Wednesday, February 22, 2017

Glenn Greenwald Nails It

I don't always agree with Glenn Greenwald, however, I always read and listen.  He's at his best here:

Glad I Moved to Jersey After All

Well, not 100% true.  I'm a Philly kid through and through, however, I'm not stupid, which I can't say for the politicians that purportedly run the City of Brotherly Love.  With the new year came the implementation of the soda tax and let's not forget, a new additional tax on gasoline (Update: this just in: Pennsylvania Turnpike tolls to increase on Sunday).  Now, along with the new year and these new taxes, the residents of Philly are surprised, alarmed and even angry at the costs they now have to pay for soda and gas.  Go figure.  Politicians had actually claimed the tax would not "have to be passed onto the consumer", but of course, someone has to pay.  Also, remember this: the soda tax is a regressive tax, that hits those that can least afford it, the hardest.  So, as a former Philadelphian, let me tell you what I did, routinely, to avoid all the bullshit taxation in Philadelphia: I went across the Ben Franklin Bridge to New Jersey to buy my alcohol (wine and liquor can only be purchased at state-run stores in PA ... well, there has been some liberalization lately with wine); I would fill up my car in Jersey while I was there, and for the most part, I would shop as much as I could outside the city of Philly in order to avoid the extra 2% sales tax.  Though I don't smoke, I know of many people that buy their smokes outside the city to avoid the extra taxation on cigarettes levied by the city.  So, if I was still there, I'd be sure to buy any sugar drinks outside the city as well.  Philadelphia is not a big city.  In addition to the short ride to NJ to the east, the northern and western suburbs such as Delaware County, Bucks County and Montgomery County is just a short ride away as well.  Granted, the gas tax could not be avoided by staying in PA, but all others can be avoided.  Let's not forget that Delaware is but a short ride south on I-95 and it has no sales tax.  When I plan to purchase anything with a significant cost, I'll likely head south. It's simple really: people respond to incentives, so it's not surprise that people will avoid taxation if at all possible.   One would think that lowering taxes would attract people to come to the city and keep those that live there buying within the city.  Anyway, if you're interested, read the latest on the soda tax implementation from - Outrage in Philadelphia as New Soda Tax Doubles Drink Prices.  For a more local and humorous view, here's The Burning Platform's Jim Quinn, who lives in the area, read Ignorant Masses Shocked By Philly Beverage Tax Impact.  Just for the record, Jim Quinn is a regular at The Shamrock in Wildwood (see my previous post on the drinking age) ...

Update 2/22/2017:  Ok, so I'm somewhat skeptical about the job loss numbers, however, I remain convinced that there will be negative repercussions as a result of Philly's Soda tax.  Here's Philadelphia Soda Tax Leads To 30-50% Plunge In Sales, Mass Layoffs and
With Sales Depressed by Soda Tax, Philly Grocers Look to Cut Jobs as Mayor Blames 'Greedy' Soda Industry

Update 1/19/2017:  Nice job by the Philadelphia Inquirer here as it provides a graphic of the impact of the sugar tax.

Abigail Blanco links to the Philadelphia Inquirer piece as well in her excellent post Escaping Philly's Soda Tax.  She provides the basic Econ 101 rules as to why this regressive tax will not work as designed.

Update 1/13/2017:  The economic illiteracy of Philadelphia politicians is once again evident as the Philly Mayor Blames ‘Price Gouging’ for Outrage Generated by City’s New Soda Tax.  Of course, I firmly believe that politicians are very aware of economics, but count on the continued ignorance of their constituents.  It borders on the absurd to believe that anyone would think that increased costs of a product would not be passed on to the customer and yet that's exactly what the mayor wants Philadelphians to believe, i.e., the increased costs should not have been passed on and rather, they should have been "absorbed" by the manufacturer and/or the distributor.  I should refer to him from this point on as Mayor Maduro.

Here is a proud Philadelphian who is tracking just how much tax he is avoiding by shopping outside the city.

Good News!

We're Halfway to Encrypting the Entire Web.  I hear a Bon Jovi song in my head ...

Friday, February 17, 2017

Still Wrecks Me

Ok, so I'm not over it like I thought I was .... If that f'ing diamond could just come off the damn thing I'd be somewhat ok ....

Source:  German churches and South Philly sites headed for historic designation

Seriously, How Long Can This Go On?

Caterpillar Records 50 Consecutive Months Of Declining Global Sales.  Really? Sure, everything's fine with the global economy. 

On Taxi Medallions and the Dalai Lama

Two worthy reads ...

Medallion Bubble Bursts: Taxi Protest Down and a US Price Collapse

and my favorite: Chinese students in the US want a 'safe space' created for the Dalai Lama's commencement talk scheduled for June ... what a f'ing world, really:

The Road to Hell Was Paved with College Safe Spaces

Thursday, February 16, 2017

Must Read: The Dangers of a "Universal Basic Income"

Another idea that sounds feasible, and one that only an intellectual or politician can actually believe would work, is that of the Universal Basic Income (UBI).  Even for those that discuss the idea as an improvement on, or as the replacement for the multitude of welfare programs in place today, rest assured that it would improve nothing and above all things, it would not reduce poverty.  Remember, nothing is free and so long as government (politicians) manages the program, it will not work.  This is simply another program crafted on the idea of "good intentions", i.e., it "sounds" so right, so good and so appealing to common sense.  These are the programs that especially fail!  Remember as well, the one trait that is not so common in the halls of government is common sense.  Here's Nathan Keeble's take on The Dangers of a "Universal Basic Income":

Finland has announced that it is conducting a social policy “experiment” which deserves closer examination. Through 2017 and 2018, Finland will provide a guaranteed basic income of 560 euros to 2,000 randomly selected welfare recipients. This benefit will be subtracted from other, currently existing welfare benefits that participants may be receiving, and, crucially, the payments will continue regardless of any other income that is earned. If a participant of this program finds a job, the government will continue to pay them the 560 euros in addition to any other income.

The Finnish government hopes — and many believe — that this program will help to alleviate poverty as well as make inroads in reducing the country’s current 8.1 percent unemployment rate. This test trial is supposed to prove it, potentially opening the door for a full implementation of a universal basic income (UBI).

Why People Support a Universal Basic Income

The universal basic income is being considered as a partial or complete replacement to the current means-tested system of welfare. Under the current system, welfare recipients’ benefits taper off and eventually stop, completely, based upon how much income individuals independently earn. Naturally, this creates a disincentive to rejoin the labor force, because people fear a reduction in total income as welfare benefits are removed or if they believe the added income from a job isn’t worth the labor. Demonstrated very simply, if someone is currently receiving a total income of $1,100 through a means-tested welfare program, many will be less likely to seek a job which will result in similar income levels, as most prefer leisure to labor.

Supposedly, the UBI’s main innovation is that it manages to largely avoid this long standing failure. Since everyone would receive the established basic income regardless of other income earned, proponents believe that people would still have strong income based incentives to work. Some have gone even further, suggesting that the program will be a positive for employment because the financial cushion provided by a UBI will help people in the transition from unemployment to employment. For instance, a struggling entrepreneur or artist could, in part, rely on it while building support.

For these reasons, the UBI has gained support from the entire political spectrum, including libertarian-leaning think tanks like the Niskanen Center.

Where UBI Proponents Go Wrong

A universal basic income is not the god-sent welfare policy that it initially seems to be. It does not create incentive to work. It won’t help solve unemployment, and it will not alleviate poverty. The truth is that a UBI will exaggerate all of these factors in comparison to what would exist in a more unhampered market. There is even reason to think that it would be worse in the long run than traditional, means-tested welfare systems.

