Nightcap

  1. Unconventional Trump successful in Korea Jung Woo Lee, New Statesman
  2. Iran’s mullahs are out of answers Ali Safavi, RealClearWorld
  3. Cultural costs of high housing prices in England Chris Dillow, Stumbling and Mumbling
  4. The new challenge to ObamaCare Randy Barnett, Volokh Conspiracy

Nightcap

  1. Don’t give the Feds anywhere to hide Scott Sumner, EconLog
  2. Tariff Truths and Income Tax Iniquities Brian Domitrovic, Law and Liberty
  3. A Proper Accounting of Glass-Steagall Daniel D Leger, American Affairs
  4. The new constitutional case against ObamaCare Ilya Somin, Volokh Conspiracy

A Note on Trump, Immigration, and Healthcare Reform

Hopefully, the US election will start getting out of the he-said-she-said of assassination attempts and badmouthing parents of military personnel and start being about actual policy issues. Unfortunately, that isn’t going to happen at all, but in a minuscule and futile attempt to help get us there, I’m going to blog about some policy issues for a minute.

Trump’s campaign released a brief memo about his healthcare positions recently. For the most part the positions—though not quite detailed enough to really call a “plan”—are fairly decent. They contain most of the reforms free-market analysts have been proposing for decades such as opening insurance competition across states, allowing for Health Savings Accounts, and streamlining Medicaid funding. Notably missing was abolishing the employer mandate to reduce price fragmentation, as Milton Friedman proposed, although Trump proposes taking steps in that direction by introducing a tax deduction for individual insurance plans.

But what stuck out to me was that Trump, surprise, surprise, made xenophobia an element of his health care proposal by furthering the myth that immigrants are a further drain on our healthcare and welfare programs:

Providing healthcare to illegal immigrants costs us some $11 billion annually. If we were to simply enforce the current immigration laws and restrict the unbridled granting of visas to this country, we could relieve healthcare cost pressures on state and local governments.

Meanwhile in reality, undocumented immigrants actually contribute more to Medicare than they withdraw. It is unclear where Trump is getting his $11 billion figure, but he is ignoring the increased payroll taxes undocumented immigrants pay into these programs. A 2015 study found that, in fact, between 2000 and 2011 immigrants paid up to $3.8 billion more into Medicare than they took out. From the results of the study:

From 2000 to 2011, unauthorized immigrants contributed $2.2 to $3.8 billion more than they withdrew annually (a total surplus of $35.1 billion). Had unauthorized immigrants neither contributed to nor withdrawn from the Trust Fund during those 11 years, it would become insolvent in 2029—1 year earlier than currently predicted. If 10 % of unauthorized immigrants became authorized annually for the subsequent 7 years, Trust Fund surpluses contributed by unauthorized immigrants would total $45.7 billion.

Poor immigrant children, both legal and illegal, are also less likely to be enrolled in Medicaid or CHIP than citizens.

Thus Trump’s campaign is being factually dishonest by claiming that restricting immigration will help fund government healthcare systems, it will actually make Medicare go insolvent sooner. Which is especially concerning given that, until this memo, Trump has shown no interest in any meaningful entitlement reform.

This refrain—that immigrants are a fiscal drag on America’s welfare programs—has been among the most common refrains from Trump, and has even been popular among libertarians who are otherwise sympathetic towards immigration. But, as I’ve argued extensively in the past, it is completely false. Almost every major study shows that immigrants, at worst, pay as much into welfare programs as they get out of them.

Would a Universal Basic Income Increase Poverty?

Switzerland has recently overwhelming voted against a proposal that would establish a universal income guarantee (sometimes called a “basic income guarantee” or the similar Friedman-influenced “negative income tax”[1]). Though I myself am a supporter of BIG as a nth best policy alternative for pragmatic reasons,[2] I’m unsure if I myself would have voted for this specific policy proposal due to the lack of specifics. A basic income is only as good as the welfare regime surrounding it (which preferably would be very limited) and the tax system that funds it.[3] However, the surprising degree of unpopularity of the proposal—with 76.9% voting against—was quite surprising.

The Swiss vote has renewed debate in the more wonkish press and blogosphere, as well as in think tanks, about the merits and defects of a Basic Income Guarantee here in the States. For example, Robert Goldstein of the Center on Budget Policy and Priorities[4] has a piece arguing that a BIG would increase poverty if implemented as a replacement for the current welfare state. His argument covers three points:

  1. A BIG would be extremely costly to the point of being impossible to fund.
  2. A BIG would increase the poverty rate by replacing current welfare programs like Medicaid and SNAP.
  3. A universal welfare program like a BIG—as opposed to means-tested programs—is politically impossible right now due to its unpopularity.

For this post, I’ll analyze Goldstein’s arguments in detail. Overall, I do not find his arguments against a BIG convincing at all.

The Political Impossibility of a BIG

Goldstein writes:

Some UBI supporters stress that it would be universal.  One often hears that means-tested programs eventually get crushed politically while universal programs do well.  But the evidence doesn’t support that belief.  While cash aid for poor people who aren’t working has fared poorly politically, means-tested programs as a whole have done well.  Recent decades have witnessed large expansions of SNAP, Medicaid, the EITC, and other programs.

If anything, means-tested programs have fared somewhat better than universal programs in the last several decades.  Since 1980, policymakers in Washington and in a number of states have cut unemployment insurance, contributing to a substantial decline in the share of jobless Americans — now below 30 percent — who receive unemployment benefits.  In addition, the 1983 Social Security deal raised the program’s retirement age from 65 to 67, ultimately generating a 14 percent benefit cut for all beneficiaries, regardless of the age at which someone begins drawing benefits.  Meanwhile, means-tested benefits overall have substantially expanded despite periodic attacks from the right.  The most recent expansion occurred in December when policymakers made permanent significant expansions of the EITC and the low-income part of the Child Tax Credit that were due to expire after 2017.

In recent decades, conservatives generally have been more willing to accept expansions of means-tested programs than universal ones, largely due to the substantially lower costs they carry (which means they exert less pressure on total government spending and taxes).

I agree that Goldstein is right on this point: universal welfare programs are extremely unpopular right now, like the Swiss vote shows. I imagine that if a proposal were on the ballot in the States the outcome would be similar.[5] However, this is no argument against a Basic Income. Advocating politically unpopular though morally and economically superior policies is precisely the role academics and think tank wonks like Goldstein should take.

If something is outside the Overton Window of Political Possibilities, it won’t necessarily be so in the future if policymakers can make the case for it effectively to voters and the “second-hand dealer of ideas” in think tanks and academia get their ideas “in the air,” so to speak.[6] It wasn’t that long ago that immigration reform or healthcare reform seemed politically impossible due to its unpopularity, yet the ladder has popular support and the former was actually accomplished.[7]

If anything, the unpopularity of a BIG is precisely why people like Goldstein should advocate for the policy.

The Fiscal Costs of Funding a Basic Income Guarantee

Goldstein points out, rightly, that a Basic Income Guarantee would be extremely expensive:

There are over 300 million Americans today.  Suppose UBI provided everyone with $10,000 a year.  That would cost more than $3 trillion a year — and $30 trillion to $40 trillion over ten years.

This single-year figure equals more than three-fourths of the entire yearly federal budget — and double the entire budget outside Social Security, Medicare, defense, and interest payments.  It’s also equal to close to 100 percent of all tax revenue the federal government collects.

Or, consider UBI that gives everyone $5,000 a year.  That would provide income equal to about two-fifths of the poverty line for an individual (which is a projected $12,700 in 2016) and less than the poverty line for a family of four ($24,800).  But it would cost as much as the entire federal budget outside Social Security, Medicare, defense, and interest payments.

