We've Moved!

I've moved my blog to a new home and a new platform.

Our new address is:

http://orderfromchaos.black-trovat.net

Hope to see you there.

Quote of the Day - Where the Blame Lies

I had taken a bit of a break from reading philosophy to give my mind a bit of a rest.  I re-read for the umpteenth time, "Beguilement" by Lois McMaster Bujold.  This is one of my favorite books, series actually.

It was something of a different experience reading it after having read of lot of Ayn Rand's philosophy as I could see similar themes, especially in the main characters who, over the course of the series, go against what is expected of them and instead work for what gives them the most fulfilling lives and in the process improve the lives of everyone around them.

At any rate, I am back reading "Capitalism: The Unknown Ideal" by Ayn Rand and soon came across another great quote.

Remember that private citizens-whether rich or poor, whether businessmen or workers-have no power to start a war.  That power is the exclusive prerogative of a government.  Which type of government is more likely to plunge a country into war: a government of limited powers, bound by constitutional  restrictions-or an unlimited government, open to the pressure of any group with warlike interests or ideologies, a government able to command armies to march at the whim of a single chief executive?
Yet it is not a limited government that today's peace-lovers are advocating.  [emphasis mine]

 

Corporations receive a lot of blame for the supposed ills of the world (while at the same time not receiving any credit for the good that has come from them) especially for their "influence" on government.  It seems that few people stop to ask themselves how much corporations would lobby and try to manipulate government if government was limited and restricted from interfering in the economy?  As Yaron Brook points out in a number of his talks, before the Department of Justice went after Microsoft, the tech giant spent virtually nothing on political lobbying.  Corporations, like individuals, respond to incentives.  When government interference and regulation make it more profitable for a company to spend their money lobbying than developing innovative new products, is it any wonder that is what they do?

 

Quote of the Day - History Repeats Itself

Today's quote comes from a talk by Ayn Rand, I believe from the 1960's, about the so-called Robber Barons of the 19th century, and how they were actually the greatest benefactors of the United States, contrary to what popular history tells us.  About 5 minutes into the recording, which you can find here, she made a statement that jumped out at me enough to go over it repeatedly to write it down.  The groups she is referring to are the Central Pacific and Union Pacific railroads.

In both cases, the main motive of the men involved in building these railroads, though not the exclusive but the main motive, was to acquire the subsidies, not to build a railroad.  More than that, there was as yet no economic need for a transcontinental railroad.  There was not enough freight to justify private investment, but the government, under propaganda similar to today's and such excuses as the prestige of the country, decided to build a railroad and it did so by means of giving subsidies to private groups.

You could very easily substitute "green energy" for "transcontinental railroad" and the quote would be applicable to current government policy.  How often do we hear "We are falling behind in green energy technology!" or similar slogans when the government touts its subsidies for such projects?

I guess the old saying is true: "Those who do not learn from history are doomed to repeat it."

Another Quote of the Day - Freedom is Fundamental

For those that may be curious, the quotes I have started posting are from my current reading, pretty much posted as I come to them.  They are passages that jump out at me as I go along.  

This particular quote is from Ayn Rand's book "Capitalism: The Unknown Ideal" and is in the section discussing reason as man's means of survivial.  As she says a bit earlier: "The action required to sustain human life is primarily intellectual: everything man needs has to be discovered by his mind and produced by his effort."  You have only to look around and see all things that are needed to allow man to survive in the world (food, shelter, clothing, defense, and etc) and enjoy life (books, movies, music, travel, and etc) to see that this is true.

"Since knowledge, thinking, and rational action are properties of the individual, since the choice to exercise his rational faculty or not depends on the individual, man's survival requires that those who think be free of the interference of those who don't.  Since men are neither omniscient nor infallible, they must be free to agree or disagree, to cooperate or to pursue their own independent course, each according to his own rational judgement.  Freedom is the fundamental requirement of man's mind."

Quote of the day

While waiting for MAN OF STEEL to start, I was reading "Basic Economics" by Thomas Sowell.  I found this quote interesting in regards to supposed scarce resources.

"In some ultimate sense, the total quantity of resources must of course be declining.  However, a resource that would run out centuries after it becomes obsolete, or a thousand years after the sun grows cold, is not a serious practical problem.  If it is going to run out within some period that is a matter of practical relevance, then the rising present value of the resource whose exhaustion looms ahead will automatically force conservation, without either public hysteria or political exhortation."

This came after a discussion virtually all natural resources have decreased in real cost over time and increased in known reserves.

Quote of the Day

Came across this quote today in Ayn Rand's essay titled "The Nature of Government", found in the book "Capitalism: The Unknown Ideal."  It seems appropriate given all that is coming out of Washington these days:

"...instead of serving as the instrument of objectivity in human relationships, the government is creating a deadly, subterranean reign of uncertainty and fear, by means of non-objective laws whose interpretation is left to the arbitrary decisions of random bureaucrats..."

This seems to me to be a spot on description of how large portions of the government operates today.   From the EPA to the IRS to Obamacare, the actual decisions on how to implement a rule and when are left to the whim of the bureaucrats involved.  We have seen this in the targetting of certain groups for extra scrutiny based on factors unrelated to the issue at hand and in the large number of instances of the phrase "as the Secretary shall decide" in the Obamacare legislation.

Theft and Taxes

I received this short and to the point comment on a post I made on Google+ recently regarding the difference between subsidies and tax breaks: 

Ah, it's the same old 'taxes are theft' horseshit. Your kind never gets tired of that malarkey.

This caused me to stop and think.  Is the idea that "taxes are theft" malarkey or is there some basis for it in reality?

First, what exactly is theft?  Unfortunately we cannot simply go to the dictionary and find out in one quick look because the main definition of theft doesn't tell us very much.  (All definitions come from dictionary.reference.com).  The dictionary defines theft as "the act of stealing," which is not terribly helpful.  Referring back to the dictionary, we find that stealing is, "to take the property of another or others without permission or right, especially secretly or by force."  That helps, but what does it mean to do something by force?  Back to the dictionary where we find that force is “unlawful violence threatened or committed against persons or property”, “the power to influence or control”, and when used as a verb “to coerce.”