First, UBI does not eliminate the disincentives to work that are inherent in welfare programs; it simply moves them around. This program must be financed after all, and any welfare system, including the UBI, is necessarily a wealth redistribution scheme. Wealth must be forced from those who have it to those who do not. This means that at some point on the income ladder, people must go from being net receivers of benefits to being net payers of benefits.

The progressive taxation that is necessary to finance a UBI means that the more a person earns, the higher percentage of their wealth will be taken from them. The work disincentives are therefore still very much present in the tax system. They’ve simply been transferred onto different, higher income groups of people.

UBI Diminishes the Power of Consumers in Directing the Marketplace

The universal basic income shares another problem with traditional welfare systems. Far from promoting the unemployed from searching for work the market rewards, it actually subsidizes non-productive activities. The struggling entrepreneurs and artists mentioned earlier are struggling for a reason. For whatever reason, the market has deemed the goods they are providing to be insufficiently valuable. Their work simply isn’t productive according to those who would potentially consume the goods or services in question. In a functioning marketplace, producers of goods the consumers don't want would quickly have to abandon such endeavors and focus their efforts into productive areas of the economy. The universal basic income, however, allows them to continue their less-valued endeavors with the money of those who have actually produced value, which gets to the ultimate problem of all government welfare programs.

In the marketplace, wealth is earned by generating value. When someone buys a good, they’ve earned the money they are spending by having produced something else. This is not so with welfare programs like a universal basic income. Money is forcibly taken from those who have produced enough to earn it, and given to those who haven’t. This allows for people who aren’t producing wealth to continue to consume scarce goods. Eventually, all government welfare leads to the consumption of wealth, or, at the very least, a reduction in the amount of wealth that would have been accumulated otherwise. When entrepreneurs have less need to respond to the needs and desires of their customers, consumers will find themselves with fewer choices and with lower-quality choices.This means that overall welfare makes everyone poorer than they would have been in a free market.

How Finland Really Can Reduce Poverty

If Finland (or anywhere else) wishes to help alleviate poverty and unemployment, the best steps to take are in the directions of reducing the cost of living and creating conditions favorable to plentiful employment.
Charles Hugh Smith recently outlined the basics:
This may seem obvious, but the conditions required for work to be abundant and the cost of living to be low are not so obvious. For work to be abundant:
  • It must be easy to start a business.
  • It must be easy to operate the new business.
  • It must be easy to make a profit so the business can survive the first few years and,
  • It must be easy to hire employees.
All these factors require an environment of low-cost compliance with regulations, low tax rates, low costs of transactions, reasonable transport costs, reasonable cost of money (but not near-zero), reasonable availability of capital for small enterprises, local and national governments that actively seek to smooth the path of new enterprises and existing enterprises seeking to expand, and a transparent marketplace that isn't dominated by politically dominant cartels and subservient-to-cartels government agencies.
This matters because the number one cause of the high cost of living is artificial scarcity created and maintained by monopolies, cartels, and the government that serves their interests. Artificial scarcity imposed by cartels and a servile state is the primary cause of soaring costs in a variety of sectors.
In Scandinavia, as in most countries, its is becoming increasingly difficult to open and sustain businesses. In Scandinavia especially, labor unions exercise immense power over private business, pushing up costs and raising barriers to entrepreneurship and creating new businesses.

As has always been the case, it is necessary to create wealth before it is possible to redistribute it, and policies that encourage movement toward less productive types of work will fail to produce the wealth that government planners would like to spread around.

(For a discussion of the ethical case against a UBI, see David Gordon’s article, A “Libertarian” Argument for the Welfare State.)

For more, listen to one of my favorite economists who actually supports the UBI, in this latest podcast from EconTalk, as Russ Roberts interviews Mike Munger.

1/27/2017:  Bryan Caplan weighs in on the topic in his latest, The Many Faces of Means-Testing

New 2/6/2017:   Edwin Dolan replies to Bryan Caplan (above) in Why Should a Libertarian Take Universal Basic Income Seriously?

2/7/2017:  Bryan Caplan's reply to Edwin Dolan, UBI: Reply to Dolan

2/8/2017:  Dolan replies to Caplan in the comments section in UBI: Ed Dolan Responds

2/9/2017:  Caplan's Rejoinder on UBI

New 2/13/2017:  Caplan's Final Reply to Dolan on the UBI, For Now

The Best 97 Seconds on School Choice

From none other than Cory Booker:

On The Nature of Politics and Ideology

Kevin D. Williamson pens a classic! Totalitarianism in the classified ads:
One of the less understood criticisms of progressivism is that it is totalitarian, not in the sense that kale-eating Brooklynites want to build prison camps for political nonconformists (except for the ones who want to lock up global-warming skeptics) but in the sense that it assumes that there is no life outside of politics, that there is no separate sphere of private life, and that church, family, art, and much else properly resides within that sphere.
Earlier this week, I expressed what seemed to me an unobjectionable opinion: that politics has a place, that politics should be kept in its place, and that happy and healthy people and societies have lives that are separate from politics. The response was dispiriting but also illuminating.
Among those who directed tut-tuts in my direction was Patti Bacchus, who writes about education for the Vancouver Observer. “That’s one of the most privileged things I’ve ever heard,” she sniffed. Patti Bacchus is the daughter of Charles Balfour, a Vancouver real-estate entrepreneur, and attended school at Crofton House, a private girls’ school whose alumni include Pat (Mrs. William F.) Buckley. It is one of the most expensive private schools in Canada. I do enjoy disquisitions on “privilege” from such people. But of course her criticism is upside-down: It is exactly we privileged people with education, comfortable lives, and spare time who expend the most energy on politics. But there are other pressing priorities, like paying the rent, for poor people. If Ms. Bacchus would like to pay a visit to West Texas, I’ll introduce her to some.
Another objection came from a correspondent who demanded: “What if politics greatly impacts every facet of your life?” That would be an excellent question if it came from some poor serf living in one of the states our American progressives so admire, such as Cuba or Venezuela, where almost every aspect of life is under political discipline, where government controls whether you eat — and, indeed, whether you breathe. But if you live in the United States and politics greatly impacts every facet of your life, you have mental problems, or you are a politician.
(But I repeat myself.)
Esar’s Comic Dictionary (1943) contains two definitions of the word “fanatic,” often wrongly attributed (by me, among others) to Winston Churchill: First, “A person who redoubles his efforts after having forgotten his aims.” Second (my favorite), “One who can’t change his opinion and won’t change the subject.”
If you want to see fanaticism at work, try looking for a roommate in Washington or New York City.

From the New York Times we learn of the emergence of the “no-Trump clause” in housing ads in our liberal (which is to say, illiberal) metropolitan areas. The idea is nothing new — I saw similar “No Republicans Need Apply” ads years ago when looking for apartments in Washington and New York — but the intensity seems to have been turned up a measure or two: In 2017, the hysteria knob goes up to eleven. Katie Rogers of the Times offers an amusingly deadpan report:
In one recent ad, a couple in the area who identified themselves as “open-minded” and liberal advertised a $500 room in their home: “If you’re racist, sexist, homophobic or a Trump supporter please don’t respond. We won’t get along.”
That’s a funny kind of open-mindedness — it is in fact literal prejudice. It is also illiterate: Whatever Donald Trump’s defects, to associate him with homophobia is a stretch to the point of dishonesty, inasmuch as Trump in 2017 is well to the liberal side of Barack Obama in 2008 on gay marriage. Trump’s personal style is abrasive and confrontational, but he also is on the actual policy issues arguably the most moderate Republican president of the modern era, one who often has boasted of taking a more progressive view of such issues as abortion, gay rights, gun control, raising taxes on Wall Street, and what we used to call “industrial policy.” Given his history in and with the Democratic party, this is unsurprising.
But, as Robin Hanson put it, politics isn’t about policy.

