. But when the Democrats argued in front of the Supreme Court, they said ‘hey, a penalty or a tax, either way’. So, Roberts gave them a tax. It is now the official law of the land — Obama-care is funded by tax dollars. 

 The "Affordable Patient Care Act" is an oxymoron: the last thing government ever knows how to do is to make ANYTHING more affordable--it has RIGGED the health care sector with delusional price-fixing and deadweight losses throughout the system--it's almost as if Obama and the rest of his rogue Administration are out to purposefully or ignorantly sabotage the health care system: nobody who knows anything about health care could possibly be megalomaniac delusional enough to believe the government is here to help you with health care. This is a perversion of the free market.

Unfortunately Republicans have going along with this government scheme to dominate the health care sector since the war-time Depression where, to pay lip service to dysfunctional wage-price controls, a cardinal sin against free markets in and of itself, the government provided business a workaround through tax-free hidden compensation, i.e., health care. (It reminds me of an old joke: "Would you sleep with me for a million dollars?" "Yes." "$20?" "No! Just who do you think I am?" "We've already established what you are; we're just haggling over the price...") There is lip service about "employer contributions" to benefits, but that's putting lipstick on a pig: it's sleight of hand. From the employer perspective, an employee's cost is the employee's wages plus incremental paid for benefit costs. Money is fungible: the employer doesn't really care if employee pays all the benefits from the employee's higher wage or pays a share of benefits on top of a lower wage.

But here's the main point: the Congress has exempted the majority of those benefits from taxes. So effectively the government has been subsidizing (for those working for companies with said benefits) your health insurance, retirement plan, life insurance, whatever... This is just as bad as the government subsidizing the purchases of homes during the housing bubble; I'm pointing out the obvious: the government is playing winners and losers in the economy through its implicit tax subsidies of employee benefits. There are costs which are not immediately obvious to the employee: he may not be able to choose his current doctor in his new company's plan, for instance. What is paid on his behalf is a health insurer's charge, only a fraction of which goes to cover your actual health care services. Think of it this way: how is it possible that Massachusetts insurance policies cost roughly twice the cost in Utah? Is it that Utah citizens are twice as healthy across the board from Massachusetts citizens? Of course not!

Here's the key point: if the federal government has been subsidizing health care all along, why can't it be taxing for health care? It's been choosing winners all the while, why couldn't it be picking losers, too? That's at the core of what Ron Paul was saying in the Daily Bell post I cited the other day, what he meant when he said effectively, it's not only necessary to do away with one level of government intervention in the health care sector: you need strip out Medicare, Medicaid, health care tax-exempt subsidies (I believe that the legislative jargon is "tax expenditures"). All of this creates inefficiencies, contributing to the unsustainable health care bubble. NOTE: our health care expenses cannot, in the long run, outstrip compensation increases any more than housing costs.

The GOP is wary of such a "radical" solution because they will see all the vested interests coming out of the woodwork to protest the fundamental necessity (it's no longer an option) of getting the government out of health care. ObamaCare is simply another layer of economic inefficiency built on other layers of inefficiency.

How realistic is this? Perhaps not. Even if and when Obama is thrown out of office, Romney needs to have a strategy to offset filibusters by a desperate Senate Democratic minority, easier said than done. We will need to liberate as many Senate seats as possible this fall. I think if Romney gets close to 60 senators, he may be able to target enough Democratic holdovers from the 2008 election in 2014, they'll have no choice. To do that, I think he needs to push/reform state/regional assigned risk pools and promote regional or national insurance (and/or self-insurance) pools. That may give Democrats on the bubble enough political cover to switch sides on the issue.

 But in the long run, Romney needs a vision to get government out of health care. The Democrats still think that Romney can't argue the issue given the precedent of RomneyCare. No, there are a number of ways to play that attack, and I'm sure that Romney is prepared for that; he's been attacked on that point for 18 months now (well, even before then). Among other things, Romney did not built a bureaucracy from scratch: he simply shifted subsidies from hospitals to citizens. Moreover, there's a big difference between a state running on a balanced budget and running the federal government already averaging over $1T in deficits, an almost $16T national debt and taking on a new entitlement program which will absolutely explode the deficit and national debt. All Romney has to say is, maybe we could have done this with a balanced budget in 2002: but we can't afford to do it now. We need a more feasible alternative.

• ObamaCare does NOT have a "judicial mandate": it got a 5-4 vote, with 4 justices saying the law should be thrown out in its entirety.  This is important. In landmark cases, e.g., Brown v Board of Education, the Court wants to affirm the decision's mandate by providing a united front. Given a deeply divided country on the issue, the fact that John Roberts flipped his vote isn't going to change how people feel about the law, no matter how much lipstick Obama puts on the ObamaCare pig. We are talking about nearly 17% of GDP. The fact that Chief Justice Roberts mitigated the decision in important ways is not being fairly reported by the media.

• SCOTUS ruled that the extortion of forcing the states into an all-or-nothing deal on unilateral federal eligibility pikes in Medicaid is out.  Again, from IMCitizen:  Roberts ruled that if a state takes the [ObamaCare-supplemental] money, fine, the Feds can tell the state how to run a program, but if the state refuses money, the federal government can’t penalize the state by yanking [pre-ObamaCare] funding. Therefore, a state can decline to participate in Obama-care without penalty.

What to do now? I'll study Romney's response and write my reaction in the near future. But the Roberts' decision suggests one political fight that the GOP may want to pick in lieu of a futile ObamaCare repeal (which is not feasible given Obama's certain veto):

Repeal the ObamaCare tax and enforcement mechanism!

If you repeal the tax, you kill the economic case for the mandate, and the whole of ObamaCare collapses under its own weight. It's Obama's Achilles heel. Let the Democrats do the heavy lift of voting against a tax cut/repeal; it will kill them in the fall elections.

Miscellany: 6/27/12

Quote of the Day  
As we let our own light shine, 
we unconsciously give other people permission to do the same. 
As we are liberated from our own fear, 
our presence automatically liberates others.
Nelson Mandela

USPS: Hunger Strike--Against Pre-funding?

Retiring Congressman Dennis Kucinich (D-OH) is on board. What principle is he supporting? Genocide in Africa? Democratic rights in Iran or China? No--pre-funding retirement health care for the USPS: "The Postal Service is unfairly required to fully fund 75 years of retiree health care benefits in 10 years with an annual $5.5 billion payment. If only the prefunding requirement were eliminated the Postal Service would be on a path to prosperity."

