Miscellany: 7/10/12

Quote of the Day
What's the earth 
With all its art, verse, music, worth
Compared with 
love, found, gained, and kept?
Robert Browning

An Inconvenient Quote for Barack Obama

Let us not seek the Republican answer or the Democratic answer, but the right answer. Let us not seek to fix the blame for the past. Let us accept our own responsibility for the future. - John F. Kennedy

Poor Barack; he can't help it. He was born under the JFK Administration, but all this stuff about cutting taxes for high income earners and "ask not what your country can do for you".

It's so unfair--I mean, you run for President for 2 years, you criticize President Bush for running up deficits, raising the debt ceiling, invoking executive privilege, and his handling the economy (at the time unemployment was nearly half of what it is now, several million more were employed, economic growth much higher, the deficit nearly a tenth, employment and federal tax revenues were at record highs)... All we hear are excuses of how difficult the problems he inherited were (not that the Democrats had a hand in expanding the GSE's and the implicit federal guarantees of the securities they sold, establishing crony bank relationships (e.g., the Fed) propping up the housing bubble or shaping banking regulations MULTIPLE TIMES over the past century,  or pressuring lenders to underwrite mortgages for political, not risk-based factors). It's not like Reagan inherited a 20% interest rate or George W. Bush inherited the aftermath of the Nasdaq market crash, 9/11 and the financial scandals...

The economic tsunami was the result of phantom social Darwinism, laissez faire economic policies of George W. Bush (let's not talk about Bush's nearly doubling the federal deficit, expanding Medicare, creating DHS, slapping on protectionist steel tariffs and expanding domestic spending and business regulations (e.g., Sarbanes-Oxley)). It's the fault of "obstructionist" Republicans (like born-again Democrat Arlen Specter) and the handful of legitimate Tea Party Republicans in Congress (whom couldn't even derail the Patriot Act).

Yes, indeed, such is the record of the most divisive President since Richard Nixon, a man whom 4 years ago promised millions of American youth a "post-partisan", "transparent" government--before in an unprecedented fashion ramming major health care and financial reforms down the opposition's throats, without a single vote (not obstructionism: pure hardball politics; he had the votes and didn't feel the need to compromise and deliberately forced partisan bills into law).

ObamaCare Ruling: Some Relevant Editorials

Not being a lawyer, I looked at Chief Justice John Roberts' idiosyncratic opinion from a logical, principled approach. For example, if all it took to make inactivity (e.g., like failing to purchase today's morphed version of health "insurance" (really bundled services)) mandatory was a penalty, where do you draw the line at inactivity? I came across other conservatives making the same point: for example, one asked, does this mean I can now be "taxed" if the Congress, in its infinite wisdom (?), decided to mandate the purchase of, say, life insurance. (I can already see the Big Insurance agents nodding their heads vigorously...)

Other conservative writers try to defends Roberts on other grounds. For instance, one could argue that we shouldn't legislate from the courts, so Roberts was looking for a way to sustain the will of Congress, but this is a real stretch. For one thing, the primary role of the Court is to protect the individual from the arbitrary actions of others. The Congress could have acted from the original intent of interstate commerce regulation, i.e., to promote a free market across the states, including allowing a critical mass of insurable households across statelines to join together and self-insure. They could have made tax incentives (which sometimes amount to as much as half of the cost of health insurance) available to uninsured households.

No, John Roberts failed, with good reason, to woo conservative members of SCOTUS: you do not respect the legislature by essentially rewriting the legislation into a more constitutional form. The time to think about a constitutional form is in the design of legislation itself. John Roberts, in fact, became the activist justice that he thought that he was trying to avoid.

The immediate takeaways I get from the following discussions are:

• Justice Roberts' version of the mandate penalty as a tax begs the question: what type of enumerated taxing authority is this? As Justice Ginsburg essentially pointed out at the hearings, if everyone bought insurance, government would collect no revenue. (I also think logically there's an equal protection problem here: the few are taxed at the expense of the many without any concomitant transaction. On the other hand, one could pay a consumption tax on a la carte medical services.)
• One of the points I raised was something Justice Roberts addressed in his opinion: I raised the point that the progressives could try to make the tax the de facto equivalent of health insurance premiums. Roberts did explicitly reject that notion, indicating it would be coercive (no kidding!) So you can have a penalty, but not too big a penalty (and so the rub is: what is the Goldilocks "just right" penalty?) I have a feeling that Justice Roberts would respond in a manner similar to how Justice Potter Stewart once famously defined porn: "I know it when I see it."... All of this, of course, is an artifact of progressives obsessed with controlling the behavior of other people and wanting "bad" people to be punished for not doing what they want them to do, like picking winners and losers in the economy. (For example, tax the oil companies to fund green energy boondoggles.) It would be far more effective to give people a reason to buy health insurance, e.g., making "equal protection" tax credits available to people having to purchase insurance with after-tax dollars. Of course, if everyone is buying health services, what's the point of giving everyone a tax break? They have to make up any necessary tax revenue through other means...