What it is about is tribe, which is what makes all that conflation of racism and bigotry with political difference so amusing. Political prejudice is not the moral equivalent of racial prejudice, but they operate in very similar ways, as anybody who ever has spent much time around a genuine racist or anti-Semite knows. Taxes too high? Blame the blacks. Not making enough money? Blame the Mexicans. Foreign policy seem overwhelmingly complex? Blame the Jews. Whataburger gave you a full-on corn-syrup Coke instead of a Diet Coke? Blame the blacks, Mexicans, Jews, subcontinental immigrants . . . somebody. Racism and anti-Semitism are metaphysical creeds, and those who adhere to these creeds see the work of the agents of evil everywhere. For them, there is no world outside race and racism.
In this, they are very similar to the Hillary Clinton–voting Manhattan balletomanes who seethe that they must endure being seated in the David Koch theater. David Koch’s brand of libertarianism is mild and constructive, and it has about as much to do with ballet as Keith Olbermann has to do with astrophysics. But for the fanatic, even to hear the name spoken is unbearable.
Imagine being so mentally poisoned and so spiritually sick that you feel the need to organize a protest at New York–Presbyterian Hospital because the institution accepted $100 million — the largest gift in its history, being put to purely philanthropic health-care purposes — from someone whose political views are at odds with your own. Imagine what it must be like to feel that doing that is a moral imperative. Imagine sitting down to listen to a Beethoven string quartet and being filled with paralyzing anxiety that the cellist might not share your views on the Arab–Israeli conflict.

(I’ll bet Beethoven had really regressive views about gay marriage. And who knows what Bach or Bernini thought about tax policy?)

Imagine being willing to take a stranger into your home only on the condition that he did not vote for the man who won the 2016 presidential election. One of those Trump-excluding roommates mentioned in the Times insisted that this discrimination was in the interest of the Trump voters, too, who would be unhappy in a household full of “raging liberals.”
Meditate, for a moment, upon the word “raging.”
The people who believe that there can be no art, literature, culture, or life apart from politics are people who do not understand art, literature, culture, or politics, and whose lives are sad and sadly deficient.
A Buddhist writer once described two kinds of material unhappiness: the absence of what one desires and the presence of what one despises. But the Buddha was known to associate with worldly men and their unclean enthusiasms in much the same way that Jesus slummed around with prostitutes and tax collectors, instructing us by example to seek after lives that are as large as our love and not as small as our hatred. The people who close their doors against those who simply see the world in a different way, who scream profanities at Betsy DeVos or chant “You should die!” at Jewish musicians, are people who cannot rise far enough above their own pettiness to understand that the thing they fear is the thing they are.

Infrastructure Projects: Money Sucking Political Behemoths

Couldn't say it any better ...

Quote of the Day

"This isn’t about Mike Flynn. It isn’t even about Trump. It’s about the future of our republic. Will we allow rogue national security officials to run rampant and utilize police state methods to advance their policy goals? If the answer is yes, then we’re doomed." - Justin Raimondo, A Win For The Deep State

Wednesday, February 15, 2017

European Debt Crisis: It's Not Just Greece

This cannot last much longer, and it will not end well. European debt crisis: It's not just Greece that's drowning in debt.  When a nation's government spends more than it produces, it just cannot go on indefinitely despite the best attempts to do so by its central bank.  Greece is a convenient distraction for all the other debtor nations.  Buckle up and hold fast.

Tuesday, February 14, 2017

Richard Epstein: Donald Trump Should Resign

It's been a long time since I posted anything by Richard Epstein, whom I hold in high regard.  Here's his latest, Time For Trump To Resign?:
The nearly four weeks since President Donald Trump’s inauguration have been the most divisive period of American politics since the end of the Second World War. The sharp lines that everyone is drawing in the sand pose a serious threat to the United States. On the one side stand many conservatives and populists who are rejoicing in the Trump victory as the salvation of a nation in decline. On other side sit the committed progressives who are still smarting from an election in which they were trounced in the electoral college, even as Hillary Clinton garnered a clear majority of the popular vote.

As a classical liberal who did not vote for either candidate, I stand in opposition to both groups. And after assessing Trump’s performance during the first month of his presidency, I think it is clear that he ought to resign. However, it important to cut through the partisan hysteria to identify both what Trump is doing right and wrong in order to explain my assessment of his presidency to date.

On the positive side is the simple fact that Trump won the election. What is right about Trump is what was wrong with Clinton—her promise to continue, and even expand, the policies of the Obama administration. The day after the election, it was clear that none of her policy proposals would be implemented under a Trump presidency, coupled with a Republican Congress. As I have long argued, there are good reasons to critique the progressive world view. Progressives believe that reduced levels of taxation and a strong dose of deregulation would do little or nothing to advance economic growth. In their view, only monetary and fiscal policy matter for dealing with sluggish growth, so they fashion policy on the giddy assumption that their various schemes to advance union power, consumer protection, environmental, insurance, and financial market regulation—among others—only affect matters of distribution and fairness, but will have no discernible effect on economic growth. In making this assumption, they assume, as did many socialists and New Dealers in the 1930s, that it is possible to partition questions of justice and redistribution from those of economic prosperity.

In taking this position, they fail to account for how administrative costs, major uncertainty, and distorted incentives affect capital formation, product innovation, and job creation. Instead, today’s progressives have their own agenda for wealth creation that includes such remedies as a $15 minimum wage, stronger union protections, and an equal pay law with genuine bite. But these policies will necessarily reduce growth by imposing onerous barriers on voluntary exchange. The fact that there was any economic growth at all under the Obama administration—and even then, it was faltering and anemic—had one cause: the Republican Congress that blocked the implementation of further progressive policies and advanced a pro-growth agenda.

Sadly, both President Obama and his various administrative heads pushed hard on the regulatory levers that were still available to them. And so we got a Department of Labor (DOL) decision to raise the exemption levels under the Fair Labor Standards Act from just over $23,000 to just over $47,000, in ways that would have disrupted, without question, several major segments of the economy for whom the statutory definition of an hour does not serve as a workable measure of account. Thus, at one stroke, DOL compromised the status of graduate students, whose studies and work are often inseparable; of tech employees, whose compensation often comes in the form of deferred stock payments; and of gig workers, who are employed by the job and not the hour. At the same time, the general counsel of the National Labor Relations Board has taken steps to wreck highly successful, long-term franchising arrangements, by announcing henceforth that the franchisor may on a case-by-case basis be treated as an employer subject to the collective bargaining obligations of the NLRA. These, and similar decisions, are acts of wealth destruction, and they offer one powerful explanation, among many, for the decline in the labor participation rate to its lowest levels since World War II.

The misguided opposition to the Trump administration extends far more broadly. I was an advisor to the MAIN coalition (Midwest Alliance for Infrastructure Now) in the now successful effort to undo the roadblocks that the Obama administration put in the path of the Dakota Access Pipeline, and still find it incomprehensible that any administration could engage in a set of collusive rearguard actions to block a pipeline that met or exceeded every government standard in terms of need, safety, and historical and environmental protection. The handwringing of the Obama administration over the Keystone XL pipeline was equally inexcusable. Two expertly crafted executive orders from the Trump administration removed the roadblocks simply by allowing the standard review processes of the Army Corps of Engineers and other agencies to run their course. Nonetheless, virtually every initiative to deregulate that comes from the Trump administration is greeted with howls of protest, whether the topic be healthcare, banking, brokerage, or consumer protection. Yet these very deregulations explain why the stock market has surged: collectively, they will help revive a stagnant economy.

