Miscellany: 8/19/12

Quote of the Day
The tragedy is not that things are broken. 
The tragedy is that they are not mended again.
Alan Paton

Sheldon Richmond, 
"Where Free-Market Economists Go Wrong": 
Thumbs UP!

Richmond revisits a point I have been repeatedly stating in response to the intellectually dishonest charges by Obama and Biden that the current economic malaise is due to the "laissez faire" policies under George W. Bush (my edits):

But the free-market economists sound a little too defensive, as though they were the defending the free market’s honor against its critics. What free market? (With all the subsidies and regulations on the books, can there possibly be a free market?) What we have—and have had for a long time—is corporatism, an interventionist system shot through with government-granted privileges mostly for the well-connected. This system is maintained in a variety of ways: through taxes, subsidies, cartelizing regulations, intellectual “property” protections, trade restrictions, government-bank collusion, the military-industrial complex, land close-offs, zoning, building codes, restrictions on workers, and more.

Let's assume that we finally rid ourselves of the unsustainable yoke of Obamanomics. It won't be enough simply to stop government intervention in the free market, e.g., manipulating bankruptcies, nationalizing home or college loans, wheeling and dealing with health care sector companies, malinvesting in green energy companies, etc. There are hundreds of years of meddling regulations, protectionist subsidies (e.g., sugar), anti-competitive software patents, etc. We've got tax loopholes, credits, expenditures, etc. Freezing the status quo perpetuates anti-consumer policies.

The bottom line is that violations of free market principles basically are at the expense of consumers: the consumer (including those with limited income) would be better off with economic liberty. One of the problems which Richmond notes at the end of the piece, quoting Hayek, is the need for "the vision thing". (If you think about, "limited government" only goes so far: we need an enabling agenda of liberty.)

My Rejoiner to Obama:
You DID Build That
And Then Some Magic Politics Happens:
You Didn't Manage That
You Didn't Fix That
You Didn't Plan For That
You Didn't Execute That
You Didn't Maintain That
You Didn't Save For That
You Didn't Fund That

Bob Boudreaux of Cafe Hayek has published his latest column (thumbs UP!) which reflects on what I call "The Gaffe of 2012", Obama's Roanoke moment: "You didn't build that". He looks at the highway system; I have addressed this point in past posts (critical, for example, of  Governor Jerry Brown and other progressives whom parrot the success of our dubiously maintained, overcapacity highway system: they don't point out that the government monopoly has banned or heavily restricted the construction of privately-built toll roads during the automobile era; thousands of miles of private roads had been built during the earlier era). Boudreaux goes beyond the point of regulated infrastructure: there are many factors beyond simply the highways connecting Wal-Mart's distribution centers/suppliers to target stores (e.g., commercial trucks and fuel) As an MIS professor, I would probably add things like Wal-Mart's state of the art logistics application software and/or dedicated data lines.

Boudreaux asks a simple question: why should a few taxpayers be singled out to bail out the federal government's mismanagement of tax revenues anymore than, say, "rich" vehicle owners or taxpayers be asked to bail out (my example) BP in the aftermath of the oil spill disaster?

A couple of takeways from Boudreaux's article:

• "Among the kinds of infrastructure that have, in fact, been supplied successfully by private businesses are city streets, highways, sewage systems, formal education, policing, money and commercial law."
• "If  privately built highways would be of higher quality and cost less to build and maintain than government highways, then government’s crowding out of private efforts that otherwise would have built highways imposes a cost on the many businesses (and consumers) that rely upon highways for their economic success."

Following up on the second point, this goes back to Bastiat's famous distinction of opportunity costs, i.e., things seen and unseen. The government monopoly on roads is inefficient; if the road is built with inferior materials (to save on costs) or poorly designed (e.g., capacity), the road user finds hidden costs to "free" roads, e.g., car repairs, inefficient stop-and-go driving, etc. I submit a more competitive system would lead to lower costs in the long run, allowing the road user to spend his savings elsewhere in the economy.

The recent kerfuffle involving a similar Obama dubious claim (on the government's role in the Internet). The first step towards the explosive growth in the Internet was deregulation of government-controlled access (you might think that progressives would have picked up on this observation and wondered what other great things would happen to the economy if only we started stripping away unnecessary regulation, but you would be wrong...) But I want to go beyond the snake oil hype of ideological progressives like Elizabeth Warren and Barack Obama: they want to own the success of the private sector, but let's look at the record of the public sector:

• the public sector across the board has made ongoing pension commitments decades after most businesses shifted to defined-contribution (401K) systems while using employer contribution allocation  as a kind of slush fund to fulfill other popular spending commitments; many states and municipalities (particularly in California) are now finding their pension obligations crowding out funding for core services
• we've seen inadequate establishment of rainy day funds, unsustainable public debt and operational spending, inadequate control systems (e.g., fraud prevention) and other best business practices, lack of cost transparency (especially with public employee compensation transparency), and grossly unfunded entitlement systems
• you've built that public schoolhouse (only to let it fall into disrepair), you built that bridge (only to see it collapse), you built that levee (only to see it fail), you built that railroad (only to have to subsidize its operational costs), you made those housing and college loans (only to stick losses to the taxpayer), you made city evacuation plans (only not to execute them when hurricanes approach), you've thrown more and more money on public education, especially new teachers  (only to see baseline scores stay the same), etc.