This blog is not sympathetic with the USPS postal workers and let me count the reasons why:

• "UPS (Union) - about 60-66% of their total operating costs are labor. FedEx (non-union) - about 45% of their total operating costs are labor. USPS - 80-85%"  Dennis Ross (R-FL). (Some will argue apples and oranges, that the world is complex, e.g., here; I am very aware that the Congress interferes with more efficient operations (surprise! surprise! Crony capitalism is never a good policy! "In 2009, USPS management tried to cut costs when it considered closing 3,000 postal outlets, but this number was reduced to 157 after complaints by members of Congress."), but the inconvenient truth is that only Wal-Mart hires more people, and the USPS' monopoly cash cow product, peaking in 2006, first-class mail, is in permanent decline, not unlike what we are now seeing in similar paper vs. digital delivery, e.g., magazines, newspapers, etc.: "On April 22, 2010, Postmaster General John Potter announced the USPS will lose $238 billion over 10 years." 
• "One in four post offices bring in, on average, a mere $52 in revenue per day and serves about four people. A full quarter of the 31,000 post offices operated by USPS operate at a loss and the 13,000 offices now under review have less than one hour of work per day, on average." Donahoe said, according to ABC. "Officially, the USPS studied 211 centers and decided 183 of them should close to cut costs." (Ross above).
• According to CATO, about 85% of postal workers are under lucrative collective bargaining agreements, which pick up higher shares of health and life insurance than even other federal employees (which, of course, are greater than in the private sector). We could talk about the total compensation on 2009 compensation for USPS primarily semi-skilled labor force of $79K vs. $59.9K in the private sectors. "This pay advantage is most pronounced in benefits, which are expected to increase in the future due to growing pension and health care costs"

Let us review what IRET has to say:

Many foreign postal services are profitable, according to data from the Universal Postal Union (UPU). Those posts have adjusted successfully to the upheaval in the postal market caused by electronic diversion and the last recession. Before enactment of the Postal Accountability and Enhancement Act of 2006 (PAEA, P.L.109-435), which established a front-loaded 10-year contribution schedule for reducing the unfunded retiree health care liability,  the U.S. Postal Service had been promising generous retirement health benefits to its workers without setting aside any money to pay the costs it would owe in future years;  the Service followed the pay-as-you-go approach, which means not funding promises when they are made but waiting until the bills later come due.. Because the Service was ignoring a very expensive fringe benefit in its income statement, its reported costs were artificially low and its reported income artificially high. The unfunded retiree health care obligation had mushroomed to $74.8 billion by September 30, 2006. The absence of pre-funding would reduce transparency, be unfair to future mail users, and almost certainly lead to a taxpayer bailout. The U.S. Postal Service is burdened with massive unfunded obligations for retiree health care: an estimated $46.2 billion at the end of 2011.

OPM estimated that if retiree health care financing had reverted to pay-as-you-go in 2010, the Postal Service’s pay-as-you-go expense would have been only $2.3 billion in 2010 but almost tripled to $6.4 billion by 2020. If PAEA had not moved toward pre-funding, insolvency and the need for a massive taxpayer bailout would be virtually inevitable for USPS, although that might not have become clear to the public for several more years because of pay-as-you-go’s lack of transparency.

Before going on, if you think $46.2 billion for the USPS is bad, think about how social security and Medicare under-funding of $41T. So let's review: USPS and its unions knew that people are living longer and that a large percentage of its workforce is Baby Boomers. Health care expenses for retirees are escalating not just because of increasing numbers and longer lives but inflationary cost pressures. What the USPS was doing before 2006 was failing to put enough funding aside. If retirees were retiring uniformly over time, health care costs were stable, retirement health costs had been explicitly set aside across a postal worker's career,  and USPS had a viable business model going forward, the story might be different. (And, of course, the unions knew there would be a day of reckoning: they failed to protect their members by ensuring adequate set-asides. Perhaps they were counting on the taxpayers bailing them out. I don't think so...)

So the federal government failed to hold USPS management accountable prior until PAEA for inadequately setting aside enough money for retirees. It's not like we can go back in time and retroactively get that money from past budgets: those are sunk costs. They have to come from ongoing and future revenues. It doesn't make a lot of sense to stretch out payments (something IRET suggests) if the first-class delivery revenue trend continues to drop. We need to get the unfunded liability reduced as much as possible by the postal customer, not the taxpayer. And, as I'm sure others have pointed out  (including CAGW), eliminating one day of delivery a week could cover a good chunk of the liability, and we could also reduce another chunk by eliminating the retiree health benefit for new/younger workers (only 1 in 7 private-sector workers have a comparable benefit; right now the public sector solution for those is Medicare enrollment).

Where do I stand? PRIVATIZE! PRIVATIZE! PRIVATIZE! As CAGW notes, "Finland, Great Britain, New Zealand, and Sweden have eliminated their government monopoly on mail service, and Germany and Holland have privatized their postal delivery services.  The U.S. would benefit from similar measures." The Constitutional post office provision has been an anachronism for decades as the US has a well-developed infrastructure of roads and other means of transport. The digital age has made first-class mail increasingly obsolete.

This concept of playing "Mother, may I" when it comes to closing military bases or post offices, regulating the costs of stamps, dictating uniform delivery costs, restricting package size, delivery times or 101 other things is a mess. You can't run a business with the Congress twisting one arm behind your back. What absolutely boggles the mind is how progressives, seeing how the federal government has mismanaged the simple  business of delivering mail, believe that it can manage health care for a nation...





Explaining the Creation of Original Quotes

• "The law is a balloon: when the target is squeezed, crime is displaced."
• "The law is a dam: it is as strong as the lawmaker's weakest assumption."
• "The law is Chinese whispers where justices have the final word."

One of my UH office mates, Bruce, knew that I had an interest in creative writing; I haven't heard from him in a while. He was a Rice University graduate and had multiple audit certifications (including CPA, internal and/or EDP); our other office mate, Minnie, also was a CPA. My best friend Tim from Catholic Newman, an accounting professor at USD, of course was a CPA, and my baby sister is a CPA. (And I'm sure a newly graduated nephew will soon be, if not already.)  I am the weakest link: I hold a mere 12 graduate hours of accounting.

Bruce has had a fascination with the Myers-Briggs Type Indicator, and we have different styles. (MBTI is based on Jung's typology. You can find an online battery here. For anyone interested in my type, click here and my career matches here (no, no, no--not the law!) I like being in the same group as Stephen Hawking, Madame Curie, William Buckley, Calvin Coolidge, JFK and Thomas Jefferson.  But Hillary Clinton, Mike Dukakis and Woodrow Wilson? I don't think so.... I think I better hire The Mentalist.) Some of the discussion is spot on. I'm also a Capricorn and left-handed. I will admit to a certain mischievous contrarian streak; I'm the kind of guy whom will walk under a ladder, break a mirror on purpose, step on a crack, talk to a pitcher throwing a no-hitter, etc.

Bruce was intrigued by my creative process and output: how does someone go about writing something like a short story? How do you decide what to put in, what to leave out? Like any great accountant, Bruce is very detail oriented. George HW Bush had a problem not getting that "vision" thing. Like Jesus, Bastiat and others, I have a knack for writing parables, fables, and/or other short stories. One of my unpublished short stories, for instance, involves a swerve on the take that Europeans came to the Americas in part to civilize the savages, to convert them to Christianity. (Remember the infamous swerve ending to the Twilight Zone episode "To Serve Man"?) Bruce attributed his relative difficulty in doing the same kinds of things to his different cognitive style.

To be honest, I can't explain the creative process, but I think most regular readers have seen it in action, e.g., my recent parody of the Fed Reserve ("The Fed Prints On") to Sonny Bono's "The Beat Goes On", my plays on words and ad libs. (Note: I think some of my funniest bits are right in the middle of a commentary, not just my Political Humor segment. Not many people can pull it off; I think the best politician at it was Bob Dole. I would do it in lecture all the time. (In part, I used it to check on whether the class was paying attention.) I often do it with a deadpan delivery. One never knows the reaction; I've had delayed reaction laughter, and I remember a company lunch when my mild-mannered Indian developer colleague couldn't stop laughing hysterically (I whispered to him what I would bring to the just-announced St. Patrick Day's potluck); this unnerved the HR person talking at the head of the table.

More seriously, when I started this segment I followed up yesterday's segment with my twists on law quotes with 3 new ones (above); there are a couple more I'm working on, but writing a poem or a quote is like being a sculptor with words. It's not a matter of trial-and-error; for example, I may focus on a word or theme and I'll suddenly see the pattern fall into place.