Worse still are the attacks on the integrity and independence of Judge Neil Gorsuch from most, but not all, progressives. Georgetown University’s Neal Katyal should be singled out for his praise of Gorsuch as a person and a judge. Unfortunately, the vast majority of progressives, like Senate Minority Leader Charles Schumer, wail that Gorsuch is not a mainstream judge, is not sufficiently supportive of progressive ideals, and, most critically, is not Judge Merrick Garland. The United States sails in treacherous waters when members of either party think that any judge appointed by the opposition is not fit for service on the United States Supreme Court unless he publicly denounces the President who nominated him for that high office. I have long believed that any nominee should be judged on his or her record, without being called on to play rope-a-dope before hostile senators who only wish to bait, trap, and embarrass the nominee.

It seems clear that if President Trump went about his job in a statesmanlike manner, the progressive counterattack would surely fail, and a sane Republican party could gain the support of a dominant share of the electorate for at least the next two election cycles, if not more.

Yet there are deeper problems, because President Trump’s anti-free trade agenda will hurt—if not devastate—the very people whom he wants to help. Extensive trade between the United States and Mexico is indispensable for the prosperity of both countries. The looming trade war threatens that win/win position. The notion that the United States should run positive trade balances with every country is an absurd position to take in international economic relations, lest every country has the right to claim the same preferred status for itself. Yet it has never occurred to Trump that a negative trade balance amounts to a vote of confidence by other countries that it is safe to invest in the United States, allowing the United States to create new industries and new jobs. Nor does he understand that any effort to be successful in the export market requires importing cheap components from foreign firms—an oversight evident from his ill-conceived executive order calling, whenever legal, for American pipe on an American pipelines. If our trade partners retaliate, the current stock market surge will take on a different complexion. The Dow may be high, but the variation in future prices will be high as well. If Congress thwarts his anti-trade agenda, the domestic reforms should yield lasting benefits. If Congress caves, or if Trump works by aggressive executive order, the entire system could come tumbling down.

Speaking of executive orders, the President’s hasty and disastrous order dealing with immigrants has vast implications for America’s position in the world. In a global economy, the United States cannot afford to let petty protectionism keep the best talent from coming here for education and staying later for work. I, for one, believe that his executive order exceeds his executive powers. Others, like Michael McConnell, disagree. But no matter which way one comes down on its legality, nothing excuses its faulty rollout, petty nationalism, exaggerated fears of terrorism, and disruptive economic effects. The Trump administration agenda desperately needs to be rethought from the ground up by a deliberative process in which the President relies on his Cabinet.

So the question remains: does Trump remain his own worst enemy? My fears are that he is too rigid and too uneducated to make the necessary shift to good leadership. By taking foolish and jingoist stances, Trump has done more than any other human being alive today to bring a sensible classical liberal agenda into disrepute. Then there is the matter of his character. The personal moral failings of the President include his vicious tweets, his self-righteous attitude, his shameless self-promotion, his petty resentments, his immoral flirtation with Vladimir Putin, his nonstop denigration of federal judges, his jawboning of American businesses, his predilection for conspiracy theories, his reliance on alternative facts, and his vindictive behavior toward his political opponents.

Hence, I think that there is ample reason to call for Trump’s resignation, even though I know full well that my advice will not be heeded. And this welcome outcome will not happen so long as the attack against him comes solely from progressive Democrats. Sensible Republicans should focus on the threat that he represents to their plan, and recall that the alternative is no longer Hillary Clinton, but Mike Pence. I think that Pence is unlikely to abandon the positive aspects of the Trump agenda, and there is some reason to hope that he will back off Trump’s suicidal positions on trade and immigration, and put a stop to the endless train of uncivil behaviors demeaning the office of the President. Some miracles happen, but a Trump transformation will not be one of them. Unfortunately, his excesses could power a progressive revival. Would that I had the power to say to Trump, “You’re fired!”

Monday, February 13, 2017

I Agree, Especially OUTSIDE the United States

Granted, I'm all for reducing our domestic military footprint to something that is more rational and reflective of today's defense challenges.  However, I'm adamant about closing all military facilities outside our borders - without exception.   I can attest to the fear that grips an area when its local military installation(s) close, but also, I can confirm the transformation that can occur when such facilities are re-purposed for civilian use.  When the military announced the closure of Philadelphia Naval Yard back in the early 80's, the area was gripped with equal parts anger and depression.  As Preble points out in the article below, closures are not a death sentence, and today, the Naval Yard is home to several companies, including GSK.  A worthy read indeed! America Has Too Many Military Bases:
Members of Congress have a hard time agreeing on virtually anything, and they’re already butting heads with the new president. But one issue should unite them: a new initiative to shrink the Pentagon’s massive overhead.

President Trump and Secretary of Defense James Mattis have pledged to cut waste. And key leaders in Congress have renewed their calls for rationalizing the Pentagon’s base structure. Now is the time for Congress to come together, put the national interest over parochial interests and finally support a new round of base closings.

As Senate Armed Services Committee chair Sen. John McCain recently said to reporters, “Right now we do have excess properties and facilities, and I think we need to look at it.” On the House side, Rep. Adam Smith, the ranking member of the House Armed Services Committee, is pushing legislation that would initiate a new round of base closings in 2019, because, as he notes, “We should not be wasting hard-earned taxpayer money to maintain excess infrastructure that DoD has determined it does not need.”

f properly structured, any new set of base closings could result in billions in savings. This item is high on the military’s agenda. The brass have been asking Congress for permission to eliminate unneeded facilities for years, and for good reason. The last round of closures occurred eleven years ago, at a time when the military was busy fighting two wars.

The Defense Department now estimates that nearly one-quarter of its current bases serve no military need. This is true even if the Army and Marine Corps remain at their current size. The billions of dollars wasted on overhead could be put to far better use, especially at a time when the services claim that they lack the resources to pay for essential functions such as training and equipment maintenance.

So why isn’t there an overwhelming push to close unneeded bases? The resistance is grounded in pork-barrel politics, not a careful assessment of the nation’s defense needs. Too many members of Congress believe that they were elected to put the interests of their state or district over that of the country. They believe that they are doing their duty by blocking any base closures.

In fact, these representatives are actually doing harm to the nation and their constituents. Their stubborn refusal to allow the military to use its resources efficiently also prevents defense communities from taking advantage of land and property currently trapped behind chain-link fences and razor wire.

In that sense, the closure of military bases actually opens them up. Just ask the people of Philadelphia, who can now follow South Broad Street all the way to the Delaware River, through the gates of what used to be the Philadelphia Navy Yard. Austin, Texas, welcomes millions of people every year through the gleaming Austin-Bergstrom International Airport, formerly Bergstrom Air Force Base. The former naval air station in Brunswick, Maine, is now Brunswick Landing, a thriving business campus. Cal State Monterey Bay was carved out of the sprawling Army training base at Fort Ord. Thousands of acres have been set aside in the Fort Ord National Monument, which includes eighty-six miles of mountain bike and hiking trails.

A 2005 study by the Pentagon’s Office of Economic Adjustment looked at seventy-three communities impacted by a base closure, and determined that nearly all civilian defense jobs lost were replaced within fifteen years. In addition, the new jobs are in a variety of industries and fields, allowing communities to diversify their economies away from their excessive reliance on the federal government.

To be sure, base closures are initially disruptive to local economies and patterns of life, but most places do recover. In some cases, recovery has been quite rapid. The best way to ensure a successful transition is by encouraging local elected officials and civic leaders to plan for the future. Congressional leaders wishing to facilitate a new round of base closures should familiarize themselves with successful defense conversion cases, and be willing to help apply lessons learned.

Before Congress signs off on sharp increases in Pentagon spending, it should make sure the department is using its current resources as efficiently as possible. Closing unneeded bases is a good place to start.

Thursday, February 9, 2017

Wish They'd Stop Putting Their Countries So Close to Our Bases!!