Where would the money to finance such a large expenditure come from?  That it would come mainly or entirely from new taxes isn’t plausible.  We’ll already need substantial new revenues in the coming decades to help keep Social Security and Medicare solvent and avoid large benefit cuts in them.  We’ll need further tax increases to help repair a crumbling infrastructure that will otherwise impede economic growth.  And if we want to create more opportunity and reduce racial and other barriers and inequities, we’ll also need to raise new revenues to invest more in areas like pre-school education, child care, college affordability, and revitalizing segregated inner-city communities.

Of course, Goldstein is right that a BIG would be fairly expensive and we are already having serious issues funding our existing welfare state. However, he grossly oversells the difficulty in funding it. In particular, it is not necessary to raise taxes to pay for it or for current welfare expenditures.

Goldstein likely gets the $10,000 figure from Charles Murray’s proposal for a BIG. Personally, I’m no fan of Murray’s proposal as it goes too far and he proposes financing it by increasing payroll taxes, which are economically inefficient. However, let’s assume that the relevant proposal is around $7,000 dollars.[8] Multiplying that by the US population of 320 million makes for a total cost $2.24 trillion per year.[9] This could be paid for by using the BIG to replace the following current welfare programs and cutting discretionary spending:[10]

  1. $65.32 billion annually in discretionary spending on Veteran’s benefits
  2. $66.03 billion in discretionary spending on Medicare and other healthcare benefits
  3. $69.98 billion in discretionary spending for education.[11]
  4. $13.13 billion in discretionary spending for food and agriculture (eg., SNAP).[12]
  5. $1.25 trillion in mandatory spending for Social Security.[13]
  6. $985.74 billion in mandatory spending for Medicare and Healthcare.
  7. $95.3 billion in mandatory spending for veteran’s benefits.[14]

Spending a UBI Could Replace

That’s a total of $2.542 trillion in savings annually, more than enough to fund the proposed BIG with another $300.3 billion to spare that could be used for tax credits for low-income households to use on healthcare,[15] education,[16] retirement,[17] and/or basic necessities like food.[18] Funding the program would be a huge challenge, but it is possible to do it without tax increases.

Additionally, Goldstein ignores the fact that similar proposals, such as Friedman’s negative income tax, would have a much lower cost while having a similar effect. The Niskanen Center’s Samuel Hammond has estimated that a NIT could cost only $182 billion annually.[19] From Hammond’s analysis:

Just how much of a cost difference is there between a UBI and NIT? To get a rough idea, I used the Census population survey’s Annual Social and Economic Supplement, which has the distribution of individuals over the age of 15 by income level in $2,500 intervals (I subtracted retirees). I then calculated the transfer each quantile would receive based on a hypothetical NIT which starts at $5,000 for individuals with zero income and is phased out at a rate of 30%. Multiplying the average transfer by the number of actual individuals in each grouping and summing, I arrived at total cost of $182 billion—roughly the combined budget for SSI, SNAP and EITC.

The Effect of Replacing Welfare with a BIG on Poverty

Goldstein would object to my line of reasoning by saying cutting all that spending would harm the poor and increase the poverty rate. He says as much in his piece:

UBI’s daunting financing challenges raise fundamental questions about its political feasibility, both now and in coming decades.  Proponents often speak of an emerging left-right coalition to support it.  But consider what UBI’s supporters on the right advocate.  They generally propose UBI as a replacement for the current “welfare state.”  That is, they would finance UBI by eliminating all or most programs for people with low or modest incomes.

….Yet that’s the platform on which the (limited) support for UBI on the right largely rests.  It entails abolishing programs from SNAP (food stamps), which largely eliminated the severe child malnutrition found in parts of the Southern “black belt” and Appalachia in the late 1960s, the Earned Income Tax Credit (EITC), Section 8 rental vouchers, Medicaid, Head Start, child care assistance, and many others.  These programs lift tens of millions of people, including millions of children, out of poverty each year and make tens of millions more less poor.

Some UBI proponents may argue that by ending current programs, we’d reap large administrative savings that we could convert into UBI payments.  But that’s mistaken.  For the major means-tested programs — SNAP, Medicaid, the EITC, housing vouchers, Supplemental Security Income (SSI), and school meals — administrative costs consume only 1 to 9 percent of program resources, as a CBPP analysis explains.  Their funding goes overwhelmingly to boost the incomes and purchasing power of low-income families.[20]

Moreover, as the Roosevelt Institute’s Mike Konczal has noted, eliminating Medicaid, SNAP, the EITC, housing vouchers, and the like would still leave you far short of what’s needed to finance a meaningful UBI.  Would we also end Pell Grants that help low-income students afford college?  Would we terminate support for children in foster care, for mental health, and for job training services?

This is by far and away the weakest part of Goldstein’s argument.

First of all, as my analysis above showed, Konczal’s and Goldstein’s idea that eliminating the current welfare state “would still leave you far short of what’s needed to finance a meaningful UBI” is just false. Even a relatively robust UBI of $7,000 a year is doable by significantly cutting current welfare programs.

But more importantly, Goldstein’s assertion that replacing the welfare state with a UBI would increase poverty is fully unwarranted. He seems to take a ridiculously unsophisticated idea that “more means-tested programs immediately reduce welfare.” His assertion that the programs in question “lift tens of millions of people, including millions of children, out of poverty each year and make tens of millions more less poor” is, at best, completely erroneous. For three reasons: first, individuals know better what they need to lift themselves out of the than the government, and these programs assume the opposite. Second, the structure of status quo means-tested programs often creates a “poverty trap” which incentivizes households to remain below the poverty line. Finally, thanks to these first two theoretical reasons, the empirical evidence on the success of the status-quo programs in terms of reducing the poverty rate is, at best, mixed.

The way our current welfare state is structured is it allocates how much money can go to what basic necessities for welfare recipients. So if a household gets $10,000 in welfare a year, the government mandates that, say, $3,000 goes to food, $3,000 goes to healthcare, $3,000 goes to education, and $1,000 goes to retirement.[21] This essentially assumes that all individuals and households have the same needs; but this is simply not the case, elderly people may need more money for healthcare and less for education, younger people may need the exact opposite, and poorer families with children may need more for food and education than other needs. It’s almost as if our current welfare system assumes interpersonal utility function comparisons are possible, or utility functions of poorer people are fairly homogenous but they’re not. It also ignores the opportunity cost of the funding for helping individuals and households out of funding; a dollar spent on healthcare may be more effectively spent on food for a particular individual or household.

In sum, there’s a knowledge problem involved in our current welfare policy to combat poverty: the government cannot know the needs of impoverished individuals, and such knowledge is largely dispersed, tacit, and possessed by the individuals themselves. The chief merit of a UBI is, rather than telling poor people what they can spend their welfare on, it just gives them the money and lets them spend it as they need.

Second, universal programs are superior to means tested programs precisely because the amount of transfer payments received does not decrease as income increases. Our current welfare programs too often make the marginal cost of earning an additional dollar, above a certain threshold, higher than the benefits because transfer payments are cut-off at that threshold. This actually perversely incentivizes households to remain in poverty.[22] For example, the Illinois Policy Institute while analyzing welfare in Illinois found the following:

A single mom has the most resources available to her family when she works full time at a wage of $8.25 to $12 an hour. Disturbingly, taking a pay increase to $18 an hour can leave her with about one-third fewer total resources (net income and government benefits). In order to make work “pay” again, she would need an hourly wage of $38 to mitigate the impact of lost benefits and higher taxes.