With that we have a pretty clear definition of theft:

To take the property of another or others without permission or right, either secretly or through the threat or commission of violence against their person or property.

Does our definition reflect the reality we observe when we see theft?  

“Your money or your life!”  says the mugger as he brandishes a gun or a knife. “I have a gun, put all money in an envelope, no dye packs, no alarms, no one will get hurt,” says the bank robber’s note. These examples of what I think of as “confrontational” theft certainly fit our definition.  The thief is attempting to take the victim’s property without permission by the threat of injury.

Thefts such as burglary, pick pocketing, fraud and other crimes that I think of as “non-confrontational” also fit the definition as the property is being taken without the knowledge of the victim.  In the case of fraud, it is being taken by deceiving the victim as to the nature of the reality of the situation.

Now that we have a clear idea of what theft is, let’s take a look at taxes.  Taxes are defined as "a compulsory financial contribution imposed by a government to raise revenue."  We should clarify what is meant by compulsory, which is defined as "required by regulations or laws; obligatory."  We have two choices here to clarify things - required or obligatory.  They both get is to the same place, obliged.  The definition for oblige is "to bind or constrain (someone to do something) by legal, moral, or physical means."  Constrain in turn brings us to compel which is defined as "to secure or bring about by force."    With force we are back to ground already covered in the discussion about theft.

After this, our definition of tax has become: 

The transfer of money to the government under a declared, or implied, intention to inflict legal, moral or physical punishment for failure to comply.  

As with theft, we need to look at some real examples of taxes to see whether our definition matches reality.  While there are many types of taxes they are similar in many respects.  They all involve the transfer of money to the government and they all carry the threat of punishment for failure to do so.  For property taxes, the threat is the loss of your property even if you own it without mortgage or other claim against it.  With sales taxes, individuals have no choice whether or not to pay them, but if the merchant fails to collect them and remit them to the government they can face, in Vermont, up to $10,000 in fines and 3 years in jail, depending on the amount involved.  Similarly, failure to pay income taxes can lead to monetary penalties, forfeiture of property and jail time.  

So in both theft and tax, we have a transfer of property from one person or group to another under the threat, explicitly stated or implied, of punishment.  In neither case do we need to consider what the transferred property will be used for, the victim only cares that he no longer has his property.  Also, we do not need to consider whether the government has the right to take your property or whether their use of force is lawful.  If the government has a right to part of your property, they have a right to all of it and simply haven’t decided to take it.  Yet.  As to lawful, well, who writes the laws?

In order to flourish, individuals must have a right to their property, to use and dispose of it as they see fit.   This right is not something granted by the government, but arises from the basic necessity of life.  If you lived on a desert island, you have to work to stay alive.  You would need to gather the goods necessary for your survival, be it food, materials to create shelter, tools, clothing and etc.  Imagine if periodically a canoe arrived at your island and strangers came and took part of your food, raw materials, tools, clothing, and destroyed your shelter.  If this continued, you could not flourish on your island and, if they took enough, your very survival would be in jeopardy.

It is no different in modern society.  If you do not have the right to use and dispose of your property in the way that you see fit, you are in exactly the same position as on the deserted island.  When someone else is able to take some or all of your property to dispose of how they see fit, your chances for thriving and even surviving will certainly be in question.

The Founding Fathers recognized this fundamental right of the individual and secured it in our founding documents.   The Declaration of Independence states, "endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."   Liberty and the pursuit of happiness require that man be free to work, to keep the fruits of his labor, and to dispose of them as he sees fit.  Further, the Fourth Amendment to the Constitution says, "The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures shall not be violated."  While this is most often quoted in terms of criminal matters, it can also be read as affirming the right of an individual to keep his property.  The Fifth Amendment contains similar language - "shall not be deprived of life, liberty or property" and "nor shall private property be taken for public use."


As the Founders noted, these rights are unalienable, i.e. they cannot be separated from the individual by any means.  We recognize, for example, that we have the right to freedom of speech regardless of whether a majority of the people disagree with what we are saying, as long as the exercise of that right does not demonstrably injure another person (the classic example of crying fire in a crowded movie theater).  In the same way, we have the right to use and dispose of our property in any manner that we choose regardless of what others may think, as long as such use does not demonstrably injure another person or actually damage their property.  

It is obvious that theft is a violation of the victim's rights and immoral.  It should also be obvious that taxes are violations of individual rights and immoral, and for the same reasons.  The fact that the government, the majority, or some group currently in power has decided that taxes are legal and "necessary" does  not make them any less so.

Regards

On Global Warming, Keystone Pipeline and Bernie Sanders

On Google+ today, I saw a post by Wil Wheaton quoting Senator Bernie Sanders, one of my state's Senators, which linked to this article and supplied a quote from it:

“It is bad enough that some people in Washington deny the overwhelming scientific evidence and claim that global warming is a hoax and a Hollywood conspiracy. In my view, it would be equally absurd to claim concern about global warming while then approving decisions that will literally throw fuel on the fire of this planetary crisis. The president must reject the Keystone XL project.”

My initial response to this was the following:

While I do believe that there is a fair amount of proof that there has been an increase in global average temperatures over the last 100 years or so, I am unconvinced about the possible future effects.  It appears, as noted here that the upper end of predictions for potential future warming are inconsistent with past warming, and thus unlikely to occur.

Additionally, even if you accept that the models of temperature increase are correct, one should consider whether a given action will serve to actually reduce the warming in any meaningful way?  As this post shows, it likely will not.   