PROOF that Russia and Iran Want War! Begs the question, as always: when does defense become offense?  Remember history: the USA was ready to start a nuclear war because Cuba was hosting Russian missiles and yet America thinks nothing of having bases outside its borders.  


Very interesting read ... The Number-One Mind-Control Program at US Colleges.  Makes 'ya think.  Here's just the opening:
Here is a staggering statistic from the National Alliance on Mental Illness (NAMI): “More than 25 percent of college students have been diagnosed or treated by a professional for a mental health condition within the past year.”

Let that sink in. 25 percent.

Colleges are basically clinics. Psychiatric centers.

Colleges have been taken over. A soft coup has occurred, out of view.

You want to know where all this victim-oriented “I’m triggered” and “I need a safe space” comes from? You just found it.

It’s a short step from being diagnosed with a mental disorder to adopting the role of being super-sensitive to “triggers.” You could call it a self-fulfilling prophecy. “If I have a mental disorder, then I’m a victim, and then what people say and do around me is going disturb me…and I’ll prove it.”

Everything That's Wrong With American Government in One Chart

The entire lot has to go in order to really drain the swamp.


Nassim Taleb on DRT

Nassim Taleb: absolutely love this guy! He tells it like it is and there is absolutely no tolerance for bullshit.  Here's an interview, ‘Trump makes sense to a grocery store owner’ that is well worth the read and explains much about what is really happening today ...

What, You're Suprised To Learn ....

The California Public Employees Retirement System, or CalPERS, voted in December to lower the pension fund's discount rate—the projected annual investment returns for future years—from 7.35 percent to 7 percent, in two steps that will occur between now and 2020. It's a modest adjustment and one that leaves the fund with a discount rate that still might be too high, but even that small change is going to add billions to the state's annual pension tab.

Last week, the California State Teachers' Retirement System, or CalSTRS, followed suit, announcing plans to lower the discount rate from 7.5 percent to 7 percent over the next two years.

"Both decisions acknowledge that the funds have earned lower-than-expected returns in recent years. With less money from investments, the funds are turning to taxpayers and employees to shore up their finances," the Sacramento Bee reported.

Taxpayers will be hit hard by the change. Bloomberg, citing data from the California Finance Department, says the share of pension costs paid by state taxpayers will triple in less than a decade and might increase further if investment returns under-perform the 7 percent threshold.

Every government entity that runs a pension system has to forecast the future costs of those benefits in order to know how much must be contributed (often, politicians will completely ignore that bit of information, but that's beside the point for now). Funding for those future benefits comes from three sources: contributions made by public sector employees, contributions made by taxpayers via government budgets, and investment returns.

To make a prediction about how much money has to come from the first two sources, governments make predictions about future investment returns. For years, pension plans have been using overly generous assumptions about future investment returns, which has effectively hidden the true cost of these pension plans for public workers and taxpayers.

California's move to lower the projected rate of return for CalPERS follows a recent trend that has seen many cities and states similarly reduce their expectations.

It's important to remember that changing those future projections doesn't alter the total future cost of the system. Those benefits are still just as costly and still must be paid for, but reducing the amount of money coming from Pot Three (investment returns) means states and cities will have to get a larger share of the money from Pot One and Pot Two (contributions from employees and taxpayers, respectively).

Here's the other catch: the contributions from Pot One are locked-in because they are negotiated as part of collective bargaining agreements. Those totals could change somewhere down the line, but they won't be changing immediately to reflect the new calculus created by CalSTRS decision this week.

That means the extra money needed to fill the gap is coming from Pot Two—from you, dear California taxpayers.

Of course, it was always going to come out of your pockets anyway. Those projected future returns are something of a fiction anyway, useful for making budgetary projections but not a guarantee of anything.

This [Think] about it like this. The Los Angeles Dodgers are projected to win 95 games this year, according to FanGraphs, which, like pension forecasting, uses statistical models of what we know about past performance to gauge future happenings. The stock market, like a baseball season, is full of surprises. There will be unexpected downturns, critical injuries, and breakout stars (or stocks) that few predicted. Adjustments will be made on a daily basis. In the end, CalSTRS might earn 7 percent for the year and the Dodgers might win 95 games, but no one can guarantee either outcome with 100 percent certainty.

If the Dodgers fall short, though, fans will be merely disappointed. If CalPERS or CalSTRS falls short, those same fans (and everyone else in California) will have to pay extra to make up the shortfall.

That's why pension plans should use the lowest reasonable projections possible. Economists and pension experts differ on what those should be, with some preferring a discount rate near zero and others arguing for a rate pegged to long-term government bonds (somewhere in the vicinity of 4 percent or so). Most experts agree that, over the long-term, pension funds are unlikely to achieve returns of 7 percent or more.

There's no downside to having a lower projection. It's like being told your favorite baseball team is expected to win about 85 games. That's a good season, but not a great one. If they end up winning 95 games, you'll be thrilled. If you expect that they will win 95 games and they only win 85, it's a disappointment.

If pension plans are pegged to 4 percent annual returns, and they earn 7 percent, taxpayers will be thrilled to learn they don't have to contribute as much as they thought. Expecting 7 percent and getting only 4 percent leaves governments exposed to higher costs than expected and puts taxpayers on the hook.

"Adopting a higher discount rate than warranted by the pension's actual risk cannot reduce the true, net cost of a pension plan," wrote Anthony Randazzo and Truong Bui, pension analysts for the Reason Foundation, which publishes this blog, in a 2015 report. "Similarly, a plan that employs a low discount rate puts a larger burden on today's taxpayers, leaving smaller obligations for future generations. Either way, the total economic cost of the pension plan remains the same."

Moving to a lower discount rate means a more realistic picture of just how expensive California's public sector pension plans are. The actual costs are probably higher still.

Quote of The Day

"Do you want to give his name? We'll destroy his career." - President Donald Trump.

Source: Updated! Meet the Libertarian-Leaning GOP Texas State Senator[s] Whose Career[s] Donald Trump Wants To Destroy.

Trust me, I understand these sentiments are expressed by many politicians, or better said, by those in power, yet to be the POTUS and utter them in public is inexcusable.  However, this being said, on another level, it is important that we hear it and it not be suppressed, as it's better to hear the bigots and despicable among us ...

Thanks Jimmy Carter ...

Why Do We Have a Department of Education? Jimmy Carter's Debt to a Teachers Union:
With Betsy DeVos just confirmed as the new Secretary of Education, it's worth taking a look back at the events that led the creation of this cabinet-level department.

Public education (including federal involvement in public education) was a thing in the United States for a couple hundred years before 1979, when Congress narrowly approved the cleaving of a new Department of Education (DoED) out of the already existing Department of Health, Education, and Welfare. But the newly created federal bureaucracy was more of a favor to a large and powerful special interest group on behalf of a beleaguered president than a necessary reorganization to allow the federal government to "meet its responsibilities in education more effectively, more efficiently, and more responsively," as then-President Jimmy Carter put it.

Upon signing the Department of Education Organization Act Statement in October 1979, Carter said:
Primary responsibility for education should rest with those States, localities, and private institutions that have made our Nation's educational system the best in the world, but the Federal Government has for too long failed to play its own supporting role in education as effectively as it could. Instead of assisting school officials at the local level, it has too often added to their burden. Instead of setting a strong administrative model, the Federal structure has contributed to bureaucratic buck passing. Instead of simulating needed debate of educational issues, the Federal Government has confused its role of junior partner in American education with that of silent partner.
Essentially, Carter's argument—similar to the argument President George W. Bush used to create the bloated, expensive, and ineffective Department of Homeland Security—is that because of all the "bureaucratic buck passing," a new bureaucracy must be created.