SingleMomWelfareCliffChart

Or consider this chart (shown above) from the Pennsylvania Department of Public Welfare showing the same effect in Pennsylvania

UBI does not suffer from this effect. If your income goes up, you do not lose benefits and so there are no perverse incentives at work here. Ed Dolan has analyzed how the current welfare state with its means-tested benefits is worse in terms of incentivizing work and alleviating poverty extensively. Here’s a slice of his analysis:

P140810-11

The horizontal axis in Figure 1 represents earned income while the vertical axis shows disposable income, that is, earned income plus benefits. To keep things simple, we will assume no income or payroll taxes on earned income—an assumption that I will briefly return to near the end of the post. The dashed 45o line shows that earned and disposable income are the same when there are no taxes or income support. The solid red line shows the relationship between disposable and earned income with the MTIS policy.

This generic MTIS policy has three features:

A minimum guaranteed income, G, that households receive if they have no earned income at all.

A benefit reduction rate (or effective marginal tax rate), t, indicted by the angle between the 45o line and the red MTIS schedule. The fact that t is greater than zero is what we mean when we say that the program is means tested. As the figure is drawn, t = .75, that is, benefits are reduced by 75 cents for each dollar earned.

A break-even income level, beyond which benefits stop. Past that point, earned income equals disposable income.

When these two factors are taken into account (that individuals know better than the government what they need to get out of poverty and there are significant poverty traps in our welfare state), it is no surprised that the empirical evidence on the effectiveness of these anti-poverty programs is far less rosy than Goldstein seem to think.

After reviewing the empirical literature on the relationship between income and welfare improvements for impoverished households, Columbia University’s Jane Waldfogel concluded “we cannot be certain whether and how much child outcomes could be improved by transferring income to low income families.” The Cato Institute’s Michael Tanner wrote in 2006:

Yet, last year, the federal government spent more than $477 billion on some 50 different programs to fight poverty. That amounts to $12,892 for every poor man, woman, and child in this country. And it does not even begin to count welfare spending by state and local governments. For all the talk about Republican budget cuts, spending on these social programs has increased an inflation-adjusted 22 percent since President Bush took office.

Despite this government largesse, 37 million Americans continue to live in poverty. In fact, despite nearly $9 trillion in total welfare spending since Lyndon Johnson declared War on Poverty in 1964, the poverty rate is perilously close to where it was when we began, more than 40 years ago.

Tanner’s point remains true today. The chart below shows that, despite a massive increase in anti-poverty spending since the war on poverty was declared under Johnson’s “Great Society,” Poverty rates have remained woefully stagnant. In fact, the reduction in poverty that was occurring prior to Johnson’s interventions stopped soon thereafter.

US Poverty Spending

Also, the point is that UBI is a replacement for current welfare benefits. Most households probably would not see a decrease in amount of benefits under a UBI, depending on the specifics of the proposal, and some might even see an increase, contrary to Goldstein’s analysis. Further, they’d be able to actually spend this on what they know they need rather than what government bureaucrats thin they need.

UBI lacks the flaws of the current welfare state, and would likely decrease poverty far more effectively than Goldstein thinks, especially when compared to his favored status-quo.

[1] Though there are some technical differences between Milton Friedman’s proposal for a “negative income tax” and most Basic Income Guarantee proposals, they essentially have the same effect on income. See the Adam Smith Institute’s Sam Bowmen on this point.

[2] See Matt Zwolinski for the “Pragmatic Libertarian Case for a Basic Income,” it should be noted that “pragmatic reasons” here does not refer to my pragmatist philosophical views. Zwolinski has also made a moral case for the basic income on Hayekian grounds that a BIG could reduce coercion in labor negations. I am unsure to what extent I am convinced by this line of reasoning, but it is a valid argument nonetheless.

[3] The Niskanen Center’s Samuel Hammond has made the case that universal transfer programs like a Basic Income cannot be analyzed outside of the tax system that pays for it.”

[4] Or, as my think tank buddies jokingly call it, the “Center for Bigger Budgets.”

[5] Having said that, polls have shown that it is popular across the pond in the Eurozone. The Swiss proposal would call into question this point but it could be argued that the vagueness of the Swiss proposal is why it was turned down not necessarily the spirit of it.

[6] My colleague Ty Hicks of Students for Liberty has made this point well. See also Hayek’s “Intellectuals and Socialism.”

[7] Granted, the Affordable Care Act was not really what most on the left or the right wanted in the first place and has been a disaster.

[8] This number is selected because, according to the CBO, $9,000 is the average amount in means-tested welfare benefits per household for 2006. But that’s for households and a BIG discussed here is for individuals, so it is understandable to make a BIG slightly less than the current average. Goldstein would object that this is far below the poverty line, but BIG is not meant to be a replacement for total income on the labor market at all, so it is unclear why this is an objection in the first place.

[9] This is admittedly a crude and naïve calculation but it is virtually identical to the method Goldstein himself uses to estimate the cost.

[10] All figures for this section are for the 2015 budget and are taken from here.

[11] Goldstein is sure not to be happy with cutting education, and I myself would like to replace this spending with few-strings-attached funding for local education or private school tax vouchers. I’ll address this point more later in this piece.

[12] Much of this is food stamps, which would be rendered obsolete by a BIG anyways. Goldstein would object, more on that in the next section.

[13] Not all of this could be cut, and there would be legal and detailed nuances on how to treat financial obligations for Social Security, veteran’s benefits, and Medicare. The specific legal complexities of mandatory welfare spending are not my areas of expertise, admittedly, and is outside the scope of this paper. I’m just illustrating that it is possible to cut at least some of this spending, perhaps even the majority of it, to fund it.

[14] Many people would object to cutting veterans benefits. First of all, BIG could act in place of these benefits

[15] I have in mind expanding tax-exempt Health Savings Accounts here. I also think funding this by eliminating the employer-based deduction would be a step in the right direction and reduce cost fragmentation in the healthcare market, as Milton Freidman argued.

[16] I have in mind a private school taxpayer voucher system like what is in Sweden.

[17] I have in mind something similar to this proposal to reform social security from the Cato Institute.

[18] I have in mind something like the pre-bates proposed in the Fair Tax.

[19] For this reason, I prefer an NIT to a BIG, but I prefer both to our current welfare state.

[20] This point is Ironic considering the fact that CBPP’s own research shows that government benefits in America overwhelmingly goes to households above the poverty line, in the middle and upper classes. See this chart (source):

1-SOlzSwsxa08Cno7PiQ9R7A

[21] The real-world numbers are probably different and vary a little bit from household to household, but this is just a hypothetical to illustrate a more general point.

[22] It should be noted, however, that the EITC, and some other programs, is largely free of this defect. This is because the EITC itself is modeled after Friedman’s NIT.

Note: The first chart has been edited since this was initially posted for readability.

Identity Crisis: An anecdote.

Today is liberalism day. A day where “classical liberals” seek to take back the moniker that was lost to them over the 20th century in an attempt to avoid confusion and to help drive home the ideological difference between modern liberals (who support a strong central government for the purposes of wealth redistribution and social control) and classical liberals such as Bastiat, Locke, and Ludwig von Mises (who advocated for little to no government tyranny and emphasized the rights of the individual over that of “society”).

In my personal experience however there is a far more dangerous muddling of ideology at the core of the libertarian movement. That is to say “when should libertarians betray their own values?” Since I was exposed to the ideas of Mises, Rothbard, Hayek and their intellectual proteges Hoppe, Block, Woods, DiLorenzo, Kinsella, Murphy, Ron and Rand Paul, and so many others I have found that there is a disconnect between the values advocated by these authors and the actions taken by them and their followers. This has often resulted in so called libertarians using remarkably non-libertarian tactics to pursue libertarian goals. First let me describe one of these events from my own personal experience and then I will discuss what I think can be done to help the libertarian movement as a whole.