Take the Keystone Pipeline as an example.  Would preventing the oil from Canada being burned, not simply preventing the construction of the pipeline, actually serve to reduce warming by any meaningful amount?  As this post shows, the "benefit" from this would be in reducing the temperature increase by something on the order of .0001 degrees centigrade per year. The benefit will likely be even less than that given that it is unlikely that this oil would simply be burned in addition to current sources (Mid-East oil or domestic coal for example) rather than replacing it.

I received two responses to my post, neither of which seemed to be from people who had taken the time to actually follow the links:

Yeah, quoting from a Koch brothers site known for pushing the oil agenda.

and

you "cite" from the cato institute which has been founded partially by one of the Koch brothers. And you have probably heard, the Koch brothers are those who would earn the big profit from building the keystone pipeline. And maybe you heard, that the Koch brothers heavily funded anti-GW propaganda. 

Below is my reply to these comments.

Sadly, both responses were mostly ad hominem attacks on the Koch brothers rather than a response to the science described in the posts I linked too, so I will summarize here. 

Using figures from the US Department of Energy in recent years world CO2 emissions have been in the neighborhood of 30,000mmt (million metric tons) per year.   

According to wikipedia (not necessarily the best source but the easiest to lay my hands on), atmospheric concentration has increased about 2ppm (parts per million) per year over the last 10 years.  So recently it has taken 15,000mmt of CO2 to increase atmospheric concentration by 1ppm.  One of the initial posts I linked indicated that this appears to have stayed relatively constant for at least the last 60 years. 

The site "Discovery of Global Warming" states that in the last 150 years or so, global average temperatures have increased 1 degree centigrade while atmospheric concentrations of CO2 have increased 104ppm.  This gives a global temperature increase of .01 degree centigrade for each 1ppm increase in concentration.  This gives us 1,500,000mmt of CO2 to increase global temperatures by 1 degree.  This is of course dependent on the assumption (and a risky one) that ALL increase in warming is attributable to the increase in CO2 concentration. 

According to Scientific American, burning the estimated 170 billion barrels of currently available oil from the Alberta tar sands would yield 22 billion metric tons of carbon, or about .13 metric tons of carbon per barrel.  According to the Carbon Dioxide Information Analysis Center, to convert from carbon to carbon dioxide you multiply the carbon by 3.667, which in this case gives us .48 metric tons or .00000048mmt per barrel.  

If the Keystone Pipeline is built and pumps 800,000 barrels per day, 365 days per year, this would result in about 140mmt of CO2 per year which would yield .0001 degrees per year, assuming there is no accompanying reduction in other fossil fuel use which would reduce this amount even further.  This is a figure likely impossible to measure let alone notice.

So it is extremely difficult to see how one can reasonably make the case, as Senator Sanders tries to do, that building the Keystone Pipeline is "throwing fuel on the fire of a global crisis."

One would hope that when it comes to public policy, there would be some balancing of costs and benefits before making a decision.  Such as balancing the potential for a .0001 degree per year rise in temperature against the economic gain, which in Nebraska alone is estimated to be significant:

Governor Dave Heineman noted in a letter to Obama that construction of the pipeline would bring his state $418.1 million in economic benefits and result in $11 to $13 million a year in additional property taxes. 

HT: Paul C. "Chip" Knappenberger, Assistant Director, Center for the Study of Science who wrote the posts I initially was exposed to all this.

Regards
Edit - You can also find data on the increase in CO2 concentration at the NOAA site.  Since 2000, the increase has averaged out to 1.96ppm per year which is for all intents and purposes the same as indicated on Wikipedia.
Edit - A letter to Senator Sanders that was written based on this article, which I sent to all Vermont's Congressional delegates, just appeared as a letter to the editor in our local paper, the Caledonian Record.  Sadly you need an online subscription to see it.

Egalitarianism Goes to the Cinema

Last week during his State of the Union address, President Obama spoke at length about his view of how America works and what the people have a right to expect from the government.  Lines about people who work hard and fulfill their obligations being able to live a decent life, increases in minimum wage and so forth brought standing ovations.  If you listened to any conservative commentary you likely heard much of what Obama said referred to as egalitarian, but just what does it mean to be egalitarian?

Imagine you are the manager or owner of a small movie theater with several screens.  You have been in business for quite some time and have developed a good knowledge of your customers and what sort of movies they like.   You are notified that the state legislature has passed a new law requiring you to show all films offered to you.  The intention, so they claim, to help ensure that small film makers have the opportunity to have their films shown and make money.   You protest but are told that this is being "supporting the arts", since it should not just be big films or films from well known directors that are shown in theaters.  You cringe to think what types of films you may be forced to accept since your own experience and judgment are no longer final and you will lose customers as they will no longer be able to trust your choice of films. 

Further, you learn as you actually read the law, you will also be required to equally share revenue between any films you show each week, regardless of how many people actually attend each one.  While this does not directly or immediately impact how much money you will make, you know that in the long term it will be devastating.  Film distributors of expensive "blockbuster" films will likely stop dealing with you as they are unlikely to see as much of a return from your theater as they would from theaters in other states.  You know that this will mean that eventually the quality of films available in your state will decline as there will be less incentive to make or distribute films in your state that require a large investment as they will not be able to recoup it as the income from ticket sales will be diluted by the share taken to give to poorly made and/or attended films.

Later you hear rumblings that this type of legislation will become national, to "protect" the theaters in those states that are just trying to "support the arts".  You know that if such a law passes it means the end of the film industry in the United States, but you have long since closed your theater as your customers have increasingly turned to DVD, streaming video and other means of obtaining films that are not available in theaters in your state.  If the law goes national, well, at least you will still have foreign films.  Until the government passes the Film and Video Protection Act slapping a large tariff on foreign entertainment available in the United States, the proceeds of which will, of course, be used to support the arts.  Well, at least those arts the government deems as needing support.

While the events described above might seem unlikely, they do illustrate the most common types of egalitarianism: equality of opportunity and equality of results.