Creating the DoED was Carter's fulfillment of a 1976 presidential campaign promise, when he earned the endorsement of the largest labor union in the United States—the National Education Association (NEA). As the Washington Post reported in 1980:
The NEA gave its first presidential endorsement ever in 1976, when Walter Mondale promised them, at an NEA annual meeting, that the Carter administration would form an education department. At the 1976 Democratic National Convention, more delegates — 180 — belonged to the NEA than any other group of any kind. They've endorsed Carter for 1980, and were a major force in getting delegates to the Iowa caucuses...

Is the department, then, a creature of the NEA?

"That's true," says NEA executive director Terry Herndon. "There'd be no department without the NEA."
By the time the bill calling for the creation of the DoED had been passed in Congress, President Carter's approval rating was at its nadir—below 30 percent—in large part thanks to an international oil and energy crisis contributing to a tanking economy and a national "crisis of confidence."

A study of the DoED's creation by Georgia State University found that although the department "was fairly low on the list of priorities," President Carter's "Domestic Policy staff did its research, sent people to testify on behalf of the department in Congress, and hoped that their endorsement of the Department would help ensure the backing of the NEA and its members for the 1980 election."

A section on the DoED in the Cato Institute's Handbook for Congress includes a passage about the lukewarm support from even congressional Democrats for creating the DoED, who were more motivated to keep a Democrat in the White House than to create a new federal bureaucracy:
According to Rep. Benjamin Rosenthal (D-N.Y.), Congress went along with the plan out of ''not wanting to embarrass the president.'' Also, many members of Congress had made promises to educators in their home districts to support the new department. The Wall Street Journal reported the admission of one House Democrat: ''The idea of an Education Department is really a bad one. But it's NEA's top priority. There are school teachers in every congressional district and most of us simply don't need the aggravation of taking them on.''
Just today, Rep. Thomas Massie (R-Ky.) has introduced H.R. 899, a one-sentence long bill which would eliminate the Department of Education in its entirety by the end of 2018. Check back later for more Reason coverage of Massie's bill.

Of Course They Do

Military Leaders Request $30 Billion Budget Increase.  Of course, to criticize the military is to offend.  Few have the courage to ask the obvious questions, such as "why?" and "where does the money come from?" and my favorite, that no one asks is this: "is this really for defense?"  The military-industrial-congressional-security complex will be the destruction of us all.  Period.

The Role of Prices

Nice foundation piece in less than 5 minutes too!

Wednesday, February 8, 2017

What, You're Surprised To Learn ...

The Federal Government’s Big Bet on Student Loans Goes Bad?  Really?:
With the flurry of executive actions that President Trump has taken since coming into office on January 20, 2016 that has dominated the nation’s news coverage, surprisingly little attention has been paid to the deteriorating condition of the U.S. government’s student loan portfolio under President Obama’s administration, which became news in the days just before the inauguration. The Wall Street Journal reports on the Education Department’s student loan reporting scandal:
Many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed.

Last Friday, the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers.

When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country.

The new analysis shows that at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years.
Worse, the WSJ‘s editors have suggested that rather than having been the result of a computer coding error, the previous numbers on student loan defaults at thousands of colleges and trade schools may have been cooked to support President Obama’s political agenda. The National Association of Student Financial Aid Adminstrators excerpts the following portions of the WSJ‘s editorial analysis:
In early January the department disclosed that it had discovered a ‘coding error’ that incorrectly computed College Scorecard repayment rates—that is, the percentage of borrowers who haven’t defaulted and have repaid at least one dollar of their loan principal. The department says the error ‘led to the undercounting of some borrowers who had not reduced their loan balances by at least one dollar.’

The department played down the mistake, but the new average three-year repayment rate has declined by 20 percentage points to 46%. This is huge. It means that fewer than half of undergraduate borrowers at the average college are paying down their debt.

... The other scandal is that the Obama Administration used the inflated Scorecard repayment data as a pretext to single out for-profit colleges for punitive regulation. The punishment was tucked into a rule finalized in October allowing borrowers who claim their college defrauded them to discharge their debt. It requires for-profits in which 50% or fewer borrowers are paying down their principal to post the equivalent of a surgeon general’s warning in all promotional materials.

... This combination of cynicism and incompetence is what made the Obama Administration’s regulatory machine so destructive. One of the biggest messes it leaves behind is the government takeover of student loans that is likely to saddle taxpayers with hundreds of billions in losses. The Trump Administration now has to begin the cleanup job.
The Education Department’s corrected numbers confirm that the problem of student loan defaults and delinquencies is not confined to for-profit institutions, but also exists at similar levels among both non-profit and public institutions.

But the problems don’t stop there. Since President Obama greatly increased the role of the federal government in directly issuing student loans, borrowing nearly one trillion dollars to loan out to students at colleges and trade schools over the last 8 years, that 54% of student loan borrowers are now either defaulting or are delinquent in making payments on their loans means that the U.S. government isn’t getting anywhere near the revenue that it needs to sustain this portion of the national debt.

The options that the U.S. government has to deal with the increasingly negative outcomes from this situation are limited. With such inadequate revenues from student loan payments coming in to cover the cost of servicing their portion of the national debt, the U.S. government must either cut spending, increase taxes, or borrow even more money than it was planning to roll over the debt and compensate for that unrealized revenue.

Getting the U.S. government into the student loan business in such a big way was supposed to improve its fiscal situation, eliminating the need for politicians to risk their seats in Washington D.C. by having to make such potentially unpopular choices. Sadly, President Obama’s student loan fiasco would appear to have only made the need to make those hard choices more unavoidable.

Worthy Reads on Trump from

Trump at the Crossroads by Justin Raimondo

Trump and the End of Innocence by Justin Raimondo

Trump’s Foreign Policy: Obama’s Third Term, Bush’s Fifth by Thomas Knapp

American Education System ...

... is a dysfunctional, leftist, destructive mess!  Don't think so?  Here, read this if your stomach can take it: No Thug Left Behind

Walter Williams on The Minimum Wage

There is little question in most academic research that increases in the minimum wage lead to increases in unemployment. The debatable issue is the magnitude of the increase. An issue not often included in minimum wage debates is the substitution effects of minimum wage increases. The substitution effect might explain why Business for a Fair Minimum Wage, a national network of business owners and executives, argues for higher minimum wages. Let's look at substitution effects in general.

When the price of anything rises, people seek substitutes and measures to economize. When gasoline prices rise, people seek to economize on the usage of gas by buying smaller cars. If the price of sugar rises, people seek cheaper sugar substitutes. If prices of goods in one store rise, people search for other stores. This last example helps explain why some businessmen support higher minimum wages. If they could impose higher labor costs on their less efficient competition, it might help drive them out of business. That would enable firms that survive to charge higher prices and earn greater profits.

There's a more insidious substitution effect of higher minimum wages. You see it by putting yourself in the place of a businessman who has to pay at least the minimum wage to anyone he hires. Say that you are hiring typists. There are some who can type 40 words per minute and others, equal in every other respect, who can type 80 words per minute. Whom would you hire? I'm guessing you'd hire the more highly skilled. Thus, one effect of the minimum wage is discrimination against the employment of lower-skilled workers. In some places, the minimum wage is $15 an hour. But if a lower-skilled worker could offer to work for, say, $8 an hour, you might hire him. In addition to discrimination against lower-skilled workers, the minimum wage denies them the chance of sharpening their skills and ultimately earning higher wages. The most effective form of training for most of us is on-the-job training.