I was introduced to libertarianism by a friend sometime in late 2008 but it wasn’t until the 2010 Conservative Political Action Committee (CPAC) that I met other libertarians “out in the wild”. I was still ideologically agnostic at the time but leaned towards a more leftist (not liberal) philosophy. I had voted for Obama in 2008 in my naïve belief that “anybody but Bush” was a valid political stance and I had supported the move towards National Healthcare; but over the next few months I was argued into holding a grudging respect for libertarian beliefs and by the time we boarded the train for D.C. I had read most of Milton Friedman’s Capitalism and Freedom and listened to a single Thomas DiLorenzo lecture through one half of a pair of headphones but was paying more attention to the other end of those headphones than the lecture droning into my ear.

So as I was walking into the Marriott or Hilton or whatnot I felt less like a fish out of water and more like a lobster in a pot and hearing a page over the loudspeaker for Dick Cheney raised the temperature ever closer to boiling. My compatriot barked a laugh at me when I turned and asked if she realized how dirty I felt being the same building as a war criminal. I was assured that I didn’t need to worry since we wouldn’t be anywhere near the neo-conservatives and would instead be linking up with some friends of hers at the Campaign for Liberty booth. A few awkward greetings later we were directed to a table, given badges with names of people neither of us had ever met, and told to vote in the Straw Poll for Ron Paul and to “do everything we could to not let the badges get punched” which signified that I.D. had been used and was ineligible for further voting. I, always good at following directions, managed with some small sleight of hand to vote and preserve the integrity of the badge, my friend was less subtle and some libertarian woman who was late to the party arrived later that day to find her I.D. already punched and her Straw Poll vote already cast. This small act of fraud was our payment for access to the speeches and Question and Answer later that day.

The speeches were interesting but uneventful. Thomas DiLorenzo on Abraham Lincoln (who else), Thomas Woods plugging one of his books. Rollback, I think, but at this point I own them all and can’t quite distinguish in my memory which one he released that year. The “Southern Avenger” Jack Hunter talked about something that completely escapes my memory though we were seated directly behind him before he went up and my friend’s cellphone going off directly in his ear is one of my fondest memories.

Then we were off to the Q&A featuring Ron Paul, Judge Napolitano with Tom Woods as moderator. At this point I feel the need to point out that throughout the day my friend and I were drinking out of 1 Liter Pepsi bottles that were approximately half Pepsi and half vodka. So at this point her cheeks were more red than Limbaugh’s cheeks and all fear I had of being outed as a “liberal pinko” was removed. In fact I was feeling bold. So as the Q&A reached its midpoint and my friend asked the air “I wonder if Tom Woods is an Anarcho-Capitalist?” I found myself stand up in this room of “right wing nutters” and insert myself into the line of people queued up waiting to ask questions.

Now anyone who enjoys the occasional overindulgence of hops and gets themselves into precarious situations knows the feeling I had at that moment. “Now what am I going to do?” I was in a hall with probably three to four hundred people, a television personality and a United States Congressman on stage in front of me while on camera and I was going to ask the MODERATOR if he had fringe political beliefs that I didn’t really know anything about.

The line in front of me grew shorter and shorter and I swear my blood pressure had to have rose a dozen digits and as I reached the front of the line I stuttered through some thanks to both Ron Paul and Napolitano before turning my gaze onto Woods and requesting his permission to ask him a question instead. At this point I knew I had broken about a dozen rules of etiquette as he mentioned that he would be available after the Q&A and noticeably stepped away from Ron Paul before agreeing to my request. I was in too deep at this point. “Mr. Woods.” I paused still figuring out my phrasing. “Do you think that a Minarchist society could lead to an Anarcho-Capitalist one?” His answer was everything I could have hoped for: “Of course, or else I wouldn’t be pursuing it.” Elated, I returned to my seat and gloated to my friend.

When we returned home I immediately looked for the video on the Campaign for Liberty website. Finding the video was easy enough but for whatever reason my question, and my question alone, was edited out. My only assumption was that it didn’t convey the “party line” that Campaign for Liberty wanted to convey. To me it felt as if I, a pseudo-democrat, was too radical for this so called party of change.

Now I didn’t think about this trip for several years but as I refined my beliefs and found the Rothbardian ideology that I now how hold dear I realized what a betrayal of libertarian beliefs my experience represented. The folks running the Campaign for Liberty booth openly and actively committed fraud in exchange for both personal and political favors while the Campaign for Liberty site runners were actively suppressing the logical conclusion of their belief system in an attempt to pander to the average voter. This was the beginning of my distrust of utilitarianism and of the political wing of the libertarian movement and that distrust has not subsided in the intervening years.

But if not politics then what can we do? I favor a two-pronged approach. The first is obvious: Education. We need to talk about libertarianism as much as possible and that is why I love this blog despite not being able to muster the time to post very often. I personally cannot stand to debate on the internet but some of the comments here and many of the posters make amazing headway into what it means to be a libertarian.

The second is more complex and much more personal. I call it practical (or passive) libertarianism. It is essentially finding it in yourself to embody the ideals of libertarian thought each and every day. Terry Amburgey says that I like to “Quote Scripture” and while he means it in a mocking way it is true that I do look to the writings of Mises and Rothbard for moral guidance. I believe that libertarianism has concrete ethics that help describe what is “right” and what is “wrong” in the world of morality and I make every attempt to live strictly by them.

What does this mean? Well for me it means following the Non-Aggression principle on a daily basis. In other words not committing aggression on persons or property. It means taking personal responsibility for my actions and not attributing blame to society or other abstract groups. It means not doing the obvious things such as stealing or littering but it also means making every attempt to keep money out of the government’s hands and in the hands of individuals by abstaining from buying superfluous goods whose proceeds go directly into the state coffers. This entails not playing the lottery (a bad idea anyway), and by trying to avoid purchasing things with heavy excise taxes.

Does this mean I live like a hermit? Of course not. I have to drive so I am forced into paying the heavy New York State gas tax. I purchase consumer goods as I see fit since sales tax is unavoidable. I am gainfully employed so the Income Tax is removed for me. But I do what I can. I try to minimize the government’s impact on my life. To quote pseudo-libertarian science fiction author Robert Heinlein”

I am free, no matter what rules surround me. If I find them tolerable, I tolerate them; if I find them too obnoxious, I break them. I am free because I know that I alone am morally responsible for everything I do.”

I suggest you do the same.

Ukraine: The Diplomatic Solution; the Conservative Blessing in ObamaCare!

There is a distinct preference out there, for solving our differences of opinion with the Putin gangster state “through diplomacy.” An elementary explanation is sadly in order here.

Diplomacy refers to one party explaining to the other with polite words how much harm it could do to that other party. And then, the second party takes its turn explaining to the first how much damage it could do to it if it really wanted to.

Once everyone understands concretely the other party’s capacity for evil, the parties get together to arrive at a compromise that minimizes the evil that  either party does to the other. That’s in successful diplomacy. Diplomacy often fails however. In 1939, Hitler and the Brits were talking to each other until the exact eve of the invasion in the west.

So, in this case, diplomacy only has a chance of  succeeding if doing severe harm is on the table in a credible manner. No perceived credible threat, no diplomacy.

Does anyone really believe that you can talk softly, talk sweet reason to Putin and that he will come to his senses and begin acting nice at last?

Another thing: As everyone knows, Obamacare is foundering. I am beginning to believe it’s a blessing in disguise. Whole young generations who really needed it are learning why Big Government is bad even when it’s trying to act nice. One of my young liberal friends is in the process of making a U-turn, I think. I don’t give myself the credit, much as I would like to. Mr Obama did it. My friend has a new bumper sticker on his car that says: “Obama- Dick-Dick.” That’s in Santa Cruz County so, it takes some courage. At least, he does not care a bit if his car is scratched! (My, that’s was evil and sly; I already feel a little ashamed!)