In the first part of the story, I describe equality of opportunity, where everyone gets a chance, regardless of merit.  While this may sound good, a little thought will show that it cannot actually exist in reality without violating someone's rights.  In my theater example, it should be obvious that the manager/owner's rights are being violated pretty significantly.  He is no longer allowed to use his own judgment to select the films he will show, but rather he has to show whatever films someone wants to offer him, regardless of any sort of objective assessment of quality or appropriateness.  Other examples include, but are certainly not limited to: providing home loans to people who do not meet the standard requirements for borrowing simply because the "deserve" the opportunity to own a home; giving tax payer funds to a company to develop products regardless of whether there is, or will be, any demand for them; forcing hiring quotas based on criteria that are non-essential to job performance such as race, gender, and age regardless of the number of candidates from those categories actually applying for the job. In all these cases, the ability of some are being suppressed or devalued to give opportunity to others.

I go on in the next paragraph to describe the second definition of egalitarianism: equality of outcome.  As with equality of opportunity it should be apparent that this is impossible to achieve without infringing on someone's rights.  In the theater example, the makers of a successful films are penalized (actually they are stolen from) in order to provide equal outcome to the less popular film.  You can find further examples of this in the world today such as the Marxist theory of "from each according to his ability and to each according to his needs";  social promotions in schools with no regard to the actual achievement of the student in their classwork; pay or employment based solely on seniority rather than performance; or, as in Obama's speech, providing a "decent living" to someone who "works hard" and "fulfills their obligations" (with no real definition of what those terms mean) regardless of the actual value created.  In all of these cases, results earned by one group are either taken away or devalued in order to provide them to another.

If infringing on the rights of some to provide benefits to others as egalitarianism requires is immoral, which it is, then what type of equality, if any, can we strive for?  The only moral type of equality is equality before the law.  If your rights are infringed on by someone, the courts should only recognize the facts of the case.  Non-essentials such as race, gender, age, wealth, social standing, political connections and so forth should play no part in the proceedings.  

Sadly, as Obama's address illustrated,  we appear to be moving toward increasing collectivism and egalitarianism and away from true, achievable, equality.  Virtually every government program claims to be all about "equality" and "fairness", again without defining what exactly this means, while trampling the rights of other groups to provide those benefits to another group that is claimed to be at a disadvantage.  At the same time these programs often reward with special privileges individuals or groups who are favored by those currently in power.   

Until we actually embrace the notion of equality before the law and reject any other supposed type, we will be increasingly at risk of finding ourselves in one of the groups whose rights need to be infringed in order to be "fair" to the politically important group of the moment.

A rarity....financial sense in Washington

In flipping through the channels I came across an interesting program on CSPAN-2 about the Securities & Exchange Commission Agenda.

The thing that caught my attention on this program was something the main speaker, Dan Gallagher of the SEC, said that to me seemed quite sensible, and illustrates one of the many side-effects of the Federal Reserve's policy of keeping interests rates artificially low:

I think a focus on fixed income especially in a 0 percent interest rate environment.  Right, where we are watching investors chase yield  in crazy places where they don't want to be either.  Right.  They'd rather be in an interest bearing CD but they can't be so they are in junk bonds and munis.

This is exactly the same sort of incentive that helped lead to the financial crisis in 2008.  Government policy led banks and other financial institutions to chase yields in places they would rather not be.  As government agencies like Fannie Mae and Freddie Mac took over more of the mortgage business, banks had to take on more risk to stay in business.  Once those riskier mortgages, which Fannie Mae and Freddie Mac then packaged up and resold in order to comply further government rules that 50% of loans be sub-prime mortgages, began to default the whole system began to break down.  For more on the causes of the financial crisis, check out this presentation by John Allison, who was the head of one of the largest financial institutions in the country during the crisis.  Well worth watching in its entirety.

Later in the program he answered a question regarding the diversity of the American financial services industry and the danger of  "implementing 400 rules is that you will begin picking winners and losers among financial firms" and suffocating the way American entrepreneurs access financial services, he said:

You've touched a cord I've been talking a lot about lately in less formal settings, but to me the issue is capital markets versus the banking markets.  What I fear coming out of the crisis, what you see in Dodd-Frank, what you in the EU directives and international bodies, like FSB here or FSOC domestically is sort of the bank regulatory view of the world taking over the capital markets.  Right the notion of de-risking and safety and soundness.  It sounds great when you come out of the crisis.  When you have seen hell and come back.  the last thing you want to do is engage in risking taking or to encourage risking taking.  As a regulator to allow it to happen at all.  Because you got burned in whatever narrative about the crisis.  But as you know the capital markets are all about risk.  Without risk we don't have the capital markets.  You have to put your capital at risk if you want to get a return.  We can't de-risk them.  Money market funds are a good example, when you start talking about silly things like capital buffer, de-risking something at 50 basis points that might kill the product.  Right at the risk of killing the product it doesn't make any sense.  But this is the mind set that's pervading.  It is something we all have to watch.  Because soon enough, if there are not enough opportunities to take risk and get a return. You know, the economy is bad enough now, lets see how it does after that mind set takes over. [ed. any errors in this transcription are mine.]

It is good to know that at least one person at the SEC realizes that implementing more poorly thought out rules and regulations could and likely will have negative consequences to the nation's economy.  For more of how Dodd-Frank will likely damage the economy, check out this article.

Government Intervention...What Could go Wrong?

So what can happen when the government interferes with the economy?  Let's take a peek at what happened in the case of health insurance, specifically employer provided insurance.

In 1942, in an effort to control costs and prevent disruptions in the labor market, the government passed the Stabilization Act which essentially froze prices, wages and salaries at the level they were at in September, 1942.  Exempted from this was insurance and pension benefits.  So to attract workers, companies began offering health insurance as a fringe benefits as they could not offer higher wages.  The next year, the IRS ruled that employer provided health care was tax exempt, further encouraging the practice.