An even more insidious substitution effect of minimum wages can be seen from a few quotations. During South Africa's apartheid era, racist unions, which would never accept a black member, were the major supporters of minimum wages for blacks. In 1925, the South African Economic and Wage Commission said, "The method would be to fix a minimum rate for an occupation or craft so high that no Native would be likely to be employed." Gert Beetge, secretary of the racist Building Workers' Union, complained, "There is no job reservation left in the building industry, and in the circumstances, I support the rate for the job (minimum wage) as the second-best way of protecting our white artisans." "Equal pay for equal work" became the rallying slogan of the South African white labor movement. These laborers knew that if employers were forced to pay black workers the same wages as white workers, there'd be reduced incentive to hire blacks.

South Africans were not alone in their minimum wage conspiracy against blacks. After a bitter 1909 strike by the Brotherhood of Locomotive Firemen and Enginemen in the U.S., an arbitration board decreed that blacks and whites were to be paid equal wages. Union members expressed their delight, saying, "If this course of action is followed by the company and the incentive for employing the Negro thus removed, the strike will not have been in vain."

Our nation's first minimum wage law, the Davis-Bacon Act of 1931, had racist motivation. During its legislative debate, its congressional supporters made such statements as, "That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country." During hearings, American Federation of Labor President William Green complained, "Colored labor is being sought to demoralize wage rates."

Today's stated intentions behind the support of minimum wages are nothing like yesteryear's. However, intentions are irrelevant. In the name of decency, we must examine the effects.

Inflation 101

A fundamentally good piece on inflation, from Tim Lucas, Inflation: How it occurs and what are its consequences.

Sunday, February 5, 2017

Teacher Unions: The Scourge of Education

Thomas Sowell, who recently announced his retirement, apparently can't stay away, which is great for us!  Two masterful pieces on the nomination of Betsy DeVos as Secretary of Education, whose crime is to want to give parents a choice in the education of their children.  Of course, choice is the last thing the teacher unions want parents to exercise.

Education at a Crossroads

Education at a Crossroads: Part II:
If she becomes Secretary of Education, the stranglehold of the teachers' unions and the educational bureaucracy on the education of millions of students will be in jeopardy. If her nomination is rejected, millions of children from low-income, inner-city families will lose a chance to escape a painfully failing system.
Just for the record, I believe the entire Department of Education should be dismantled and cast to the winds, buy hey, that's just me.

A Must-Read on Price Controls

Price controls have never worked, but that never stopped governments from trying them again.  This is a jaw-dropping piece from Alasdair MacLeod entitled Price Controls and Propaganda:
So far, central bankers are claiming that an increase towards their inflation targets of two per cent in the CPI (already achieved in the US) is a sign that economic normality is returning. They are also confident they can manage the rate of price inflation, so it should not present a risk. But in all previous credit-driven business cycles, the rate at which prices increase has always been beyond the control of central banks. This article explains why, and highlights the central role of statistical propaganda, of which its promoters are hardly aware. It also suggests how inflation outcomes are likely to evolve. We shall start by looking at officially-recorded prices.
The manipulation of data by the USG is staggering, really.

I love this line:
This is why statistical propaganda has become central to economic and monetary policy. 

The Sugar Debate

Somewhere in this mess I've created, I believed I had already added what I have termed "The Debate on Sugar", but I'll be damned if I can find it!  As the one or two people that read this blog know, I am convinced that sugar is simply this: a killer.  Also, I have become the an acolyte for Gary Taubes, the author of Good Calories, Bad Calories, Why We Get Fat and his latest, The Case Against Sugar.  Lastly, I am also fond of the Cato Institute, a libertarian think tank (a term I dislike FWIW), and in the Cato Unbound, A Journal Of Debate, Taubes has presented his case against sugar and Cato has provided a forum for challenges to his hypothesis.  Below is a chronological history of the debate to date.

January 9, 2017Unintended Consequences, Special Interests, and Our Problem with Sugar by Gary Taubes

January 11, 2017:  Americans Eat Too Much Cake, but the Government Isn’t To Blame by Stephan Guyenet, a response to Taubes' hypothesis.

January 30, 2017:  The Case against Sugar Isn’t So Easily Dismissed by Gary Taubes, in response to Stephan Guyenet.

February 2, 2017:  Extraordinary Claims Require Extraordinary Evidence by Stephan Guyenet, in response to Taubes' most recent rebuttal.

New: February 3, 2017: Complex Multi-Factorial Problems Tend Not To Have Simple Singular Causes by a new voice in the debate, Yoni Freedhoff

Friday, February 3, 2017

It All Starts With Free Trade

Two short videos well worth the time:

and ....

Source: Don Boudreaux at Cafe Hayek

Thursday, February 2, 2017

The Roadmap for Creating Jobs

Charles Hugh Smith nails it in Want to Bring Back Jobs? It's Impossible Unless We Fix these Four Things

Purveyors of Death

And I wonder why peace will never have a chance ... Visualizing the Global Weapons Trade

They Certainly Do

Elections Have Tax Consequences by Kevin Williamson:

If you have spent much time in the more rarefied corners of California, one thing will be obvious: The lifestyle associated with urban progressivism can be very comfortable — if you can afford it. If you can’t — well, the view from Santa Monica is very different from the view from Friant, just as the view from Tribeca is very different from the view from Elmira in upstate New York. Progressivism in the United States used to be a school of political action, but today it is mainly a highly refined lifestyle — one that Republicans may be on the verge of making a little more expensive.

It’s time for a blue-state tax hike.

Congressional Republicans and the Trump administration will disagree about many things, but it is rare to find a Republican of almost any description who will turn his nose up at a tax cut of almost any description. As Robert Novak put it: “God put the Republican Party on earth to cut taxes. If they don’t do that, they have no useful function.” And tax cuts are coming. But there are two proposals in circulation that would constitute significant tax increases — tax increases that would fall most heavily on upper-income Americans in high-tax progressive states such as California and New York. The first is a proposal to reduce or eliminate the mortgage-interest deduction, a tax subsidy that makes having a big mortgage on an expensive house relatively attractive to affluent households; the second is to reduce or eliminate the deduction for state income taxes, a provision that takes some of the sting out of living in a high-tax jurisdiction such as New York City (which has both state and local income taxes) or California, home to the nation’s highest state-tax burden.

Do not hold your breath waiting for the inequality warriors to congratulate Republicans for proposing these significant tax increases on the rich. Expect lamentations and the rending of garments, instead.

Slate economics editor Jordan Weissmann, who is not exactly Grover Norquist on the question of taxes, describes the mortgage-interest deduction as “an objectively horrible piece of public policy that should be reformed,” and it is difficult to disagree with him. It distorts the housing market in favor of higher prices, which is great if you are old and rich and own a house or three like Bernie Sanders but stinks if you are young and strapped and looking to buy a house. It encourages buyers to take on more debt at higher interest rates than they probably would without the deduction, and almost all of the benefits go to well-off households in the top income quintile. It is the classic example of upper-class welfare. And it has a nasty side, too: Those sky-high housing prices in California’s most desirable communities serve roughly the same function as the walls of a gated community or the tuition at Choate: keeping the riff-raff out. Pacific Heights is famous for its diversity: They have all kinds of multimillionaires there.

Geographically, those mortgage subsidies are not randomly distributed. The mortgage-interest deduction is much more important to rich people in San Francisco, where the median home price exceeds $1 million, than it is to middle-class people in Tulsa, where the median home price is about $110,000. In San Francisco, the median home costs 10.2 times the median household income; in Houston, the median home costs 4.3 times the median household income, a fact that probably will be of some interest if the deduction is eliminated and housing prices readjust.

The current arrangement means, among other things, that taxpayers outside the expensive, Democratic-leaning coastal metros are much more likely to simply take the standard deduction than to itemize their taxes. Put another way, the mortgage-interest deduction is a lot more important to Nancy Pelosi’s constituents than to Mac Thornberry’s. Both Trump’s campaign tax plan and reforms under discussion in the House call for raising the standard deduction, which would make the mortgage-interest giveaway irrelevant to an even larger majority of taxpayers. Trump’s plan also calls for putting a cap on deductions — not just for mortgage interest but for all itemized deductions — at $100,000. (The mortgage-interest deduction already is capped at a very generous level, applying to interest on loans up to $1 million.) Eliminating or reducing deductions is intended both to simplify the tax code and to offset some of the revenue losses associated with other tax-reform ideas under discussion, especially reducing the number of brackets and lowering the rates in those brackets.