So let me explain 3 of yesterday's quotes; I haven't normally commented on my original quotes: it's almost like trying to explain a joke. If the reader reads other meanings to my quotes based on his or her own life experience, I'm okay with that.

• "Shame may restrain what law does not prohibit." - Seneca

What I believed Seneca was saying here was a point I was raising in discussions about regulations, in particular a progressive author's rigorous defense of Big Nanny meddling: e.g., unscrupulous meat producers putting rat feces in their sausages. So you need inspectors, etc. The implication is without a federal inspector, private sector sausage makers will take any and every opportunity to put disgusting things in their sausages. The point is that a verified public revelation of rat feces in a company's products in a competitive processed meats market might decimate a company's sales--without the government raising a finger to that end.

I contemplated the word "shame": if a company's products can be shameful, can't the law be shameful, too? Say, for instance, where in the purported interest of public safety, a TSA professional inappropriately touches an elderly woman or young children? What if SCOTUS actually believed  that the presumption is in favor of of the protection of individual's person and property from arbitrary searches by coercive government? It would be better not to make any such laws from the start:

• "What prohibits a law may restrain shame."

The second is a twist on one of Jesus' favorite metaphor: "By their fruit, you will know them". Jesus is clearly, from context, referring to the fate of men at the judgment after one's passing. It's not enough to say the right things: words are cheap. What have they actually done with the gift of their lives? Good deeds? Or self-serving ones?

One of the discussions here is that Jesus anticipates that the bad man will attempt to argue his way into heaven. One predictable approach is to argue that he fulfilled all the formal requirements of religious laws: he always went to church every week, he contributed to the church, etc. Now, in my take, I want to go beyond religious laws and talk about the law in general. Can we evaluate the law, just like we judge man? What makes for "good" versus "bad" law? Just like the evil man can argue that he may have done a wrong thing, but his intent, his heart was in the right place, can we apply the same critique to the law? Say, for example, we have progressive legislation intended to promote the welfare of poorer individuals (for instance, welfare payments) Now if we argue that progressive legislation is good, shouldn't it also contribute to the development of the virtuous man, e.g., self-reliance, hard work, etc.? Or does it involve moral hazard and contribute to one's undue dependence on other people? Does it corrupt the human spirit? Maybe if his stomach is full, the law has been successful, but that's not enough if in that process, we lose a fully contributing member of society. A full stomach is a tactical success; perpetuating failure or impeding moral development and independence is a strategic failure.

• "By the fruits of the law should you know it. Good law does not yield vice, and bad law does not yield virtue. If the law corrupts men, it should be repealed, condemned to the fire." (reflection on Matthew 7:16-23)

Finally, I have created a bear metaphor. (At last! I have written something Sarah Palin can relate to...) What I'm clearly wanting to say is that I consider lawmaking inherently troublesome: I know enough to be wary of unintended consequences, the hidden costs of bad laws. From what I understand, if confronted by a bear, you want to draw as little attention as possible; you certainly don't want to mess with cubs. I was initially thinking in terms of crony capitalists and other interest groups (e.g., unions, AARP, etc.) approaching legislators: they are equally dangerous. I didn't like the way the metaphor worked by having the special interests approach the bear's lair. So, what I did was focus on the aftermath. I'm subtly implying the mother is the crony interests, not a lawmaker: the symbolism of a lawmaker attacking voters doesn't work.

I hope that the reader picks up on the symbolism of the cubs: laws resulting from the morally corrupt relationships between lawmakers and crony interests. The "mother" is, of course, the vested cronies or interest groups which will do all they can to protect their corrupt gains. I use the term "prudent" (NOT "courageous" or even necessary) because the righteous man will surely be attacked if he attempts to approach the "cubs", i.e., repeal or reform the law. The last part is meant to suggest is the only time we can rest against the creation of bad law is when a legislature is not in session.

• "A lawmaker is like a bear emerging from his lair, and the wise man avoids his attention. The cubs may look harmless, but the prudent man keeps his distance: he knows that the mother is watching, even if he does not see her. The vigilant man waits to rest until the bears hibernate."

Musical Interlude: My Favorite Groups

Tom Petty & the Heartbreaker, "Learning to Fly"

Miscellany: 6/26/12

Quote of the Day  
Be wiser than other people if you can,
but do not tell them so.
Lord Chesterfield

My Original Quote of the Day for Obama

Here is the only Latin phrase Barack Obama understands:
"Ignorantia juris quod quisque scire tenetur non excusat."

My variation is:

Ignorance of the free market, which every politician is supposed to know, does not constitute an excuse.

Sorry, Obama: this doctor (of philosophy) will not write an excuse for your catastrophic failure as a President (in Name Only).

Solon reportedly had a saying, "Laws are like spiders' webs which, if anything small falls into them they ensnare it, but large things break through and escape." My twist on Solon (and Jonathan Swift):  "Laws are like cobwebs, which don't catch any spiders."

Here is a selected list of other law quotes that Obama never came across at Harvard Law School:

• "Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws." - Plato
• "A state is better governed which has few laws, and those laws strictly observed." - Rene Descartes
• "Law is often but the tyrant's will, and always so when it violates the right of an individual." - Thomas Jefferson
• "Good men must not obey the laws too much." - Ralph Waldo Emerson 
• "If you have ten thousand regulations you destroy all respect for the law." - Winston Churchill *
• "Shame may restrain what law does not prohibit." - Seneca *
• "The best way to get a bad law repealed is to enforce it strictly." - Abraham Lincoln *
• "To make laws that man cannot, and will not obey, serves to bring all laws into contempt."  - Elizabeth Cady Stanton
• "The law will never make men free; it is men who have got to make the law free." - Henry David Thoreau
• "We must not make a scarecrow of the law, Setting it up to fear the birds of prey, And let it keep one shape, till custom make it Their perch and not their terror" - William Shakespeare

* My reflective variations:

• "A lawmaker is like a bear emerging from his lair, and the wise man avoids his attention. The cubs may look harmless, but the prudent man keeps his distance: he knows that the mother is watching, even if he does not see her. The vigilant man waits to rest until the bears hibernate."
• "A lawyer is like a toll keeper: his vested interest is the existence of law, not its nature. A law is effective insofar as it yields a client, the state or individual."
• "The law is like an iceberg: we only see the tip. What sinks the ship is the government, the bureaucrats and the judges, beneath the surface."
• "By the fruits of the law should you know it. Good law does not yield vice, and bad law does not yield virtue. If the law corrupts men, it should be repealed, condemned to the fire." (reflection on Matthew 7:16-23)
• "If laws were sufficient, man would not require liberty, conscience or judgment. Thus, if the law is necessary, the first law must protect man's liberty, conscience, and judgment."
• "What prohibits a law may restrain shame."
• "The best way to get a bad law repealed is to expose its practical relevance."
• "Ignorance of the law is the salvation of any incumbent politician."

The Verdict on ObamaCare is Due Thursday
Mitt: Your Message Must Be
RESTORE HEALTH CARE TO A FREE MARKET

There is rampant speculation about what the Court is expected to announce Thursday. If there is a consensus, it seems that the controversial mandate is gone (indeed, it's very difficult to see where you draw any line otherwise to any government coercion of consumers: if nothing else, you could see the statists to load any mandatory purchases through any opening SCOTUS gives them, which would be the end of any meaningful concept of individual liberty). Some Obama loyalists hope that their post hoc rationalization of a penalty as a tax will stand. The penalty is a form of economic extortion by the federal government: if I can't afford a $10K/year health insurance policy, taking the penalty is a no-brainer. Believe me, it's only a matter of time before businesses realize with health care expenses out of control, a low, fixed tax penalty can help them control their costs. I think everyone is waiting to see which corporation takes the plunge first, but if and when it does, you are going to see a bandwagon effect. This alone will skyrocket health costs beyond the Democrats' wildest imaginations. I GUARANTEE this will happen. It will contract the private health care market, and federal subsidies will explode upwards.