Towards the end of the war, the War Labor Board ruled that companies could not discontinue these benefits during the life of a contract.  A few years later, in 1949, the National Labor Relations Board ruled, later upheld by the Supreme Court, that insurance and pensions could be considered wages and thus subject to collective bargaining.  During the 1950's when there was little competition for US manufacturing, companies and governments were eager to provide these tax free benefits.  This greatly expanded the number of employees covered by employer provided insurance.  In 1951 100,000 employees were covered by major medical insurance, by 1986 this had reached 156,000,000.

All of this helped increase the rate at which health care costs rose.  As a report from the Wisconsin Policy Research Institute shows:

The regulatory changes that propelled the rapid expansion of employer-provided health insurance during and after World War II helped fuel the hospital cost spiral by completely removing consumers from any contact with health care costs.

This trend was likely exacerbated by the introduction of Medicare and Medicaid in 1965 which further removed the individual from the real costs of their health care.

All of this has led to recent decades where the only real growth in employee compensation is from the increase in health care costs rather than in an increase in wages.  So the cost to the employer has gone up but the employee has received little direct benefit from it as the services he gets for his insurance likely have not improved, just had their costs increase.  For example, a USA Today report shows that from 2007 to 2011, real wages increased only 1.4% ($777) while benefits increased by nearly twice that amount, $1302.  The article does not mention how much of the $777 growth in real wages went to paying the increased employee contribution to health care.

Enter Obamacare, which was in part intended to help control the spiraling costs which were in part caused by previous government interventions.  With the Obamacare employer mandate, many employers will be compelled to provide health insurance for their employees or face fines.  While some employers already do provide insurance, many will see their costs go up due to the requirements of the new law.  This will likely further erode real wage growth for many employees.  Assuming they keep their full time jobs, which is by no means guaranteed.

Which brings me to the latest step in long chain of cause and effect.  Last week, Investor's Business Daily had an interesting editorial.  In it, Betsy Mccaughey describes a coming change we will be seeing on our W-2 forms this year, namely a box for your health care benefits.  According to the administration this is simply for information purposes so you can appreciate the value of your health care plan. The fear is that this is actually a prelude to employer provided health care benefits being taxed.

The federal government, since it is apparently incapable of actually controlling spending, is always on the look out for new sources of additional tax revenue.  It likely did not take them long to come to the conclusion that the exemption for employer provided health insurance is the single largest "tax expenditure" in the tax code.  (Interesting how a feature of the tax code that allows people to keep more of their money is considered by analysts to be an expenditure to the government.)  In 2012-2013, the CBO estimates this single item has a total "expenditure" of 1.8% of GDP or something approaching $300 billion, making it a likely target for tax reform, especially for the "rich."

If you feel that this is unlikely, I found an article detailing such a proposal in President Obama's 2009 jobs bill.  In this bill the proposal was to exclude employer-provided health benefits from itemized deductions for those making more than $200,000 while at the same time capping the remaining deductions for the same group.  It is not difficult to imagine this notion seeping down to lower brackets.  As I pointed out in "First the "Rich" and the YOU!", it simply isn't possible to fund current government spending by just taxing the "rich."

So thanks to a history of government intervention in the economy, you could end up paying taxes on benefits that government policy helped inflate the price of out of a paycheck that is likely smaller because of those same government policies.

Government intervention, what could go wrong?


Regards

Gun Control, Fiscal Cliff Cronyism and more

Some good links for this week.

Enjoy!

This is perhaps my favorite article of the week, though there were plenty of good ones, and I quite honestly lost track of some.


With Gun Control, Cost Benefit Analysis Is Amoral
Really nice take on the whole gun control issue.  I especially like his statement: "Statistics about how often gun-related crimes occur in the population is no evidence against you. That’s collectivist thinking. The choices made by others are irrelevant to the choices that you will make."


Senators, Representatives—and Americans Who Voted for Them—to Blame for Increased Spending and Tax Hikes

Obama's Debt Problem
Even Politico.com recognizes that the debt is Obama's now, not Bush's (though Bush did his share to start digging the hole.)

Crony Capitalist Blowout
Great write up of all the pork in the fiscal cliff bill.

Rum Subsidies Included in Fiscal Cliff Pork
Still more pork, or in this case rum, in the fiscal cliff bill.

Of Hurricanes, Pork and Subsidies
And yet more pork.

The Spending Cliff
The real issue facing America.  While increasing taxes is bad, not cutting spending is what will sink the country.

Has the Kyoto protocol done more harm than good?
Did the effort to fight global warming via the Kyoto Protocols contribute to "outsourcing" of manufacturing to undeveloped or developing countries?  Seems like it could very well have had a part to play.  Also, the countries where manufacturing moved too use less efficient fuels so likely have higher emissions, so overall global emissions are up.  Great example of unintended consequences.

My Boys Like Shootouts. What's Wrong With That?
Ah, the craziness regarding guns.  And apparently butter knives.

So What's Next, Mr. President?
And still more on the failure of the fiscal cliff deal to actually deal with the country's real problems: debt and out of control spending.

No Regulation, No Problem
Stossel on the need (lack there of) for government regulation.

Farm Bill Extension Better Than Trillion-Dollar Bill
Repealing the old "permanent" law regarding dairy price supports would make too much sense.  Much easier to be able to scare the public with the thought of doubling or tripling milk prices.  The government really has no place in the economy other than making sure that force and fraud are removed from it.

It’s a Spending Problem
More support for my contention in an earlier blog post that we can't tax our way out of the financial problems we have in this country.

Closing the Jobs Gap
Great little calculator for seeing how long it would take to recover all the jobs lost during the recession based on average monthly job gains.  Interesting fact is that 88,000 is the average number of new workers entering the job market each month from population growth.  So when you see 155,000 new jobs as we did in the latest jobs report, that is actually only about 67,000 net jobs recovered.  Something to keep in mind when the government claims to have created X million jobs in Y years.  Subtract 12*Y*88,000 to see how many people who lost their jobs might have found new ones.