The best course of action would be to eliminate the mortgage-interest deduction entirely over a relatively short period of time, say five years. The National Association of Realtors (a.k.a. The Committee to Re-Inflate the Bubble), the members of which make their livings on sales commissions and which therefore favors higher housing prices at all times, will howl. But it is difficult to make a compelling case that subsidizing Lena Dunham’s mortgage on her $5 million Brooklyn apartment (or helping out whoever took that $4.2 million Trump apartment off Keith Olbermann’s hands) needs to be a top national policy priority.
The state-tax deduction is a slightly stranger beast.
In principle, there is something in state taxes that federalism-minded conservatives should like: Most of us would prefer if the main tax collectors in Americans’ lives were located in Austin or Tallahassee — or even Sacramento — rather than in Washington. Fifty states with 50 different tax regimes and 50 different ways of spending the money provide Americans with lots of choices, lots of interstate competition, and 50 laboratories of democracy in which to test different approaches to social problems. The question of the California model vs. the Texas model need not ultimately be an issue of right and wrong but simply one of different preferences: There are Oakland people and there are Odessa people, and there is no reason to think that they should have to live in the same way or that they should want to.
The problem is that allowing for the deduction of state taxes against federal tax liabilities creates a subsidy and an incentive for higher state taxes. California in essence is able to capture money that would be federal revenue and use it for its own ends, an option that is not practically available to low-tax (and no-income-tax) states such as Nevada and Florida. It makes sense to allow the states to compete on taxes and services, but the federal tax code biases that competition in favor of high-tax jurisdictions. There is a certain kind of partisan Democrat who likes to sneer that the rich blue states subsidize the poor red ones (which isn’t exactly true; there’s a reason that there isn’t a big, expensive Air Force base in Manhattan), but there is a great deal of cross-subsidy, too. Tax handouts such as the state-tax deduction and the mortgage-interest deduction interact in complex ways with state and local policies (the nice liberals in San Francisco practice utterly ruthless economic segregation) to partly shift the burdens of the progressive model away from the residents of our progressive metros.
The more you look at it, the more the parts of the Republican tax mantra not having to do with rates per se — simpler, fairer, flatter — appear to be wise. Of course, it would be wiser still to cut federal spending down to the level of federal revenue (my first choice) or to raise taxes enough to cover spending (second choice), but nobody is going to talk seriously about that until there isn’t another option.
For the moment, though, Republicans give every indication that they are loading up a big tax hike on the rich — one that the Democrats will not enjoy very much at all. As someone once said, “Elections have consequences.”

The Real Inconvenient Truth (Trigger Warning & Micro-agression Ahead)

The Real Truth About Washington by Robert Samuelson:
"For too long, a small group in our nation's capital has reaped the rewards of government while the people have borne the cost. Washington flourished, but the people did not share in its wealth." - President Donald Trump, Jan. 20

Washington is not a swamp.

Since at least the days of Jimmy Carter, presidential politicians have run against Washington, which is — according to the standard indictment — overrun by corrupt politicians, overpaid lobbyists, and self-important media types. Donald Trump is no exception and, indeed, in his sneering description of the nation's capital as a "swamp," has done his predecessors one better.

But his portrait is an absurdity. It bears little relationship to two overriding realities. First, the rewards of government go mostly to "the people" through massive transfer programs such as Social Security. Second, the costs have been borne mainly by the rich and upper middle class, who pay most taxes, and foreign and domestic lenders who cover chronic budget deficits.

It's true, of course, that many Washington legislators, lobbyists, lawyers and journalists have done well — and there are repeated instances of sleazy lobbying, greed and undeserved wealth. But this bounty affects thousands, not millions, and influence-peddling thrives because Washington distributes so much money to "the people." The same holds true for protecting popular tax breaks: say, the deductibility of charitable contributions and interest on home mortgages.

Historically, this wealth transfer is relatively new. As late as the 1950s, 50% or more of the federal budget often went to defense. In 2016, the military's share was 16% and declining. In its place have been huge entitlements to groups deemed deserving. When considered together, they totaled $2.4 trillion in 2016 or roughly two-thirds of federal spending, says the Congressional Budget Office.

The table below, based on Census Bureau data and provided by the Center on Budget and Policy Priorities, shows how pervasive these transfers are. It lists some major programs. The left-hand column gives the number of recipients, the right hand column their share in the population. For example: In 2012, Social Security had 52 million recipients, representing 16.8% of the population.

Federal Transfer Programs, 2012

Program People Population share

Social Security 52 million 16.8%

Medicare 49 million 15.8%

Medicaid 83 million 26.7%

Food stamps 51 million 16.6%

Jobless benefits 4 million 1.2%

When all transfer programs were included and double counting was eliminated (say, food-stamp beneficiaries on Medicaid), about 153 million Americans received some sort of federal benefit in 2012, Census estimated. That was nearly half (49.5%) of the then-population. Over a lifetime, the proportion of beneficiaries would be higher, because most older Americans ultimately receive Social Security and Medicare.

About two-thirds of these benefits were "means tested" (with income limits to eligibility) and aimed at the poor. The rest, led by Social Security and Medicare, were open to the broader public and subject to varying eligibility requirements.

Meanwhile, the money to pay for all these benefits comes heavily from high-income households. In 2013, says the CBO, the richest 1% of Americans paid 25.4% of all federal taxes — mainly income and payroll taxes — and the richest 10% (including the top 1%) accounted for 53.9% of tax revenues. As for buyers of Treasury securities, they are financing government at low interest rates, now about 2.5% before inflation on 10-year Treasury notes.

So the notion that the "people did not share" in government's wealth is a preposterous platitude. It's the opposite of the truth, which is that Washington has become a gigantic engine of redistribution. If the attendant lobbying sometimes seems chaotic or corrupt — swamp-like — it reflects a democratic system focused on near-term rewards and not long-term dangers. Huge budget deficits, totaling around $9 trillion over the next decade by the CBO's count, are the most obvious result.

Leaders of both parties have evaded a candid debate on government's role and limits. What programs need to be reduced or expanded? What taxes need to be raised? Trump did not even mention deficits in his inaugural address. On this issue, he may be as bad as his recent predecessors and, perhaps, worse.

The Internet of Things (IoT)

Two superb reads from Bruce Schneier on the IoT!

IoT Ransomware against Austrian Hotel:
Attackers held an Austrian hotel network for ransom, demanding $1,800 in bitcoin to unlock the network. Among other things, the locked network wouldn't allow any of the guests to open their hotel room doors.

I expect IoT ransomware to become a major area of crime in the next few years. How long before we see this tactic used against cars? Against home thermostats? Within the year is my guess. And as long as the ransom price isn't too onerous, people will pay.

EDITED TO ADD: There seems to be a lot of confusion about exactly what the ransomware did. Early reports said that hotel guests were locked inside their rooms, which is of course ridiculous. Now some reports are saying that no one was locked out of their rooms.

Security and the Internet of Things:

The opening paragraph:

Last year, on October 21, your digital video recorder ­- or at least a DVR like yours ­- knocked Twitter off the internet. Someone used your DVR, along with millions of insecure webcams, routers, and other connected devices, to launch an attack that started a chain reaction, resulting in Twitter, Reddit, Netflix, and many sites going off the internet. You probably didn't realize that your DVR had that kind of power. But it does.