The Obama administration is not releasing figures the citizenry has a legitimate interest in knowing, such as: How many who signed up are also paid up? How many of the new sign-ups were without health insurance before? What is the net gain – if any -in insured  people who did not join publicly supported health insurance?

Refusing to divulge these figures has only one purpose. It’s to impede the opposition. That’s already Fascism. Not gathering these figures when you can and when you know some part of the public wants them is also Fascism. (Fascism is not an epithet, it’s political description. (See:  “Fascism Explained” and others on this blog. )

ObamaCare was a dishonest venture from the first. If it had not been, its first act would have been to make all health insurance available across state lines so as to maximize competition between insurance companies. If any Republican lawmakers had resisted, it would have been a blood feast for the Democratic Party. Large-scale buddy capitalism is also part of a  classical Fascist program.

A Conspiracy of Debacles: the Advent of Single Payer?

I don’t believe much in conspiracies. For one thing, they require secrecy and belief in the other guy not to spill the beans. Often, information connected with conspiracies has value, economic value or simply psychic value (“I already knew it yesterday!”) Hence, the frequent betrayal. Moreover, people in general mess up, the conspiratorial group tends to amplify the mess. For all these reasons, mention the conspiracy against Julius Caesar and I will tell you it’s not obvious it happened. I am skeptical about conspiracies in general but I can make exceptions.

Today, in December 2013, my skepticism is vacillating. I am skeptical about my usual skepticism, you might say. The reason is that I have never seen a governmental debacle of the magnitude of the current roll out of the Affordable Care Act (It’s “Obamacare.” Don’t even try to correct me on this. I heard the president with my own ears claim the nickname.) The present demonstration of incompetence is so out of proportion with everything I have experienced in my life that a part of my brain is whispering to the other that it can’t just be simple incompetence. To begin with, it seems to me that an average nerdy company would have done a better job of the electronic exchanges: WSJ says 12/12/13 that in all of Oregon 44 people have enrolled. (My friend Scott from Silicon Valley will correct me if my assessment of the ease of setting up the exchanges is wrong.) Furthermore, in an operation of this complexity and of this magnitude at best, some degree of failure was to be expected. Any normally prudent person would have set up a fail safe mechanism, a second chance device, or, at least, readied a large lifeboat. None of the above exists it seems. I have trouble believing in a simple oversight.

Beyond the electronic failure -which is guaranteed to induce sneering hostility in the young who use EBay and Amazon with their eyes closed – the same people desperately needed to join, there is the deleterious substance of the reform: Many people find themselves saddled with larger premiums, higher deductible and often both. I don’t know how many. I don’t think anyone knows how many. It does not matter but those reporting that they are so affected are not, cannot all be Tea Party fanatics.

Even the main redeeming virtue of this disaster has been largely withdrawn. I heard that the Congressional Budget Office had estimated that 30 million people would still be off the health insurance roles after the whole Obamacare law is implemented. It’s as if a malignant hand had deliberately withdrawn the last consolation from the disaster: It will make you poorer; it might leave you with a doctor you don’t like (“might”); it leaves you exposed without health insurance although you used to have a plan with which you were satisfied; and it won’t even help that much those it was supposed to help.

Digression on Tech. source note: The first numbers come from an editorial in the 12/12/13 Wall Street Journal. The notion that millions of non-insured will remain uninsured even under the best hypothesis is all over the media. I am not able to cite a precise source. Make a note that I will not consider any lazy and irresponsible denial of this assertion. If you think that’s not true, that I misheard or heard well something false, just say so here, explain why you are sure it’s wrong, and sign your name. I will publish any denial in bold letters. Girlish snickering is not welcome.

By the way, I don’t want you to think that I am implicitly legitimizing the Democratic claims about the number of real uninsured. I never bought the “millions of uninsured” argument. Two reasons. First, it confused “no insurance” with no “health care.” It also confounded and confounds “inefficient way to deliver care” with “the poor dying on the hospital lawn for lack of care.” More importantly, I became convinced that the poor, powerless abandoned souls imagery the Democratic Party uses to characterize the uninsured is largely an invention. Many of the formerly uninsured are people already legible for existing programs who were not enrolled, many children of the irresponsible and incompetent, for example, probably some isolated older people. Other non-insured are clearly rich enough to afford health insurance and simply don’t take he trouble to buy it. Others, mostly young people who are not rich, make the rational calculation that they are quite unlikely to become seriously sick. They engage in low-stake gamble about their proximate health. Once you added the three subgroups of the uninsured, the pathetic-sounding category “ uninsured” melted to little, to next to nothing.

I can ignore my disbelief about this for the time being. I just assume that millions of Americans thought the reform was necessary for reasons of compassion toward the more vulnerable among us. Absent or diminished this justification and this rationalization many of the same Americans will feel disappointed or even cheated. (I am charitably ignoring the claim that the scheme would make health insurance cheaper.)

Now, let’s project ourselves only four to six weeks, to the 2014 State of the Union Address. By that time, by law, most everyone is supposed to be covered. The insurance companies have continued withdrawing plans that are non-compliant, or that they fear may be judged non-compliant with the new law. The number of people between insurance plans has grown from an estimate of 4 million (the WSJ 12/12/13) to ten million. There are reasons to believe that the numbers of those left out will yet grow. The forty or fifty millions original uninsured remain mostly uninsured. The young that the new law unaccountably counted on to finance the new project stay away in droves. The fine they incur, after all, is not much higher than the beer bill for three average parties. Discouraged by the mess, the shamble, the unpredictability, small businesses nearly all shed their health coverage.

In this scenario, in a matter of weeks, the number of Americans without legally required health insurance rockets up to some large proportion of the population, perhaps to one American in four, even one in three. At that point, according to the implicit liberal narrative, we have a national life-and-death disaster, an event that makes Katrina look like a Cajun picnic. According to the same implicit narrative which the Democratic hierarchy cannot suddenly denounce, people are going soon to begin dying in the streets. What was but recently a controversial reform has become a national emergency.

What’s a normally compassionate, responsible president to do under the circumstances? I mean any president?

The answer is blindingly clear: In this emergency, the president will announce that all Americans not otherwise covered are now under the existing, reasonably functional Medicare program. And, he will leave the accounting for later. And this accounting will not seem like much of a new problem because it’s just an enlargement of an old problem. (“The devil we know….”) The president could decree on such a radical measure without fear of much criticisms from the opposition. What Republican official will have the fortitude to insist that proper constitutional form must take precedence over the imminent distress, and possible death from neglect of millions? Which elected Republican will have what it takes to face the first media story – true or false – a single story of a youngish person dying for lack of care?

Many ordinary Americans will opt for the simple solution: Instead of digging around for an elusive insurance plan that suits them and that is also compliant, they will ask to join Medicare. Once nearly half of Americans are covered by Medicare, the private insurance companies will quietly surrender. Some will begin to specialize in luxury coverage for the very rich. Others will just re-focus on areas other than health care. Many will simply go bankrupt and then vanish (as happened in other countries under similar circumstances). Soon, the US too will have a single payer government run health insurance system. The Obama administration will have reached the Graal of all liberals since F.D. Roosevelt.

This would be an easy conspiracy to carry out because it does not require that explicit instructions be given to the co-conspirators. Hence, there is no possible leak, no chance of getting caught red-handed. It’s also a conspiracy that does not require extraordinary skills but only the subtle encouragement of government’s normal low standards of performance. Much of the deliberate sabotage of a real implementation of the new law would only have to take the form of inaction, for example, of the administrator in charge of the reform. This does not require talent but good nerves, or indifference. Ms Sebelius, the person in charge of implementing Obamacare has been reported by conservative media to have had no (zero) meetings with the president. If they are wrong, the real number must still be very low, lower than you would expect given the centrality of the scheme to the Obama presidency. That is if the president really wanted the implementation of the 2,000+ pages of the Affordable Care Act to go smoothly. If!