Libertarian Purity Test
Interesting "libertarian purity" test.  My score was 98 out of a possible 160.  A number of the high value questions I didn't agree with, such as privatizing law or the police for example.

Climate Impact of the Keystone XL Pipeline
Just how little impact the Keystone Pipeline would have on the environment.

Regards

You Cannot Compromise Principles

I've always had a hard time with the concept of compromise when it comes to government. For reasons I could never really define, I was uneasy by the concept that you should accept something you fundamentally did not agree with in order to obtain something you wanted, or in the case of government, in return for a promise to vote for something you wanted in the future.

Of course I would always be told that government was all about compromise and look at how the Founding Fathers had to compromise in order to write the Constitution. Still, it did not make any sense to me and despite this "explanation", it didn't seem right.

Recently I came across the writings of Ayn Rand and things started to become clearer.  In regards to compromise, the following quotes struck home for me:

"It is only in regard to concretes or particulars, implementing a mutually accepted basic principle, that one may compromise. For instance, one may bargain with a buyer over the price one wants to receive for one’s product, and agree on a sum somewhere between one’s demand and his offer. The mutually accepted basic principle, in such case, is the principle of trade, namely: that the buyer must pay the seller for his product. But if one wanted to be paid and the alleged buyer wanted to obtain one’s product for nothing, no compromise, agreement or discussion would be possible, only the total surrender of one or the other."

"In any compromise between food and poison, it is only death that can win. In any compromise between good and evil, it is only evil that can profit."

 
To me this made perfect sense to me.  It helped me realize that it was on principles where I did not want to accept that compromise was valid.  Pretty much every issue in government, major ones at any rate, involve principles.  So for example, if on principle you believe it is wrong for the government to use its coercive power to redistribute wealth from one segment of the population to another, then it would be immoral  and evil to do anything that increases the burden of taxes as this would be compromising your basic principles.
  On the other hand, on issues where there is not a difference on basic principle, national defense for example (at least I hope everyone in government agrees we have a right to protect our interests), it is perfectly moral to compromise (to a point) on how to go about that task, how much to spend and how to fund it and so forth.


Unfortunately it appears that government today is all about compromising on both details and principle and the mainstream media agrees, and tends to support the view of the Democrats.  In this week's Time magazine there is an article, "Cliff Dweller" by Michael Grunwald which has the following quote:

"if Senate Republicans had decided to work with Obama in his first term instead of fighting him, they could have helped shape Obamacare and other Democratic legislation."

 So apparently the feeling in the media, and I think in large parts of the population, is that the Republicans should compromise their principles and go along with the Democrat agenda to help "shape" the legislation. In the case of Obamacare, this is essentially saying that if Republicans are opposed on principle to allowing the Federal government to compel citizens to purchase a product, they should set aside that principle and work with those feel it is proper for the government to do so.  To do so is not a compromise, but an abdication of your principles.

Sadly, I don't believe many Republican members of Congress actually hold the principles they claim to hold.  As one example, the individual mandate in Obamacare has roots on the Republican side.  One need only take a glance at this article on Fox News to see it has a long history of Republican support. In the final debate between Mitt Romney and President Obama, my main impression was there was no principle difference between the two in many areas.  Many of Romney's answers appeared to me to be variations on "I agree with the President, but I think I can do it better."  So it is merely the details, not the underlying principles, that they differed on.

It should be obvious that most members of Congress hold the same statist and altruistic principles, though the details vary.   Very few would argue for reducing and eventually eliminating the welfare/regulatory state we live in, only how to fund it and run it more efficiently (i.e. look at the expansion of regulation under Sarbanes-Oxley which had no dissenting votes in the Senate and only 3 in the House).  Even Paul Ryan's so-called "radical" budget plan doesn't cut government spending, rather it simply slows the growth so that the budget will balance, at a higher level, in 20 years or so.

The main difference between the two parties is that the Democrats present a more consistent message of these principles.  They openly state that it is the government's job to provide cradle to the grave economic security for everyone and take whatever steps required to achieve that whether that be higher taxes, banning large soft drinks, compelling companies to provide nutrition labels and so forth.  The Republicans tend to say the opposite, talking of personal freedom and individual rights, while pursuing many of the same goals.

I think one final quote from Ayn Rand perfectly sums up how we have arrived at the situation we find ourselves in as a country:

Consider a few rules about the working of principles in practice and about the relationship of principles to goals . . . .

1.     In any conflict between two men (or two groups) who hold the same basic principles, it is the more consistent one who wins.
2.     In any collaboration between two men (or two groups) who hold different basic principles, it is the more evil or irrational one who wins.
3.     When opposite basic principles are clearly and openly defined, it works to the advantage of the rational side; when they are not clearly defined, but are hidden or evaded, it works to the advantage of the irrational side.

Regards

Perhaps there is Hope for Change

Sometimes it can be disheartening looking at the direction the country appears to be going.  Hardly a day goes by when we do not hear news of some new program or regulation or law that is supposed to make us "safer" or "healthier" or to promote the "common good."   When we note that these laws and programs and regulations restrict our individual liberty and limit our rights (or take them away altogether), we are told that we all have to make sacrifices to make this country great or for the "public good."*

Sadly the majority of Americans seem intent on electing officials, in both parties, whose opinion of the people is essentially "you are too ignorant or easily misled to make good decisions about <insert whatever issue they want to control this time>, so just let us tell you what to do and think."  The only difference between the parties often appears to be little more than which issues we are too stupid to make decisions about or the best way the government can make those decisions for us.

Sometimes though, there can be a little glimmer of hope that things can change to a more positive direction.  On Reason.com today I was reading a review of "Iron Curtain: The Crushing of Eastern Europe, 1944–1956," by Anne Applebaum.  In the midst of the review was the following quote that was one such glimmer of hope for change, and especially relevant today:

"Even when they seem bewitched by the cult of the Leader or of the party, appearances can be deceiving. And even when it seems as if they are in full agreement with the most absurd propaganda—even if they are marching in parades, chanting slogans, singing that the party is always right—the spell can suddenly, unexpectedly, dramatically be broken."