There is a big problem here in the sense that state governments have traditionally regulated health insurance--and that has problems, too. The real economic problem here is that special interest groups can socialize costs on other Americans, and if the federal government (or state government) is allowed to mandate them, I have lost any ability I have through the marketplace to obtain a bare bones package. If the federal government had any role to play, it would be to facilitate, e.g., self-insured groups operating across states. What you really have here is progressivism run amok: instead of special interest groups having to lobby across 50 states, they get a central clearinghouse of benefits in which individuals and states have no say.

 But, strictly in terms of states' traditional regulation as part of its policing power, I see the flip result of what was just argued in terms of yesterday's Arizona SB 1070 decision. For example, the majority argued that a state couldn't make it a misdemeanor for an unauthorized alien to apply for work, because the federal government did not assign criminal penalties (just civil). So if, say, the emerging federal bureaucracy imposes new health benefits on top of state government's historical regulation, how does that not imply an unconstitutional primacy of the federal government over the state? The same thing holds true of the federal government unilaterally raising eligibility for Medicaid, which has traditionally been split with the states. The federal government's out is to say "all-or-nothing". That's not a choice: that's extortion. So, say, for instance, if a state's match rises to 130% of current costs: the federal government is saying to the states, you have a choice between assuming 30% more of your costs, or 100% more of your costs, because we'll no longer contribute anything.

In fact, health insurance is a perversion of the concept of insurance, and the federal government is responsible for the current mess. For example, I have to pay auto insurance with after-tax dollars, but the government subsidizes employer/employee health insurance by exempting the compensation in question from being taxable. Should we be surprised? I made the same type argument recently in looking at the real estate bubble, and we now have a health care bubble. Just like real estate, government policies have perverted this, in multiple ways: but the whole process of price-fixing in Medicare and Medicaid is a PERVERSION of the free market system. The 50% or so of the national health care pie paid by the federal government is perverse: what you really have here is sort of a wolf in sheep's clothing: the private sector cannot continue to subsidize an increasing national share of the pie paying below cost. You will end up with rationing, etc.; the private sector will melt away, leaving a single payer government system by default. Progressives know this: it's a stealth takeover by government bureaucrats.

I'm not going to rewrite what Ron Paul did in a brilliant essay today (if only somehow I could merge Ron Paul's political principles with Mitt Romney's business know how and administrative experience... I described myself the other day to a libertarian economist blogger as a pragmatic Ron Paul). Reading this short essay is experiencing an intellectual rapture: it's such a difference in listening to someone whom knows what he's talking about versus a pretentious know-nothing like the current President in Name Only.:

Supporters of Obamacare are willfully ignorant of basic economics. The fundamental problem with health care costs in America is that the doctor-patient relationship has been profoundly altered by third party interference. Absent [free market] pricing information, our system increasingly resembles socialist systems with centralized price setting, shortages, rationing, apathy and declining quality of care. As the situation deteriorates, fewer bright young people want to practice medicine and fewer foreign doctors seek to immigrate. Obamacare's third-party insurance mandate is only the first step toward what the political left really wants: a single payer government healthcare system.

In a free market, most Americans would pay cash for basic services and maintain inexpensive high-deductible insurance for catastrophic injury or illnesses only. Health insurance would be decoupled from employment, which would unleash entrepreneurs. Costs would plummet due to real competition among doctors, price sensitivity among patientsand elimination of enormous paperwork costs...Congress needs to let markets work by aggressively repealing healthcare laws, including: the HMO Act of 1973, the Medicare Part D prescription drug benefit passed in 2003 and the Obamacare bill passed in 2010. Furthermore, we must begin scaling back Medicare coverage

YES! YES! YES! Testify, my brother! (I've been watching too much pro wrestling...)



TSA: Tacky Shameless Arrogance

The interesting part of this Fox News Channel story is that the molested passenger, an ex-TSA agent who was traveling to attend the funeral of her brother (which she ended up missing), used to work with or for the supervisor. They had an adversarial history. After multiple inappropriate touches during the search, the former agent decided to return the favor. She, if anyone did, KNEW that wasn't prudent and wasn't going to end well.

I've mentioned a couple of times about the time I almost lost my flight because of a TSA screwup. When you get selected for a "random" search, there's a code on the boarding pass. As part of compliance, airline gate personnel are supposed to ensure that the boarding pass shows a TSA stamp that the screen was completed. I wasn't aware of the fact that the TSA agent who screened me was supposed to stamp my boarding pass but hadn't done so. An airline gate agent seemed almost proud of himself for catching the discrepancy, refused to let me board, and called TSA. The agent finally arrived to the gate, apparently in a foot race with a tortoise, while a stand-by passenger is trying to get the airline to book him into my seat.  When she started to repeat a full search--in front of everyone in the gated area--I protested. "Why do I have to go through a second search? Don't you people track who goes through the detailed searches? Can't you just double-check with someone in the screening area?" No, of course not. It's far more likely an obese man managed to sneak his way through security unnoticed. She simply said, "One more word, and we'll go back to the screening area to have it done."

It reminded me of how Clayton Williams, a Texas Republican "good old boy" shooting star who just obliterated his primary competition, blew his gubernatorial campaign against Ann Richards in 1990, despite beating her by 20 points in early polling. (I was on the UTEP faculty at the time.) "During the campaign, Williams publicly made a joke likening rape to bad weather, having quipped: "If it's inevitable, just relax and enjoy it"." [Joking about rape is brain-dead under any circumstances; when your general election opponent is strident Democrat feminist Ann (" Poor George [HW Bush]. He can't help it. He was born with a silver foot in his mouth.") Richards, it's like a political death wish.]

So I shut up and let the TSA agent have her way with me. The second scanning would only take a minute or two. It wasn't worth losing my flight over. But I didn't forget or forgive what happened.

I can't believe, when the evidence clearly shows someone--who had a history with the passenger--touched the passenger inappropriately multiple times, which in other circumstances would be considered criminal assault but doesn't even merit disciplinary action from TSA. These TSA agents are on a power trip and use un-American authoritarian tactics to intimidate the flying public. The TSA serves at the discretion of the people; the people are not subordinate to the TSA. It takes institutional chutzpah for an organization which engages in assaults as standard operating procedure to point fingers at customers engaging in justifiable self-defense. I feel for the defendant here; it's bad enough trying to cope with the loss of her brother but having to put up with the unprovoked, unnecessary, unprofessional behavior of a former supervisor whom she didn't get along with in the first place? If any judge or jury buys that the repeated unwanted touching was "accidental", there's a Bridge to Nowhere in Alaska I want to sell you...



For this second video, this is from the TSA website:

Passengers are allowed to carry a crematory container as part of their carry-on luggage, but the container must pass through the X-ray machine. Under no circumstances will an officer open the container even if the passenger requests this be done. 

From ABC News:

John Gross was leaving Florida with the remains of his grandfather  in a tightly sealed jar marked “Human Remains.” “They opened up my bag, and I told them, ‘Please, be careful. These are my grandpa’s ashes,’” Gross told the station. “She picked up the jar. She opened it up.” Gross said the TSA agent used her finger to sift through the ashes and accidentally spilled it.  He said one-third to one-half of the ashes spilled and that the agent laughed as he tried to gather what he could from the floor. “She didn’t apologize. She started laughing. I was on my hands and knees picking up bone fragments. I couldn’t pick up all, everything that was lost. I mean, there was a long line behind me.”