Roger Pilon / Cato Institute, "First Thoughts on the ObamaCare Ruling"


Ilya Shapiro / Cato Institute, "Did ObamaCare Ruling Unleash a Taxing Leviathan?"


A Race for the Cure... of Government Sclerosis

Any regular reader knows that I love quotes (in fact, I have a blog webpage of original blog quotes). Here are just a few relevant ones:

• Problems cannot be solved at the same level of awareness that created them. - Albert Einstein
• The biggest problem in the world could have been solved when it was small. - Wittier Bynner
• If you tell people where to go, but not how to get there, you'll be amazed at the results.- Gen. George Patton
• It is well known that "problem avoidance" is an important part of problem solving. Instead of solving the problem you go upstream and alter the system so that the problem does not occur in the first place.- Edward de Bono
• It isn't that they can't see the solution. It's that they can't see the problem.- G. K. Chesterton
• Plurality should not be assumed without necessity. - William of Ockham

Mark J. Perry of Carpe Diem noted via CNN Money a little-noticed action last week, involving FDA approval of a home-administered saliva-based HIV test (reportedly under $60). Despite the fact that the propagation of HIV might be significantly affected by making such a test available sooner than later, it took the FDA 24 years to finally approve one.

Question: why is it easier and cheaper for addicts to purchase health-threatening hard drugs in almost any large city than for sexually-active people to get a reliable, confidential HIV test approved by the FDA? The test doesn't risk the purchaser's health....

Still, like most libertarians, I despair of Einstein's quote above in a political context: politicians can't help themselves. They think they are not doing their jobs if they're not further intervening in the affairs of the free market. Chesterton is prescient: the Democrats say "don't worry: be happy" when confronted with over $40T in unfunded entitlement liabilities. And, of course, what would the Democrats do with General Patton? Instead of micromanaging details, any of which obstructs a possible solution. What would Thomas Jefferson, the anti-national bank founder of the early version of the Democratic Party today seeing the Fed Reserve running amok, his party followers implementing a variation of too-big-to-fail banks or fining people for not buying gold-plated health services? The time to ensure limited government is to keep it spare from the get-go, not growing inevitably every year like rings about the tree trunk...

Even the "repeal & replace" Republicans are annoying me. We don't need more of the same government meddling: we need restoration of a legitimate free market in health care. The world's fastest runner cannot set records running through a government maze; yet that is what megalomaniac economic fascists do everyday intervening between a patient and his doctor...

Dishonorable Obama Campaign Tactics

It is only natural that a failing President, with nothing to show from 3 years of the most anemic jobless economic recovery in decades, including a vast expansion in the structurally long-term unemployed, would be defensive in going up against a successful business executive whom has dealt with new and struggling business clients during expansions and recessions.

What is clear is that Obama's policy mix of unprecedented trillion dollar deficits, massive new health care and financial laws and regulations, picking winners and losers in the economy, and tax hikes for only the most economically successful hasn't worked, despite record low Fed Reserve interest rates all his term. He doesn't have any new answers for the second term; in fact, he's gone back to recycling bad ideas from the first stimulus, e.g., the morally hazardous state/local bailouts, dressed up in politically popular public safety and teacher job funding.

So he has to resort to the nonstop divisive campaign rhetoric he's been saying for the last 6 years. Mitt Romney in many ways represents an interesting contrast: he is a multi-millionaire, one of the upper 1% Obama has been attacking since his election to the Senate. As the CEO of a private equity firm, Romney's 25 years of business executive experience provides dozens or hundreds of client companies, and all of these have been scrutinized for any and all possible political embarrassments: plant closures, failed clients, lucrative fees, bankruptcies, etc. The same holds for Romney's single term as Massachusetts governor, when he inherited a high tech-oriented economy still reeling from the Nasdaq meltdown.

The first general point I want to make is that the Obama campaign is making a lot of disingenuous arguments about Romney's record. Private equity firms exist to make a profit, and they are dealing with new and existing businesses with a lot of risk. In Romney's case, he wasn't simply babysitting a business; he was implementing Bain's methodology. Some factors were beyond Bain's ability to control, like trying to build a paper business while the industry sector was eroding in the face of the digital world.