Regards

*oddly, it often appears that the definition of "public" in this usage is "everyone but you."

My 2 percent...I mean cents

I had a little interaction on Twitter the other day that got me thinking.  A dangerous thing as my brother might tell me.

I had posted to Twitter:

Ah, first paycheck of the year, first view of my higher taxes. And people say the government can't work fast.

The difference in my paycheck was just the ending of the so called "payroll tax holiday."

This garnered a decent number, for me, of favorites, retweets and even a few new followers.  It also drew one direct reply:

This was a two year tax holiday; would you like to have it made permanent? Why not lower the rate to 0%, and borrow 100%?

Implicit in this reply is that Social Security is a fact of reality that is not subject to change and that the only choice open to us is how we fund it.

This is a pretty common assumption, or at least not uncommon.  A quick search revealed any number of similar reactions a year ago when the payroll tax holiday was extended.  For example:

Investor's Business Daily (one of my favorite newspapers) said, "Result: cash for pizza now — and smaller Social Security checks later."
Truth Sandwich's headline read: "Raiding the Social Security Piggy Bank for Pizza Money"
CNS News reported, quoting Rep. Frank Wolf (R-VA), "Wolf called the payroll tax extension a "raid on Social Security, which is already going broke," and he noted that the money paid into the system now -- through payroll taxes -- pays benefits for existing retirees."

This was pretty much my reaction at the time.  I felt that if we have a Social Security system that is by all accounts already looking at trouble down the road it is foolish to knowingly take in less money.  For those that don't believe that Social Security is on shaky ground, here is a quote from Social Security Administration that they used to send out when they mailed statements to people:

"Your estimated benefits are based on current law. Congress has made changes to the law in the past and can do so at any time. The law governing benefit amounts may change because, by 2037, the payroll taxes collected will be enough to pay only about 76 percent of scheduled benefits.”

There are a number of philosophical issues with a Social Security system.  The first is that it essentially requires that you work/live for the benefit of someone else.   To whatever extent you are living for someone else's benefit you are NOT living for your own.  Given that we are forced to live for others, as opposed to choosing to do it for your own reasons, we are not free.  As Ayn Rand put it, "Living for others is slavery -- and nothing else whatever -- and no names, ends or excuses can alter the fact."

Contrary to popular belief, the government is not saving and investing your contributions in order to give you income during your retirement.  Rather, money paid in today is used to pay benefits to those collecting them today.  In the past, more revenue was collected in payroll taxes than was needed to pay the current benefits and the surplus was used to fund other parts of the government in return for IOUs (Treasury bonds) which  were put in the "Trust Fund."  Now that payroll taxes are no longer covering current benefits, bonds from the "Trust Fund" need to be redeemed.  Which means the cash needed to pay shortfall is coming from general tax revenues further burdening current tax payers.  This latter problem will worsen as demographics catch up with us and there are fewer and fewer workers paying taxes to support retirees.  In the 1930s it was about 17 workers for 1 retiree and now it is approaching 2 to 1.

There have been a number of models for privatizing Social Security which would appear to remove the issue of requiring people to work for the sake of others.  Two of the more often mentioned systems are those of Chile and Galveston, Brazoria and Matagorda counties in Texas.

Chile converted their system from an untenable government run system to a privately invested system where the individuals can decide how their money is invested.  So far this seems to a lot of improvements over the government run system.  One interesting side effect is that savings rates are higher than before the private system which certainly helps long term growth.

The three counties in Texas took advantage of a since-closed loophole in the law and opted out of Social Security in 1981 and convert to a privately invested system.  These counties pool the contributions and then money management firms bid to manage this money with certain restrictions on guaranteeing rates of returns. Even the report from the Social Security Administration indicates that in many ways the private program is as good and often better than Social Security.  In the areas where it appears Social Security is better it is unclear whether the figures given for Social Security include the reduction in benefits that would appear to certain to occur around 2037 (the examples given in the report are for workers retiring in 2045).  Assuming the government doesn't increase payroll taxes by about 1/3, at current estimates, then benefits as noted above would be reduced by 24% making the private plan in these counties better in pretty much all areas.

The problem with both of the above alternatives is that they use government force to compel the workers involved to participate.  (Well, in the case of the counties in Texas, workers are compelled to either participate in the private plan or social security.)   While the government properly should have the monopoly on the use of force in a civilized society, this force should only be used in retaliation against those who initiation the use of force unlawfully.  The government should never be the initiator of force against the innocent.

When the government uses force to compel behavior, or prevent behavior that does not infringe on the rights of others, it effectively takes away our right to use our own mind and reason to decide what the best course of action for ourselves is.  When the government compels someone to save X% of their income towards retirement it precludes the person from using that money for something else.

Maybe the person would like to start their own business but because of such a law they would be unable to save the money needed to begin, or would be so delayed that the opportunity would disappear and the person's future be worse off as a consequence.  Maybe the person would decide to take a trip, buy a new computer or whatever and not bother with saving for the future.  Either way, man's most important right, the one he cannot truly live without, is the right to live his life as he sees fit based on his own reason.

Below is Yaron Brook of the Ayn Rand Institute discussing the entitlement problem in the United States.

So my feeling is the the ultimate answer is essentially the same as what Yaron speaks of in the video.  As I put it in response to the tweet quoted above:

or how about phasing out Social Security all together and let individuals plan for themselves?

After I started writing this post, I noticed I had a reply to my response.  I was a little surprised, but pleasantly so, given my preconception based on the initial reply:

That would be the best idea, since it isn't a "retirement plan" and is nothing more than an entitlement program.

Regards

Life, Liberty and the Pursuit of Happiness?

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

How far we have moved away from these founding principles, the underlying philosophy, of our country.

While researching what may (or may not) become a blog post, I found myself on the website for the National Bureau of Economic Research.  This sounds like a government agency, but according to "History of the NBER" on their website, the NBER is:

a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works.