Let's go beyond the fact that TSA agent didn't know relevant rules or even have the common sense to ask for supervisory assistance in what was clearly a novel circumstance for her. What is obviously clear from her actions is that she didn't have a clue what she was doing, but her job was to inspect things, and so she was going through the motions of showing her supervisor (or others in the area) that she was doing due diligence by going through the late grandparent's ashes, bluffing as if she had any clue what she was looking for in a dead person's ashes and bone fragments. And the same thing goes for invasive searches in or around one's private areas. Not one American flight in decades of passenger traffic has ever been brought down by a bomb hidden in a catheter, an urn or a person's private areas. Most people doing these searches don't have the slightest idea what they're really looking for. Go back to Plato's quote at the head of the post: I guarantee if some bad person was trying to do something, he or she would be factoring in TSA's screening procedures. The one thing that's almost guaranteed is that unwanted offensive touching by TSA agents will occur multiple times daily through the system, and  the TSA agent at the drop of a hat will abuse whatever authority he or she has to portray the victim as the criminal!





Political Humor

A new survey found that only 30 percent of Americans are confident in the country’s public schools. It’s pretty bad — for my niece’s history final, they’re just taking the kids to see “Abraham Lincoln: Vampire Hunter.” - Jimmy Fallon

[That may explain why "Barack Obama: UBL Slayer" is opening early this fall.]

"Yesterday President Obama released a new commercial aimed at female voters. Which explains the commercial’s title, “Fifty Shades of Change.”" - Jimmy Fallon

[The other reelection ads in the "I Promise to Listen Better" campaign include "Michelle's Honey Do List for America", "I Still Remember Our First Vote", "Next Term Michelle Is in Charge of the Budget",  "The White House Toilet Seats Are Always Down", "I'm Asking You For Directions",  "You Get the Final Word This Election" and "I Was Wrong, and You Were Right".]

Musical Interlude: My Favorite Groups

Tom Petty & the Heartbreakers, "A Face in the Crowd"

Miscellany: 6/25/12

Quote of the Day 

I do not know which makes a man more conservative—
to know nothing but the present, 
or nothing but the past. 
John Maynard Keynes

Editorial Quote of the Day

President Obama is due in Durham today for yet another expensive campaign stop. It is by now a well-worn cliche to say that if he spent half as much time on the nation’s problems as he does on the campaign trail, we would be better off. But would we? More time campaigning does mean less time harming the country. This man has been an utter disaster for America. - Joseph W. McQuaid, UnionLeader.com

C'est vrai... D'accord! Or, as I might put it, Barack Obama isn't the solution to America's problems: he is one of America's problems. It's not just the fact that he's never really stopped campaigning these past 4 years in office: it's his total lack of leadership. 

And I knew it before he ever got elected (but nobody asked me): I took a particular interest in terms of how Obama took part during the 2007 immigration fight. He never was really involved in the detailed negotiations; it was like he was there just long enough for the photo ops. And then in the process of making a compromise, there's a code of honor: the Republican negotiators would stand by the concessions made to Democrats, and vice-versa. The immigration bill died when Democrats, aided by Obama's votes to kick out concessions (e.g., for temporary foreign worker programs, opposed by unions), killed the compromise. Even though the liberal lion Ted Kennedy stuck by the concessions (which should have given Obama all the political cover he needed), Obama didn't. I suspect it's because he was in the process of running for President, and he didn't want to risk alienating the unions on key votes.

Some people think that Obama is a "shrewd" politician: that's bunk. A shrewd politician would have moved quickly to divide-and-conquer by giving demoralized Republicans some meaningful face-saving concessions; if I had been in Obama's position, I would have worked quickly to deal with the Bush tax cuts. I would have attempted to co-opt the GOP talking points by passing a modest deficit reduction and earmark reform initiative, and I would certainly have embraced the Bowles-Simpson plan as political cover for dealing with entitlement reform. I would have put the time and effort in arm-twisting getting a highly symbolic goal like shutting Gitmo accomplished, and I would have expedited an exit from Iraq and Afghanistan.

But the same Obama, who confidently told former Congressman Marion Berry that the main reason the Democrats lost the House in 1994 was because it was Clinton, not him, in the White House, had his priorities: after criticizing the Bush Administration for deficits and raising the national debt ceiling, Obama has already added the only trillion-plus deficits in history and has already added more to the public debt than any President in US history (including Bush's two-term Presidency). He rammed two major, unpopular partisan "reform" packages down the throats of the opposition party, without a single bipartisan vote, unprecedented in American history. Obama went abroad with a highly unpopular blame America tour. Instead of taking responsibility with a Trumanesque "the buck stops here" attitude,  Obama dishonorably shifted the blame for his ineffective performance in an unprecedented manner at his predecessor and a vastly outnumbered political opposition and gave pathetic excuses for anemic, jobless economic growth at roughly a third of the rate of job growth in a typical recovery, with the lowest labor force participation rate in 3 decades. His anti-war supporters are demoralized, not to mention environmental allies without their climate change legislation, Latinos without immigration reform, or labor unions with the President MIA during their latest loss, the targeted recall election of Governor Scott Walker.

So now we have a President, with all the advantages of the incumbency, left with few concrete accomplishments on his primary objective, to improve the economy, reduced to little more than promoting a progressive policy wishlist which is all but dead on arrival with a likely GOP-controlled Congress next year, and few answers other than the same old same old neo-Keynesian super-spending at a time the credit rating agencies have already downgraded US Treasury debt. With employment still down by over 5 million since early 2008 of the Bush Presidency with millions more young people graduating or otherwise entering the labor force over the past 4 years with absolutely no new jobs created, Obama has few options to engaging in a fear-mongering campaign and launching a lame attack against Romney's job creation record in Massachusetts after its high tech economy was crushed during and after the Nasdaq stock bust. Obama's resorting to a negative campaign will almost certainly be a double-edged sword.

Sunday Talk Soup, Prosecutional Discretion, and Justice Scalia

I have only recently reviewed some of the more recent Sunday morning network shows. Although the Romney campaign has had some good moments, they aren't doing the kinds of things I want to see and do, and their message is muddled at point. As someone who has been forced to endure Maryland's feckless governor Martin O'Malley, these past 6 years, and now to see him pop up like a mole on all these Sunday morning shows, I sorely want to play whack a mole, but that piece of work is not worth my time and effort. (Maryland has been a big beneficiary of federal super-spending, and O'Malley has nothing to do with that.) The Maryland libertarian/conservative bench is so weak, I'm sorely tempted to enter politics myself. These progressive empty suits reciting their latest political spin wouldn't know what hit them--these commentaries aren't ghost-written; three-quarters of politicians have all the personality of a plate of leftover grits, including O'Malley.

Anyway, Martin O'Malley was going on in one of my pet peeves: false comparisons of Obama's economic record versus Bush's. I have knocked Debbie Wasserman Schultz for her similar abuse of pick-and-choose statistics. Bush's Presidency was book-ended by recessions: two asset busts, the 2000 Nasdaq meltdown (not to mention 9/11 and the financial scandals--i.e., Enron, Tyco, etc.), and of course all but the last 5 months of the 2007-2009 recession. The fact is that Bush lost way more jobs in his last year than Obama has gained since the bottom of job numbers, well after the recession formally ended in June 2009, the same numbers O'Malley is misrepresenting as Obama's record. (After all, he's counting the job losses at both ends of Bush, but none of the long string of job losses under Obama: as the Church Lady might say, "Isn't THAT special?") O'Malley is being intellectually dishonest, but is anyone really surprised?  Let's point out that Obama has had trivial (just above zero: NEGATIVE real interest rates when you factor in inflation) Fed funds rates HIS WHOLE PRESIDENCY: unprecedented in American history--not to mention TRILLIONS of additional dollars in super-spending, and this is the best Obama can do? Several million less jobs than Bush in January 2008--when the very same Obama was slamming Bush's poor economic record? So knock off the disingenuous political spin, you political hack!