And yet the progressives will tell you, never mind that our programs only reimburse at best 80 cents on the dollar, forcing the private sector to subsidize the costs of government entitlement programs: we can't balance our own budget, but we can "fix" the health care sector....

A Smear Scenario Targeting the Tea Party

I don't really want to give the widely reported Benson/Weber article, speculating on a 2016 Tea Party-inspired rebellion, undue publicity. The context is that the progressives lose this fall's election. The new federal government cuts off Keynesian and relief spending but the economy continues to flat-line (my edits):

A high-profile and vocal minority has directed the public’s fear and frustration at nonwhites and immigrants.  After almost ten years of race-baiting and immigrant-bashing by right-wing demagogues, nearly one in five Americans reports being vehemently opposed to immigration, legal or illegal, and even U.S.-born nonwhites have become occasional targets for mobs of angry whites. In May 2016 an extremist militia motivated by the goals of the “tea party” movement takes over the government of Darlington, South Carolina, occupying City Hall, disbanding the city council, and placing the mayor under house arrest.  Militia members quickly move beyond the city limits to establish “check points” [for "illegal aliens"]. Activists also collect “tolls” from drivers, ostensibly to maintain public schools and various city and county programs, but evidence suggests the money is actually going toward quickly increasing stores of heavy weapons and ammunition.   The “tea party” insurrectionists in South Carolina enjoy a groundswell of support from other tea party groups, militias, racist organizations such as the Ku Klux Klan, anti-immigrant associations such as the Minutemen, and other right-wing groups.  

I believe that these mediocre historians specifically wrote this nonsense to drive pageviews; a recent Washington Times editorial addresses the distasteful subject of the US Army being used to quash a domestic rebellion.

Let me be clear: I am a libertarian-conservative, and I'm pro-free market. This blog is pro-immigrant. I want liberalized visiting worker programs; I want comprehensive immigration reform, but Obama is too tied to protectionist labor unions for authentic reform. I do have some concerns about border security issues and dysfunctional policies which transfer federal cost burden of immigration policy to the states, but I reject fear-mongering and/or scapegoating of Latino visitors. But let's point out that the "anti-amnesty" movement arose in 2007, not 2009. A free market/classical liberal (vs. social liberal) rejects government/business collusion in protectionist policies.

The Tea Party movement was galvanized by Rick Santelli's clarion call involving the Democrats' legislative proposal to bail out homeowners with less than a conventional down payment on a house. The movement was based on the concept of limited government. At its core this was fundamentally a libertarian protest against statist government run amok. Kirby and Ekins recently published a study, "Libertarian Roots of the Tea Party"; the authors argue that the movement consists of a coalition of libertarians and conservatives, bridged by certain common beliefs, especially fiscal and Big Government issues but significantly differing on a number of social/cultural issues, one of which is illegal immigration: "Most tea partiers have focused on fiscal, not social, issues — cutting spending, ending bailouts, reducing debt, and reforming taxes and entitlements — rather than discussing abortion or gay marriage."

I particularly identify with the Campaign for Liberty, with ties to Ron Paul and other libertarian conservatives; there is no discussion of immigration. Even if you go to FreedomWorks, you won't find discussion of immigration among key issues. Marco Rubio (R-FL), probably the poster boy Senate candidate for the Tea Party in 2010, has proposed a GOP alternative to the DREAM Act. Mike Lee (R-UT) with Schumer (D-NY) has proposed immigration reform allowing a 3-year residential visa for foreign nationals agreeing to buy and principally live in  above-average valued homes in the US.

Tea Party libertarians like myself absolutely reject xenophobic policies as a violation of individual unalienable rights. Tea Party rallies have been generally peaceful and respectful (in fact, participants often help clean the area for litter after rallies); never mind the fact that left-wing environmentalist or animal rights groups, trade protests, or OWS rallies have sometimes resulted in public chaos: the liberal mass media almost invariably tries to link almost any tragedy (e.g., the recent movie theater massacre) to the Tea Party. The Tea Party remains committed to working for restoring our traditional liberties through constitutionally-provided mechanisms, like the ballot box. The Benson scenario reads like sensationalized nonsense from ideological progressive outlets like the Huffington Post or the Daily Kos, at the same time law enforcement is scaling its restrictions (e.g., flagpoles) given a pattern of peaceful rallies.

(Tell Me) You Didn't Drink That!
Obama Says, Bloomberg Says
Lemonade & Raw Milk Freedom Day




Musical Interlude: My Favorite Groups

Hodgson/Supertramp, "Give A Little Bit"