Private and non-partisan sounds like it might be an organization that would be a good source of information about the economy.   After reading a bit of one article, I have my doubts about the philosophy behind the organization.

Here is a quote from a 2010 report regarding the tax exemption for employer offered health insurance (emphasis is mine):

This tax exclusion is extremely costly - it reduces federal and state tax revenues by $260 Billion per year and is the government's third largest expenditure on health care, after Medicare ($400 Billion) and Medicaid ($300 Billion).

Apparently according to a private, non-partisan organization, any tax that the government fails or chooses not to take is an expense.   This is not an unusual sentiment these days.  Just enter "tax break cost government" or a similar search phrase and you'll get any number of links which reflect the same belief:  tax cuts are giveaways, expenditures and cost the government money.  For example here, here and here.

If you accept this idea, it logically follows that anything your earn rightfully belongs to the government, which simply allows you to keep some portion of it for yourself.   After all, if it is an expenditure for the government to NOT take the money in taxes, it must rightfully be theirs in the first place.

This in turn leads to the idea that you do not work for yourself, but for others and your only reward is what they decide to give you or let you keep.  Another way of putting this is that you are essentially the servant of the government.

If we are the servant to others, we are not free to act in pursuit of our own goals and happiness.  If we are not free to act as we see fit, we do not have liberty.  If we do not have liberty, in essence we do not have life.

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness."

Regards

Some interesting articles

I tend to read a bunch of articles over the course of a week, so I thought I would share some of my favorites from the past week.  I am going to try and do this every Wednesday.  This is by no means a complete list, but it does include most of the articles that I had particularly made note of, at least since I decided to publish such a list.

The Battle of the Narrative: How Ordinary Americans can Fight Obamacare
While Obamacare has been upheld by the Supreme Court, the fight against it is far from over.  There are a number of lawsuits working their way through the court system.  The big battle for individuals is making sure that as the problems with the law come to light, as they are certain to do, the blame does not get placed on the remnants of the free market system, as the government (and likely the mainstream media as well) will likely try to do.

The New Abolitionism: Why Education Emancipation is the Moral Imperative of our Time
This article from the Objective Standard lays out the case for abolishing the government education system.  I was quite surprised with a lot of the quotes from this article the shed some light on how the originators of the public education system saw children and parents.  One example:

The goal of government schools is not to serve children by teaching them to think and acquire important knowledge, but to serve the state by forcing children to conform to its will. The U.S. Bureau of Education made the point clear in 1914: “The public schools exist primarily for the benefit of the state rather than for the benefit of the individual.”30 More recently, William H. Seawell, a professor of education at the University of Virginia, defended government schooling by stating: “Each child belongs to the State.”31

You do need to be a subscriber to read all the article.

Planning ahead is considered racist?
An article referenced in the above article gives another great example of why government schools need to be done away with.  The article is from 2006 but I don't anything has changed in the meantime.

According to the district's [Seattle Public Schools] official Web site, "having a future time orientation" (academese for having long-term goals) is among the "aspects of society that overtly and covertly attribute value and normality to white people and Whiteness, and devalue, stereotype and label people of color."

Fiscal Cliff Deal Raises Taxes, Delays Sequestration...And Will Cut Spending!
I am not sure that I am convinced that the fiscal cliff deal will eventually lead to spending cuts, but it is a good summary of the deal and its possible effects.  One thing that I think is particularly worth noting is the one year extension of the so-called "doc fix" which was enacted back in the 90's to help control Medicare costs by reducing payments to doctors.  Every year since the law was passed Congress has passed a "fix" that prevents the effect of the law from actually taking place.  If the law had taken effect this year, it would have resulted in a 26.5% cut in payments to doctors accepting Medicare patients.  This would likely have some pretty significant impact on access and timely treatment.

I find this of particular interest because part of ObamaCare is the IPAB, Indpendent Payment Advisory Board, whose job it is to control Medicare costs by reducing payments to providers.  Given that Congress has refused to follow a similar law for almost 20 years because of, presumably, the negative impact on seniors, how popular is Obamacare going to be when the same type cuts are required by the IPAB and the Congress has very limited options to override the cuts?

No Real Cuts in Those Fiscal Cliff "Spending Cuts"
A nice summary of why when the government in Washington (I loved the reference to Mordor on the Potomac) says they are cutting spending, the don't really mean it the way a normal person would think of it.

The Times on Taxes
One of my favorite blogs to read, The Grumpy Economist, goes over a story from the New York Times that perhaps reveals what liberals mean when they talk about tax reform.  This seems to be right in line with comments by the chairman of the Democratic National Committee, Howard Dean, that we all need to be paying higher taxes.  WCAX television from Burlington, VT reported Dean as tweeting:

The cliff bill is a fiscal disaster.  Those under 450k get permanent tax cuts.  The deficit will be fixed entirely by cuts in the future
It is worse than doing nothing.  The easy way out and will be very bad in the long run.  Deficits will grow, and key programs must be cut.

Apparently for many liberals, or at least some, the only answer is to raise taxes and keep spending money.  Also, I am not sure what world Howard Dean is in where anything that Congress does is "permanent."  In this case "permanent" simply means that the tax cuts for those who make less than $450,000 do not need to be renewed periodically.  There is nothing that says they cannot be changed at a later date.

Hugo Chavez's Last Days
This one worries me because my wife and her family live in Venezuela, so the possibility of bad things happening there when/if Chavez is gone is certain to give me some sleepless nights.  Hopefully things will be better than a worse case scenario.

Government Can’t Silence Speech Criticizing Its Actions, Even If That Speech Is 'Commercial'
A nice article of how the government tries to hide the actual extent of their taxes on the public, even to the extent of attempting to limit the First Amendment's Freedom of Speech.  Also another good example of why corporations, which are just groups of individuals who come together for a specific purpose, need to have the same rights as the individuals that make up the group.

Regards