The most successful socialist revolution socializing more than 15% – and growing- of the largest economy in the world will have been achieved quickly and without much real opposition. Hurrah!

Now, this is all speculation. I am just connecting the dots. I hope I am completely wrong, that we are all facing an ordinary debacle, one due entirely to gross but innocent incompetence.

Personal note: I have seen the French single-payer system at work under trying circumstances. My subjective evaluation is that it works quite well. On the objective side, there is the fact that French men live two years longer on average than American men. (Yes, I too would like to believe it’s the red wine but I know to keep my inner child in line.) My objection to a government health sector is of a moral and political nature: We just don’t need more government; we need much less government in order to be free. Besides, one should not take for granted that we can do well whatever the French do well. Take ratatouille, for example, take pâté de campagne, etc.

Blind Faith

By Adam Magoon

On November, 26th Eric Liu, founder of “Citizen University”, a pro-government think-tank, wrote a telling article about having faith in government on the CNN opinion page. He begins the piece with a story about leaving his suitcase in a New York City cab saying:

“I had an experience recently that reinvigorated my faith in humanity — and bureaucracy.”

Keep that equivalency in your mind for a few minutes. Humanity and bureaucracy.

He goes on to explain that he did not even realize he left the suitcase in the cab for twenty minutes and only then began calling people for help. He explains this process in detail, emphasis mine:

“For almost three hours, various people tried to help me — two folks at my bank, whose credit card held the only record of the cab ride; three people at two yellow cab companies based in Long Island City; a service rep at the New York City Taxicab & Limousine Commission; people in my office back in Seattle.”

So Eric was helped by no less than eight individuals (counting the cab driver) in his successful search for his luggage. Eight people helped improve Eric’s business trip. He then claims this experience taught him three lessons.

First:

“Always, always get a receipt.”

This, as he says, is obvious.

Second:

“Another is that New Yorkers, contrary to popular belief and their own callous pose, are essentially nice.”

As someone born in New York I would like to think this is true, but I adhere to the maxim that terms such as “New Yorker” can only describe places where someone lives or is born. Saying “all New Yorkers are nice” is equivalent to saying “all Scots are drunks” or “all Scandinavians are attractive”. Essentially it is a non-statement that is easily refuted. There are just as many people who would have taken anything of value from his case and threw it into the nearest dumpster.

That is just the appetizer though, here is the main course.

His final lesson, and where the train totally leaves the rails, is this:

“But the third, even more deeply contrary to popular belief, is that government is not the enemy.”

Wait, what?! What kind of logic is Mr. Liu using? Of the eight people who helped him only one (the service representative at the New York City Taxicab & Limousine Commission named Valerie) even worked for a governmental organization and “she insisted she was just doing her job”. How did Mr. Liu get to “government is not the enemy” from that series of events? He goes on to claim that:

“Government is not inherently inept. It’s simply us — and as defective or capable of goodness as we are”.

Mr. Liu tries to rationalize his faith in government with a single good experience with a few select people. What he ignores though, is that many people are not “essentially nice”. If that were the case crime, corruption, and violence simply wouldn’t exist. There are people in the world who only seek to exploit and profit from the work of others and to quote the great classical liberal theorist Frédéric Bastiat:

As long as it is admitted that the law may be diverted from its true purpose — that it may violate property instead of protecting it — then everyone will want to participate in making the law, either to protect himself against plunder or to use it for plunder”

Even if we were to assume that most people in the world are “essentially nice” the very nature of government attracts precisely the opposite type; the corrupt, the malevolent and the lazy. His agenda finally becomes clear nearly two-thirds of the way through the article when Mr. Liu unabashedly asks us to not wonder what our country can do for us, but rather what we can do for our country in response to the failed Obamacare launch.

Individuals are expected to bail the government out when it fails at intruding into our lives? How can we expect the government to run healthcare without kickbacks and corruption when they cannot even get someone to build the website without it being a disaster?

Mr. Liu fails to offer any helpful advice on how to improve things but he does offer one revealing suggestion. He says that citizens should not expect the “state…to serve us perfectly” and that individuals should not “forget how to serve”.

The argument often goes that taxes pay for services provided by the government but Mr. Liu suggests we shouldn’t expect too much from those services. That we shouldn’t get upset when we pay a third of our labor to the government and it spends that money on things we do not want; in fact he implies we should fix for free the broken things they have already spent our money on.

If Mr. Liu goes out to dinner and his silverware is dirty when he sits at the table does he go back to the sink and wash them? Or does he expect more from the things he spends his money on? At least in that situation Mr. Liu could choose to spend his money elsewhere. With the government spending our money for us we aren’t even afforded that meager victory.

Around the Web

  1. John Locke, President Bush and the Jesus Pushers
  2. (More) on the legality of the latest ObamaCare fix
  3. Israel is wigging out; One of the fairest assessments of Israeli foreign policy I’ve seen since my own musings!
  4. Has Barack Obama told the biggest (dumbest) lie ever?
  5. Are real rates of return negative? Is the “natural” real rate of return negative?

The Tyranny of Darth Obama

Commentary by LA Repucci

 November 14th, Washington DC

President Obama spoke from the White House this morning regarding a proposed ‘fix’ to his failed health care policy in an effort to edify his fellow democrats through the next election cycle.

After publicly promising the American people that they could keep their insurance plans 30 times, the president has received flack due to the fact that millions are losing their insurance policies due to the Affordable Healthcare Act, commonly referred to as Obamacare.

In his address this morning, the president announced a ‘delay’ of the portions of the law to enable insurers to re-instate individual policies purchased on the “old individual market” to avoid losing their coverage…presumably, for another year.  Obama offered no details or legal explanation as to how this radical change in the law of the land would be implemented.

Okay — let’s suspend the fact that our Constitution very clearly states the government is prohibited from compelling the people to purchase a product or service.  Let’s pretend that the government, having betrayed this constitutional provision time and again (Social Security comes to mind), may simply call a compulsion to purchase a ‘tax’ as chief justice Roberts ruled regarding the health insurance mandate, circumvent one of the clearest directives of the US Constitution, and may compel the people to purchase a product or service. Even with this egregious transgression of the sovereignty of the people as a given, the State seems unable to obey its own new laws these days.  The federal government has been exposed time and again in the last few months (and decades) as the primary and frequent transgressor of our laws – the confirmed reports of illegal mass warrant-less surveillance are only the latest example of complete disregard for and perversion of the law to come from this administration.

There is a single mechanism by which our federal government transgresses the will of the people; one over-arching distortion of sanity by which the administration, law-makers and courts continue to exploit (at accelerating pace) and abridge the will of the people.  President Obama is merely the culmination of this singular corruption of constitutionality that transforms our nation from the rule of law toward the rule of tyrants.  As a student of constitutional law, Mr. Obama must know precisely what he is doing. Even if he didn’t, ignorance would not save his neck from the block that is the US constitution.

The truth is this:  all three branches of the federal government disregard the rule of law.  They are all traitors to the republic, and as such, should be tried, convicted, and sentenced for high treason.

How can a president (and constitutional scholar) mandate the people’s purchase of a product in clear violation of our supreme law, then claim the power to arbitrarily change his own law simply by decree?  The answer is two-fold.  First, a legitimate president cannot – a tyrant can and will do anything they please.  Second; as a tyrant by definition does not respect law in any case, once abridged, law may be changed without the legislative process or will of the governed, by decree.