In reviving a failing business you have to reduce costs; the nature and extent of those costs are context-specific. Quite often, a company's products and services are facing domestic or global competitors with a more streamlined cost structure, including, yes, employees. But it can also apply to parts, raw materials, etc.

I simply want to introduce the concept of outsourcing which can, but does not necessarily mean. offshoring. For example, I worked for an IBM subsidiary that served to host ERP databases using Oracle's E-Business Suite applications. Many client companies are smaller shops where people can wear multiple hats. Many of the client DBA's are overutilized, and projects slip. A year or two ago I interviewed with a company that was using a remote DBA service like a metered utility service to supplement his internal DBA. He wanted to bring on a second DBA to consolidate control (and there was now enough work). But in many budgets a decision to bring in a new salaried worker is significant.

Going back to IBM, some workers were American (like me): we handled peak (normal business hour) schedules for multiple clients, databases and servers. We had a team of Unix system administrators, even a small group of DBA's whom did nothing but backups. We also had a team of less-experienced DBA's in Bangalore, India whom during off-peak hours handled some routine maintenance activities like applying Oracle software patches. Our clients never could afford the staffing on their own to do the same thing; because of our economies of scales spreading costs across clients, we could do it better, faster, and cheaper than they could on their own.

The Obama campaign critique which focuses on a couple of companies involved in outsourcing and more specifically offshoring (and a veto Romney made involving a legislature attempt to demagogue against a Massachusetts vendor, Citicorp, with an Indian call center operation). Offshore operations have their own benefits and problems, beyond the scope of this post, but American business expand internationally (something Obama is engaging in counterproductive protectionist rhetoric over) for a variety of reasons (e.g., currency fluctuations, logistics (transportation) costs, resources, knowledge of the local market, etc.), not just to save a few bucks on, say, an Indian call center analyst.

We have the law of comparative advantage: some countries may produce certain goods or services more efficiently than we can. For us to reject the fact that some things (e.g., sugar) can be produced more efficiently elsewhere (say, Cuba)  is foolish. The US government artificially raises the price of domestically available sugar, which is good for protected sugar growers, say in Florida, Colorado or the Dakotas, but lousy for sugar consumers (citizens, bakeries, etc.) It's like a tax that unduly shrinks our discretionary income. There are other goods and services we could buy if the government wasn't intervening: those goods and services support jobs, too. As a consumer, I want to stretch my dollars as much as I can; that's the free market. The Democrats want to hold onto jobs that are already being phased out. It could be, for example, that a local company purchases a software product that enables the company to service the same number of calls by 4 versus 5 support analysts. What is Obama going to do? Demagogue against ATM's because they take the jobs of bank tellers? Holding onto obsolete costs--which the Democrats and unions want to do--is futile: with a high cost structure, you can't compete domestically or globally. Business sells fewer goods and services at higher prices. If other companies, say, in England, have no problems using Indian call centers, that can create a competitive advantage to customers across the globe.

So, in any event, the Obama campaign is trying to suggest that Romney is going to be the Outsourcer-in-Chief. No, unlike Obama, Romney has no interest in meddling in the affairs of businesses. His ability to create jobs is indirect; what he can do is to stop competing with business for investment dollars to finance massive deficits. What he can do is to attempt to reduce economic uncertainty with massive government interventions in the economy. He can recommend to cut a globally noncompetitive business tax bracket. If he can simplify loosen the regulatory straitjacket, he will make this country a desirable location for foreign corporations to invest in...

Transcript via Daily Kos:

What a president believes matters.

Mitt Romney’s companies were pioneers in outsourcing US jobs to low-wage countries. He supports tax breaks for companies that ship jobs overseas.

President Obama believes in insourcing. He fought to save the US auto industry. And favors tax cuts for companies that bring jobs home.

Outsourcing versus insourcing.

I’m Barack Obama and I approve this message.

I'm Ronald A. Guillemette, and I reject this message.

What a president believe DOES matter: Does he believe in the unalienable rights of the individual life, liberty and property? Does he believe in self-reliance, initiative, hard work, responsibility, and the right to be left alone? Does he believe in free markets and free trade?