I can't speak why the Romney campaign gives the absolute worst responses I've ever heard. I'm going to go after Ed Gillespie in a future commentary, but in a special preview, Chris Wallace asked Ed Gillespie about the differences between Bush and Romney on economics: one of the most PREDICTABLE questions I've ever heard. That's a fast ball down the middle of the plate: I have written several commentaries telling Romney to ATTACK the Bush/Obama record of overspending, regulation growth, military mission creep, etc. I want Romney to talk about the highest business tax marginal rates of any major country, I want him to talk about how Bush and Obama EXPANDED entitlements while their existing unfunded liabilities exceed $40T! I want to hear about streamlining redundancy government operations, while Bush was creating the largest bureaucracy (DHS) in human history. I want him to talk about how Bush expanded domestic expenditures the most since LBJ.

Instead, Gillespie starts talking about China and currency manipulation! IS HE CRAZY? If he was my campaign adviser, I would have fired him for cause on the spot. Some business models were already noncompetitive from a global standpoint; mercantilist policies only defer the day of reckoning and adversely affect consumers. Price-fixing is NEVER a good idea; if and when China undervalues its currency, it pays more for imported resources and components than it should, which adversely affects margins and creates unsustainable inflationary pressures, a particularly egregious hidden tax on the poor! But, and this is a point I've frequently made in this blog, China has been slowly raising its currency against the US dollar and Chinese imports have INCREASED over the past 5 or 6 years while American exports to China have SOARED. Got that, Romney? Not to mention if, say, China invests its dollars, say, helping to underwrite the US debt, this frees up other investment dollars for the local economy--which is GOOD for American businesses and jobs. Engaging in a trade war is a LOSE-LOSE proposition, and that's why demagoguery targeting China is especially dangerous and irresponsible. It may win votes of people whom don't understand economics, but it makes for very bad public policy. Romney needs to purge his campaign of this type of rhetoric; he doesn't need it to beat Obama. If, on the other hand, China decided to dump a trillion dollars of bonds on the market, the net effect could be soaring interest rates (i.e., plummeting bond prices), and an almost certain recession, unless the Fed intervened. But if the Fed released all that fiat money on the market, the dollar would probably steeply correct. (I don't think China would do that because they would be catching a falling knife on bond prices all the way down.)

I think I heard Romney or one of his surrogates questioned about the Obama "jobs plan", as in paying for teachers, police, and firefighters. Schieffer (Face the Nation) was probing into that. I have frequently commented on this issue: I've pointed out that money is fungible, there's an issue of moral hazard, and there are also dysfunctional public policies at play. (I'll give a couple of examples: teacher budgets have vastly expanded beyond school attendance increases since the 1970's, without zero to show for it in terms of improved student achievement. There are excessive overhead costs. Benefit costs (e.g., retirement pension and health systems) are unsustainable. All of these issues have to be confronted head on, sooner than later. Now in terms of police officers, a lot has to do with laws. For example, we could be spending a lot of time cracking down on victimless crimes like prostitution and marijuana busts. (Note that I am not an advocate of victimless crimes; I don't partake of either.)) I think the stock response has been, look, the President did the same thing in 2009, under the massive stimulus bill, and it didn't work (to juice the economy). That's correct, but if I was Romney, I would frame it in bigger picture terms: the opportunity costs of spending the same money much more effectively and efficiently in the private sector than in the public sector.

But I especially want to criticize Romney on what I thought was a weak, evasive question regard Obama's unlawful abuse of prosecutional discretion regarding unauthorized aliens. Schieffer (I believe in the June 10 FTN) repeatedly tried to pin Romney down on what he would do with Obama's directive if he became President. Romney immediately pointed out this was a blatantly political move (of course), since Obama could have done the Dream Act or immigration reform on favorable terms early in his Presidency if he had wanted to spend the political capital. This is, of course, true enough.

But my response would have been like this: "No, Bob: the President's directive is unconstitutional. He cannot pick and choose to enforce the law in ways that benefit his interest groups. I believe in the rule of law. I would administer and enforce the law as it is written, not how I think it should be written. I think that discretion is a tactical decision, not a strategic one: the President is trying to provide a sham rationalization to create his own laws: as Charles Krauthammer pointed out, it's lawlessness. I will work with Congress to come up with a fair, balanced approach to immigration reform, but I will not abuse my powers as President as this President has."

According to Politico (see SB1070 decision below):

Scalia asked whether states would have entered into the union had the Constitution included a clause enacting immigration laws but stipulating that the president had a choice on whether to enforce them. 

“To say, as the Court does, that Arizona contradicts federal law by enforcing immigration law that the president declines to enforce boggles the mind,” Scalia said.

“The husbanding of scarce enforcement resources can hardly be the justification for this,” he said of the new Department of Homeland Security directives, “since those resources will be eaten up by the considerable administrative cost of conducting the non-enforcement program, which will require as many as 1.4 million background checks and biennial rulings on requests for dispensation.”

I'm more curious by the nature of Justice Scalia's discussion here. I would have thought that he would have questioned the rule of law under a situation where the public administrators arbitrarily decide in advance what laws to enforce or which suspects they are going to process. There's a real question about the rule of law and equal protection under the law when discretion is raised to the point of policy. It becomes more like dereliction of duty and abuse of power. It's one thing if a police chief in a small town had to dedicate resources to investigate a rare murder, versus, say, writing tickets for jaywalking. But you don't know, as a matter of policy, you will have any murders but decide you aren't going to enforce jaywalking, even if you have police officers on the street at the time.

Then there's the issue of whether, because the federal government arbitrarily decides that it doesn't want to bother processing unauthorized aliens even if they've broken Arizona's laws. Arizona is unfairly having to pay costs for people that are here because of ineffectual border enforcement, the federal government's responsibility. The federal government should be required to reimburse Arizona for all costs associated with unauthorized immigrants or visitors. Arizona shouldn't have to being paying immigration costs, period. I personally think Arizona is engaging in moral hazard by requiring its officers to do what the federal government is failing to do.

SCOTUS Decision on Arizona SB1070: Thumbs UP!

This dispute reminds me in a way of a controversial topic in Christianity: the sacrament of the Eucharist. Jesus  is recorded in the Synoptic (non-John) Gospels and Pauline writings as instituting this memorial ritual at the Last Supper, taking bread and saying "This is my body" and then taking a cup of wine and saying "This is my blood". There is little doubt where how the early Christians understood the sacrament: Romans used it to accuse them of cannibalism.

I won't go into the doctrinal disputes over the celebration of the Eucharist here, except to note that Martin Luther and other early Protestants, after their schism from Roman Catholicism, disputed whether the Eucharistic was the Real Presence of Christ or merely symbolic. Luther, a former priest, had this to say: "[S]ince we are confronted by God’s words, “This is my body” – distinct, clear, common, definite words, which certainly are no trope, either in Scripture or in any language – we must embrace them with faith . . . not as hairsplitting sophistry dictates but as God says them for us, we must repeat these words after him and hold to them."