Obamacare is unconstitutional – the state-appointed high-priests of the Supreme Court aren’t required to understand that simple point.  As an unconstitutional law issued by the fiat of a tyrant, supported by a false legislative process of ‘democracy’, it should be taken as given that law will now be dictated from the executive office out of hand, as the now impotent legislative and judicial bodies meekly question ‘can the president make law by decree? Law, by definition, is the littoral antipode of decree.

Dictation is the province of dictators – those who would destroy the rule of law and institute the rule of decree.  Ayn Rand prophesied this exact eventuality for American politics in her opus Atlas Shrugged, within the pages of characters decry ‘pragmatic, relative flexibility’ to be superior to principle.  When the state abandons duty to the law of the people, then it is the duty of the people to abandon the state.  A state that represents not the interest of the people, is anathema to the rule of law. According to Rand’s prophecy, this perversion of the very concept of law will accelerate dramatically as more ad-hoc tyrannical declarations are needed to patch the tower of babel created by the abomination that is the rule of man.  If Rand is right, this will all get much more absurd and destructive before it gets any better.

Obama’s decree this morning illustrates the now obvious point that the Affordable Health Care Act is HIS law, and not the law of the people.  The people change laws through the legislative process and the ballot — a tyrant changes his laws by decree.

Gravity is a law.  It needs no paper legislation, no judicial review, no vote of democratic tyranny to ‘be’ a law. It is a natural force acting upon reality whether people consent to it or not.  Markets are the same – they are a natural law.  They exist whether or not they are acknowledged by the state — and will continue to exist so long as there is a society within which to emerge and operate.  ‘Regulating’ an economy or market is akin to regulating gravity.  Paper law — Obama’s law, is not law at all. In fact, it is now specifically the opposite of law – it is the whim and decree of a despotic megalomaniac — it is Canute ordering the tides back.  Let’s all hope this tyrant drowns quickly so that our nation may once again be ruled by the laws of the natural universe, and the US government may return to performing its sole legitimate function – safeguarding the liberty of the people against tyrants like Obama.

Image

Our President minored in bong rips, honoring his predecessors’ commitment to cocaine and drunk driving.

I am considering sending Mr. Obama a copy of Bastiat’s “The Law” – apparently, this foundational primer, along with Locke and Jefferson aren’t required reading in the Columbia University constitutional law curriculum.  Is it intellectually honest to assume that the nations’ chief executive is ignorant of the school of thought that is the genesis of our nations’ supreme law?  Likely not – either Mr. Obama is ignorant of the very nature and definition of law itself, or he is openly perverting its’ mechanisms in an effort to destroy the liberty of the people and supremacy of the Constitution.  Darth Sidious, evidently, trained another apprentice after the death of Vader.

Oh Jedi, where art thou?

 

Disgusted and Furious,

LA Repucci

Unequal Poverty: Tricks (Part Two of two)

In the previous installment:

I explained how the general standard of living in America, denoted by real income, grew a great deal between 1975 and a recent date, specifically, 2007. This, in spite of a widespread rumor to the contrary. The first installment touched only a little on the following problem: It’s possible for overall growth to be accompanied by some immobility and even by some regress. Here is a made-up example:

Between the first and the second semester, grades in my class have, on the average, moved up from C to B. Yet, little Mary Steady’s grade did not change at all. It remained stuck at C. And Johnny Bad’s grade slipped from C to D.

Flummoxed by the sturdiness, the blinding obviousness of the evidence regarding general progress in the standard of living, liberal advocates like to take refuge in more or less mysterious statements about how general progress does not cover everybody. Or not everybody equally, which is a completely different statement. They are right either way and it’s trivial that they are right. Let’s look at this issue of unequally distributed economic progress in a skeptical but fair manner.

It’s awfully hard to prevent the poor, women and minorities from benefiting

I begin by repeating myself. As I noted in Part One, it’s too easy to take the issue of distribution of income growth too seriously. Some forms of improvements in living standard simply cannot practically be withheld from a any subgroup, couldn’t be if you tried. Here is another example: Since 1950, mortality from myocardial infarctus fell from 30-40% to 5-8%. (from a book review by A. Verghese in Wall Street Journal 10/26 and 10/27 2013). When you begin looking at these sort of things, unexpected facts immediately jump at you.

Fishing expeditions

The US population of 260 millions to over 300 million during the period of interest 1975-2007 can be divided in an infinity of segment, like this: Mr 1 plus Mr 2; Mr 2 plus Mrs 3; Mr 2 and Mrs 3 plus Mr 332; Mr 226 plus Mrs 1,000,0001; and so forth.

Similarly, the period of interest 1975 to 2007 can be divided in an infinity of subperiods, like this: Year 1 plus year 2; year 1 plus year 3; years 1, 2, 3 plus year 27; and so forth. You get the idea.

So, to the question: Is there a subset of the US population which did not share in the general progress in the American standard of living during some subperiod between 1975 and 2007?

The prudent response is “No.” It’s even difficult to imagine a version of reality where you would be right to affirm:

“There is no subset of the US population that was left behind by general economic progress at any time during the period 1975- 2007.”

Let me say the same thing in a different way: Given time and good access to info, what’s the chance that I will not find some Americans whose lot failed to improve during the period 1975 to 2007? The answer is zero or close to it.

This is one fishing expedition you can join and never come back empty-handed, if you have a little time.

Thus, liberal dyspeptics, people who hate improvement, are always on solid ground when they affirm, “Yes, but some people are not better off than they were in 1975 (or in _____ -Fill in the blank.)” The possibilities for cherry-picking are endless (literally).

Everyone therefore has to decide for himself what exception to the general fact of improvement is meaningful, which trivial. This simple task is made more difficult by the liberals’ tendency to play games with numbers and sometimes even to confuse themselves in this matter. I will develop both issues below.

To illustrate the idea that you have to decide for yourself, here is a fictitious but realistic example of a category of Americans who were absolutely poorer in 2007 that they were in 1975. You have to decide whether this is something worth worrying about. You might wonder why liberals never, but never lament my subjects’ fate.

Consider any number of stock exchange crises since 1975. There were people who, that year, possessed inherited wealth of $200 million each, generating a modest income of $600,000 annually. Among those people there were a number of stubborn, risk-seeking and plain bad investors who lost half of their wealth during the period of observation. By 2007, they were only receiving an annual income of $300,000. (Forget the fact that this income was in inflation shrunk dollars.) Any way you look at it, this is a category of the population that became poorer in spite of the general (average) rise in in American incomes. Right?

Or, I could refer to the thousands of women who were making a living in 1975 by typing. (My doctoral dissertation was handwritten, believe it or not. Finding money to pay to get it typed was the hardest part of the whole doctoral project.) One of the many improvements brought about by computers is that they induced ordinary people to learn to do their own typing. Nevertheless, there was one older lady who insisted all along on making her living typing and she even brought her daughter into the trade. Both ladies starved to death in 2005. OK, I made them up and no one starved to death but you get my point: The imaginary typists fell behind, did not share in the general (average) improvement and their story is trivial.

So, I repeat, given some time resources, I could always come up with a category of the US population whose economic progress was below average. I could even find some segment of the population that is poorer, in an absolute sense, than it was at the beginning of the period of observation. Note that those are two different finds. Within both categories, I could even locate segments that would make the liberal heart twitch. It would be a little tougher to find people who both were poorer than before the period observation and that would be deserving of liberal sympathy. It would be a little tough but I am confident it could be done.

So, the implication here is that when it comes to the unequal distribution or real economic growth you have to do two things:

A You have to slow down and make sure you understand what’s being said; it’s not always easy. Examples below.

B You have to decide whether the inequality being described is a moral problem for you or, otherwise a political issue. (I, for one, would not lose sleep over the increased poverty of the stock exchange players in my fictitious example above. As for the lady typists, I am sorry but I can’t be held responsible for people who live under a rock on purpose.)