Or does he believe that Big Government Knows Best, on the unfettered subjugation of the individual to arbitrary authority, in the undue dependency of the individual on the government in major economic matters,  in intervening in individual or business internal affairs, of picking winners and losers in the marketplace or among groups of people,  in the unbounded promulgation of a vast labyrinth of unknowable, hopelessly convoluted, nuanced, unnecessary, unaccountable rules and regulations that sap economic growth and are extraordinarily expensive, ineffective, and arbitrarily enforced?

The Obama Administration and reelection campaign are grossly incompetent on business and economic matters and are knowingly engaging in deliberate distortion, having been rebuked by independent observers like the Washington Post Fact Checker ("The Obama campaign is resorting to old tricks and ignoring our previous rulings...misleading claims.") and FactCheck.org ("Some of the claims in the ads are untrue, and others are thinly supported.")

Where do we start here? American companies exist in a global economy; they lead by bringing innovation and efficiency to their products and services at low prices. Early America had a largely agrarian economy; today's farms not only employ just 2% of American workers but Americans pay one of the lowest household income percentages for food in the world (just under 7% household income overall) and we are a leading global exporter of food. In large part, the need for farm labor decreased with ongoing improvements in agricultural technology.

Businesses hire people because it is profitable to do so; if and when business face  adverse market conditions (say, a competitor has introduced products or services at a significantly lower price), they have to adjust; maybe instead of manufacturing a component internally, they can buy the same out of Italy at two-thirds the price. Maybe they can retrain relevant workers for other company vacancies, but the businesses are NOT a charity.  Maybe as the economy rebounds, they'll sell more widgets and need additional labor, say, to start a second or third shift.

US jobs are dynamic in nature; thirty years ago, there weren't webmasters or a variety of other careers related to, say, nanotechnology; a number of people worked as telephone operators. The problem is that Obama and his crony union supporters want to intervene and make it difficult for businesses to adjust to rapidly changing conditions. This is counterproductive. Businesses don't layoff workers because they want to. They need to wring costs out of their structure to compete and grow the business. If and when the business grows, job creation will occur organically.

The rest of the commercial is rubbish as usual. Romney is advocating a territorial tax system, something I've advocated in this blog. Obama is in a state of denial. Nearly four years into his presidency, while even Japan (which used to have the highest brackets) undercut the US' rates, Obama has done NOTHING to make businesses more competitive: there are REASONS companies don't expand more in America--it has some of the highest regulatory regimes in the world. It has high taxes.  We have eroded on a number of dimensions as one of the top 10 countries to do business in during the Obama Presidency. Instead of addressing those issues, Obama is engaging in counterproductive mercantilist propaganda. The territorial tax system simply says that you pay the same tax as every other business in the country you're operating in. So, as an example, if Ireland charges a 12% rate next to the US' 35%, what Obama wants to do is charge US businesses on money it is making in Ireland. Why? The US isn't providing services for US businesses in Ireland. So in Obama's Alice in Wonderland worldview, he wants to pretend that American companies in Ireland are really operating in the US and he gets first dibs on that 35% off Irish-based income. (There are subtle nuances here, the nature of any Irish tax paid deductions against American tax rates on US firms' Irish income.) So Obama regards Ireland's lower tax as a "tax break". Almost every other country doesn't touch their companies' Irish income. But the way he gets foreign companies to invest here (or for domestic companies to expand locally) than in Ireland is by competing for that business. He's not going to talk them into it by maintaining the highest business taxes in the world, more interventionist policies, etc.

There are a number of reasons why US companies operate in Ireland over and beyond tax rates. But in-sourcing? There are some reasons why some companies are in-sourcing back to the US (Mark J. Perry of Carpe Diem regularly features such stories), but those companies do so DESPITE Obama, not because of him. For instance, some decided that they wanted tighter integration between affected business functions.

Just a final word here: Obama is LYING when he claims to have "saved" the auto industry. For one thing, Ford never went through bankruptcy, other foreign manufacturers operating in the US (Toyota and Honda, for instance) also survived, and many companies have gone through bankruptcies without Bush and Obama throwing taxpayer money at them. The only thing Obama really did, besides engage in morally hazardous activities of setting a precedent for "too-big-to-fail" [insert-big-business/bank-here] is BAIL OUT HIS CRONY UNION SUPPORTERS, at the expense of higher-standing bondholders. Do you think I'm ever going to knowingly invest a dime in Government Motors' future bonds? NOT A CHANCE.

Courtesy of Heritage.org
Index of Economic Freedom 2012

Musical Interlude: My Favorite Groups

Tom Petty & the Heartbreakers, "Free Girl Now". This is the final selection in my Tom Petty series. I will start a small retrospective on The Who with my next post.