In a similar way, as a conservative, I believe in federalism, including traditional policing powers of states, against a subordination of states to a stealth increasingly powerful federal government. I also believe in the US Constitution. I argue, just like Luther might, Article 1 specifies "distinct, clear, common, definite words, which certainly are no trope, not as hairsplitting sophistry dictates."

And the US Constitution unambiguously establishes the primacy of the federal government when it comes to border protection and immigration (Article 1, Section 8, Clause 4): "The Congress shall have Power To establish an uniform Rule of Naturalization." I think this is also clearly implied from Section 10, Clause 3: "No State shall enter into any Agreement or Compact with a foreign Power." Although the Constitution doesn't flesh out the details, e.g., of the regulation of foreign visitors and immigration,  it's clearly implied: if, say, Arizona did have an immigration policy, it would imply that Arizona had the authority to engage in diplomacy with foreign powers or that its immigration policy could differ from and/or trump the plain-word Congressional "uniform rule of naturalization".

SCOTUS reviewed 4 provisions

The District Court issued a preliminary injunction preventing four of its provisions from taking effect.  Section 3 makes failure to comply with federal alien-registration requirements a state misdemeanor; §5(C) makes it a misdemeanor for an unauthorized alien to seek or engage
in work in the State; §6 authorizes state and local officers to arrest without a warrant a person “the officer has probable cause to believe . . . has committed any public offense that makes the person removable from the United States”; and §2(B) requires officers conducting a stop, detention, or arrest to make efforts, in some circumstances, to verify the person’s immigration status with the Federal Government. The Ninth Circuit affirmed.

The  Supreme Court upheld the district court judgment in the first 3 provisions: it held that Section 3 is a federal, not state-shared process; Section 5C imposes a criminal penalty versus a federal civil violation; and Section 6 preempts the federal government's discretion on how to handle any relevant arrest of an unauthorized person (e.g., directly or with the assistance of local/state police).

On the other hand, the Court reversed the lower court judgments on Section 2B. Local/state law enforcement can check for immigration status provided it's in the context of the performance of duty checking a person's identify and no state drivers license and/or ID is available. This was controversial since Obama and Holder presumptuously regard  the law as a rationalization for "racial profiling", e.g., stopping a motorist for no apparent reason other than the fact he looks Latino. The justices correctly point out that this is merely part of the information gathering process of how state/local authorities augment federal personnel (e.g., the Border Patrol).

DHS Suspends Immigration Agreements with Arizona: 
Thumbs DOWN!

In the wake of SCOTUS' mixed ruling on Arizona SB1070, DHS is not only enforcing Obama's lawless abuse of prosecutional discretion but essentially thumbing its nose at SCOTUS, which confirmed that Arizona did have the right to improve internal procedures in gathering information about possible unauthorized aliens as a subordinate partner to federal enforcement endeavors. DHS says even if gets a higher volume because of tightened procedures in Arizona, it has no plans to add to its own Arizona staff:

The Obama administration said Monday it is suspending existing agreements with Arizona police over enforcement of federal immigration laws, and said it has issued a directive telling federal authorities to decline many of the calls reporting illegal immigrants that the Homeland Security Department may get from Arizona police.

Administration officials, speaking on condition they not be named, told reporters they expect to see an increase in the number of calls they get from Arizona police — but that won’t change President Obama’s decision to limit whom the government actually tries to detain and deport.

“We will not be issuing detainers on individuals unless they clearly meet our defined priorities,” one official said in a telephone briefing.

Follow-Up Odds and Ends

• Miscellany: 6/17/12: Citizens United vs. FEC: Another Commentary. I referenced a George Will column noting that Montana's Supreme Court defiantly upheld state restrictions on political speech (campaign finance). Political speech is an enumerated right and manifestly applicable to states under the Fourteenth Amendment; it was inevitable that SCOTUS would reject this. Thumbs UP! I read this more as a desperate 'Hail Mary' pass, trying to get the same majority of SCOTUS to reverse itself. The political left is conceptually muddled with their conspiracy theories: crony capitalists are politically agnostic. They want to cuddle up to anyone whom is in power and if anything they will hedge their bets. However, it is possible that individuals and businesses could support the political right, not because they want special privileges, but because more government intervention makes it difficult to operate and grow.

From the CNN News Blog this morning: "[Updated at 10:08 a.m. ET] The court has thrown out a Montana state ruling on limiting spending in state elections, by saying it believes the historic Citizens United case applies to state elections as well. The court will not hear oral arguments on the case."

Musical Interlude: My Favorite Groups

Tom Petty & the Heartbreakers, "Runnin' Down a Dream"

Miscellany: 6/24/12

Quote of the Day
Let there be spaces in your togetherness.
Kahlil Gibran

Pass the Russia PTNR NOW!

Russia, with the seventh largest economy in the world, is joining the WTO this summer. There are 5 critical aspects to WTO: non-discrimination; reciprocity; arbitration of trade disputes; transparency; and recognized exceptions to the rules. Non-discrimination (excluding tariffs) includes Most Favored Nation and national treatment. We can think of MFN policies as the trade deal equivalent to low price guarantees. Naturally all countries want to export goods, access to other countries' markets. Suppose Germany, which traditionally allows each country a quota of (say) 500 widgets in Germany, agrees to allow France to sell 1000 widgets. Then it would have to make the same deal available to other WTO members, e.g., Japan. National treatment addresses incidental barriers to foreign product competition.

The Congress this summer is considering Russia Permanent Normal Trade Relations; I'm glad to see that Chairman Max Baucus (D-MT) is pushing for passage, but I have generally two major criticisms of his approach. First, he's using American jobs (and related issues, e.g., enforcement of US intellectual property rights) as the carrot. Second, he's addressing issues of human rights issues involving certain Soviet or Russian  citizens or current foreign policy differences.

First, Adam Smith's salient text is The Wealth of Nations, not The Jobs of Nations. Jobs are created in the pursuit of wealth; you grow wealth by developing and producing existing or innovative goods and services that consumers want to buy at attractive prices. That often entails taking on risk. All things being equal, consumers are better off with an abundance of competitive offerings; low prices generally attract more consumers. Low prices allow the consumer to stretch his purchasing dollar: it leaves him better off. I understand that Baucus wants to focus on the export part of the ledger, but he forgets that free trade (or at least improved trade) is a win-win proposition: it may well be that certain Russian-produced goods or services have a comparative advantage over their American counterparts. Just to provide a minor example: it may be there are Russian American producers of popular Russian products (say, dolls, vodka or caviar). The market size in the US is limited, but Russian producers may have relevant economies of scale enabling them to pass along the savings to American consumers. Always remember Bastiat's sage advice (below).

Second, although I have concerns about alleged human rights abuses and Russian foreign policy, I don't think it's ever prudent to grandstand and engage in morally superior and condescending talking points.  All this does is ramp up counterproductive finger-pointing (e.g., Russians may point out disproportionately large numbers of young males of color in American prisons or rising suicide rates among former homeowners evicted from their homes in the aftermath of the 2008 economic tsunami). What is this all about? America thinks that it's doing Russia a favor by getting American exporters improved access to the Russian consumer market? Come on, demagogues! When you shoot down a win-win trade accord, you're really shooting yourself in the foot. I strongly believe that improved trade ties are constructive steps forward towards global peace.

President Obama, after we get this done, I would like to see you follow this up with a free trade pact with Russia.

Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.  -  Frédéric Bastiat

Yes, I know the USSR reference is dated, but I wanted a pretext to
embed a great Beatles tune; I love the Beach Boys/Chuck Berry-like fusion



It's NOT the Banks: It's the Government
Failed Social Liberalism Is At Fault

I have not been a homeowner. But some of the stories are heartbreaking (HT Douglas French). According to KLAS-TV in Las Vegas (my edits; see embedded video below and here for more videos and statistics):

For more than 20 straight years, Nevada grew faster than any other state. Las Vegas led the nation in unemployment. In just one year, 25,000 personal bankruptcies were filed. Business bankruptcies increased 170 percent after 2008.  Since 2008, more than 75,000 homes in Clark County have been foreclosed. Twenty thousand local families were evicted from their homes in a single year. Another 20,000 had to escape their mortgages through short sales. The number of homeless on the streets increased 40 percent. Nevadans on Medicaid jumped 66 percent since 2007. The demand for public assistance tripled. The number asking for food assistance exploded by 169 percent since 2007.

As of June [2011], more than 63 percent of homes were underwater, meaning nearly 270,000 [Las Vegas area] local homeowners owe more than their homes are worth. They are upside down by a collective $14 billion dollars. Up to 6 percent of local houses and 11 percent of apartments are vacant.  Banks have made it worse by failing to maintain the foreclosed homes, allowing entire neighborhoods to become islands of neglect. Southern Highlands is one of the valley's most prestigious addresses. The McSwain home was purchased for well more than $1 million but is worth about a quarter of that now. Laura McSwain estimates 60 percent of the homeowners on her street have walked away. 

"We were counting the effect this economy has on people and it is literally killing them," said attorney Tisha Black. "We counted 29 suicides that we know of." The shame of losing their home led Mr. and Mrs. Jeff Lingle out to the desert, where they took their own lives. Police found their bodies and a gut-wrenching note. 

Barack Obama, the Pied Piper of Failed Liberalism (my originally coined phase since the early days of the blog nearly 4 years ago), wants to blame this all on laissez-faire economics; but let's point out that the Federal Reserve was responsible for loose money policies, and many of these mortgage notes got purchased  by the GSE's (Fannie Mae and Freddie Mac), implicitly backed by the American taxpayer. The federal government has subsidized (unlike a number of other countries) home purchases in various ways: interest paid deductibles  for income tax, home sales capital gains exemptions under certain conditions, etc. You can also note CRA policies that encouraged bankers to lend to riskier groups and policies that made money available to people without a conventional down payment. We have government guarantees all over banking, including savers' deposits. We had a historically high home ownership percentage at a time home prices are outstripping wage gains and a sluggish economy. It's not like the Fed or the mortgage bankers weren't aware of a real estate cycle.

Let's point out it was the Dems whom established the Federal Reserve, felt a need to "fix" the banking system nearly a generation later,  fed the taxpayers' exposure to the mortgage market through the GSE's from under 10% in the 1960's to nearly half overall, and pressured bankers to make loans to politically favored interest groups.

Steve Hanke starts off his CATO Institute paper "The Great 18-Year Real Estate Cycle" with this observation: "In his formal paper, "Monetary Policy and the Housing Bubble," Chairman Bernanke argues that the Fed's monetary policy was not responsible for the U.S. housing bubble. He claims that faulty regulation was the primary culprit."

I have to say this much about Bernanke: at least he has the intellectual integrity not to blame the issue on laissez-faire banking! I'm sure Helicopter Ben is getting details ready for the Fed's centennial birthday next year, but Hanke points out that while the Fed's inflation statistics during the bubble seemed to be reassuring, housing prices, stocks, and commodities were soaring. But how well known is the 18-year cycle? Hanke tells us "Prof. Fred Foldvary wrote in 1997: "the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war."

And the Fed is still trying to manipulate the economy: they hope to encourage investors to make higher risk investments (like stocks and corporate bonds) and hence invest in the economy by making Treasuries a less profitable or attractive alternative. But as others have pointed out, by telegraphing holding interest rates very low, the Fed is actually being counterproductive, because investors or companies feel that they have time to wait in making the decision to borrow at historically low rates. And price-fixing almost never ends well. Artificially low savings rates are like borrowing from Peter to pay Paul, e.g., pulling future purchases into the present: you would have thought that social liberals learned their lessons from the Cash for Clunkers program! (We can think of savings as future consumption: penny-wise, pound-foolish) This may make it harder to sustain demand in future periods.

Progressives DON'T draw the right lessons: after the 2008 tsunami, what did they seek to reform? The GSE's whom have been loaned almost $200B, returned a mere fraction to date, the auto makers (with taxpayers still deep in the red, but Obama thinks is a prime reason to reelect him for "saving" the auto industry at their expense!). When they do do "financial reform", they try to implement a new variation of "too big to fail" versus actually letting bad banks fail! 


Paul Krugman (references from Enron available on request) had this to say in "Why We Regulate", seizing on the recent JP Morgan Chase issue (a $2B loss in which the bank was actually trying to hedge itself against risks; note that in the first quarter alone the company made over $5B):

But banks are special, because the risks they take are borne, in large part, by taxpayers and the economy as a whole. Why, exactly, are banks special? Because history tells us that banking is and always has been subject to occasional destructive “panics,” which can wreak havoc with the economy as a whole. Current right-wing mythology has it that bad banking is always the result of government intervention, whether from the Federal Reserve or meddling liberals in Congress. In fact, however, Gilded Age America — a land with minimal government and no Fed — was subject to panics roughly once every six years. And some of these panics inflicted major economic losses.

Steve Horwitz, in "Krugman's Misreading of US Banking History", makes a compelling case that Krugman is wrong:

What Krugman calls the “right-wing mythology” is largely correct: government intervention is responsible for the systematic problems with the US banking system. The federal and state governments played a huge role in the banking industry [during] what he calls “Gilded Age America”. The two most relevant regulations were: 1) the prohibition on interstate banking, which created overly small and undiversified banks that were highly prone to failure; and 2) the requirement that federally chartered banks back their currency with purchases of US government bonds, which made it prohibitively expensive to issue more currency when the demand rose. Banks during the Great Depression were hardly unregulated, and those bank failures happened after the creation of the Fed. If free markets in banking are the problem, why did Canada, which, during this period, had a far less regulated banking system than the US, not experience the panics we did, and why did no Canadian banks fail during the Great Depression while around 9000 US banks did?

IPPON! By the way, speaking of diversification, every MBA student has to take a managerial finance course  which includes a discussion of the importance of diversified portfolios; every business and economics student knows about economies of scale. Most businesses want to diversify their products and services: consider, for instance, a one trick pony pharmaceutical which finds itself coming off patent or facing competitive offerings by larger companies in final stages of FDA approval....


Let me close with relevant quotes from a Washington Post article in October 2008, entitled "Worldwide Financial Crisis Largely Bypasses Canada":

Canadian banks have not gone shaky like their American counterparts, economists and other experts said. There is no subprime mortgage or home foreclosure mess. Experts here note that Canadian banks are more tightly regulated, more liquid and less highly leveraged. 

According to the Canadian Banking Association, one reason for the system's solidity is that banks are national in scope. Each of the largest five institutions has branches in all 10 Canadian provinces, meaning they are less susceptible to regional downturns and they can move capital from region to region, as needed. "As far as I am aware, no American bank has branches in all 50 states," banking association spokesman Andrew Addison wrote in an e-mail.

By Canadian law, any mortgage that will finance more than 80 percent of the price of a home must be insured. Defaulting on a loan is also more difficult in Canada than the United States, Gregory said. "You can't just drop off the keys and walk away." Another difference is that in Canada, mortgage interest is not tax-deductible, making it harder to buy a house. 

Musical Interlude: My Favorite Groups

Tom Petty & the Heartbreakers, "I Won't Back Down"