Naively blatant misrepresentations

A hostile liberal commenter on this blog once said the following:

“Extreme poverty in the United States, meaning households living on less than $2 per day before government benefits, doubled from 1996 to 1.5 million households in 2011, including 2.8 million children.”

That was a rebuttal of my assertion that there had been general (average) income growth.

Two problems: first, I doubt there are any American “households” of more than one person that lives on less than $2 /day. If there were then, they must all be dead now, from starvation. I think someone stretched the truth a little by choosing a misleading word. Of maybe here is an explanation. The commenter’s alleged fact will provide it, I hope.

Second, and more importantly, as far as real income is concerned, government benefits (“welfare”) matter a great deal. Including food stamps, they can easily triple the pitiful amount of $2 a day mentioned. That would mean that a person (not a multiple person- household ) would live on $1080 a month. I doubt free medical care, available through Medicaid, is included in the $2/day. I wonder what else is included in “government benefits.”

The author of the statement above is trying to mislead us in a crude way. I would be eager to discuss the drawbacks of income received as benefits in- instead of income earned. As a conservative, I also prefer the second to the first. Yet, income is income whatever its source, including government benefits.

The $2/day mention is intended for our guts, not for our brains. Again, this is crude deception.

Pay attention to what the other guy asserts sincerely about economic growth.

Often, it implies pretty much the reverse of what he intends. In an October 2013 discussion on this blog about alleged increasing poverty in the US, asked the following rhetorical question:

“Or have Americans’ standard of living only improved as the gap [between other countries and the US] closed?“

I meant to smite the other guy because the American standard of living has only increased, in general, as we have seen (in Part One of this essay posted). A habitual liberal commenter on my blog had flung this in my face:

“….Since 1975, practically all the gains in household income have gone to the top 20% of households…” (posted 10/23/13)

(He means in the US. And that’s from a source I am not sure the commenter identified but I believe it exists.)

Now, suppose the statement is totally true. (It’s not; it ignores several things described in Part One.) The statement says that something like roughly 60 million Americans are richer than they, or their high income equivalents were in 1975. It also says that other households may have had almost stationary incomes (“practically”). The statement does not say in any way that anyone has a lower income in 1975. At best, the statement taken literally, should cause me to restate my position as follows:

“American standards of living have remained stationary or they have improved….”

You may not like the description of income gains in my translation of the liberal real statement above. It’s your choice. But the statement fails to invalidate my overall assertion: Americans’ standard of living improved between 1975 and 2007.

What the liberal commenter did is typical. Liberals always do it. They change the subject from economic improvement to something else they don’t name. I, for one, think they should be outed and forced to speak clearly about what they want to talk about.

Big fallacies in plain sight

Pay attention to seemingly straightforward, common liberal, statist assertions. They often conceal big fallacies, sometimes several fallacies at once.

Here is such an assertion that is double-wrong.

“In the past fifteen years the 20% of the population who receive the lowest income have seen their share of national income decrease by ten percentage points.” (Posted as a comment on my blog on 10/21/13)

Again, two – not merely one – strongly misleading things about this assertion. (The liberal commenter who sent it will assure us that he had no intention to mislead; that it’s the readers’ fault because, if…. Freaking reader!)

A The lowest 20% of the population of today are not the same as those of fifteen years ago, nor should you assume that they are their children. They may be but there is a great deal of vertical mobility in this country, up and down. (Just look at me!) The statement does not logically imply that any single, one recognizable group of social category became poorer in the interval. The statement in no way says that there are people in America who are poor and that those same people became poorer either relatively or in an absolute sense. Here is a example to think about: The month that I was finishing my doctoral program, I was easily among the 20% poorest in America. Hell, I probably qualified for the 5% poorest! Two months later, I had decisively left both groups behind; I probably immediately qualified for the top half of income earners. Yet, my progress would not have falsified the above statement. It’s misleading if you don’t think about it slowly, the way I just did.

I once tried to make the left-liberal vice-president of a Jesuit university understand this simple logical matter and I failed. He had a doctorate from a good university in other than theology. Bad mental habits are sticky.

B Percentages are routinely abused

There is yet another mislead in the single sentence above. Bear with me and ignore the first fallacy described above. The statement is intended to imply that the poorer became poorer. In reality, it implies nothing of the sort. Suppose that there are only two people: JD and my neighbor. I earn $40, neighbor earns $60. In total, we earn $100. Thus my share of our joint income is 40%, neighbor’s is 60%. Then neighbor goes into business for himself and his income shoots up to $140. Meanwhile, I get a raise and my income is now $60.

In the new situation, my share of our joint income has gone down to 30% (60/60+140), from 40%. (Is this correct? Yes, or No; decide now.) Yet, I have enjoyed a fifty percent raise in income. That’s a raise most unions would kill for. I am not poorer, I am much richer than I was before. Yet the statement we started with stands; it’s true. And it’s misleading unless you pay attention to percentages. Many people don’t. I think that perhaps few people do.

My liberal critic was perhaps under the impression that his statement could convince readers that some Americans had become poorer in spite of a general (average rise) in real American income. I just showed you that his statement logically implies no such thing at all. If he want to demonstrate that Americans, some Americans, have become poorer, he has to try something else. The question unavoidably arises: Why didn’t he do it?

Was he using his inadequate statement to change the subject without letting you know? If you find yourself fixating on the fact that my neighbor has become even richer than I did because he more than doubled his income, the critic succeeded in changing the subject. It means you are not concerned with income growth anymore but with something else, a separate issue. That other issue is income distribution. Keep in mind when you think of this new issue that, in my illustration of percentages above, I did become considerably richer.

Liberals love the topic of unequal progress for the following reason:

They fail to show that, contrary to their best wish, Americans have become poorer. They fail almost completely to show that some people have become absolutely poorer. They are left with their last-best. It’s not very risky because, as I have already stated, it’s almost always true: Some people have become not as richer as some other people who became richer!

Policy implications of mis-direction about income growth

The topic matter because, in the hands of modern liberals any level of income inequality can be used to call for government interventions in the economy that decrease individual liberty.

Here are a very few practical, policy consequences:

A Income re-distribution nearly always involves government action that is, force. (That’s what government does: It forces one to do what one wouldn’t do out of own inclination.) That’s true for democratic constitutional governments as well as it is for pure tyrannies. In most countries, to enact a program to distribute the fruits of economic growth more equally it to organize intimidation and, in the end, violence against a part of the population. (For a few exceptions, see my old but still current journal article: “The Distributive State in the World System.“ Google it.) This is a mild description pertaining to a world familiar to Americans. In the 1920s, in Russia, many people (“kulaks”) were murdered because they had two cows instead of one.

Conservatives tend to take seriously even moderate-seeming violations of individual liberty, including slow-moving ones.

B Conservatives generally believe that redistribution of income undermines future economic growth. With this belief, you have to decide between more equality or more income for all, or nearly all (see above) tomorrow?

It’s possible to favor one thing at the cost of bearing the travails the other brings. It’s possible to favor the first over the second. This choice is actually at the heart of the liberal/conservative split. It deserves to be discussed in its own right; “Do your prefer more prosperity or more equality?” The topic should not be swept under the rug or be made to masquerade as something else.

If you are going to die for a hill, make sure it’s the right hill.

PS: There is no “income gap.”

Growing Poverty, a Declining Standard of Living: Watch Out for…. Part 1.

It’s vital to the liberal narrative that pretty much everything has to go generally downhill (except global warming, of course, which is always going up even when it’s not, like right now). Life has to deteriorate, they think. That things are getting worse is an article of faith among liberals; it’s even a tenet of their faith. (If things are swimming along fine, what excuse is there for government intrusion?) You might even say that most liberals hate most good news. Prominent among the liberals’ permanent myths is the belief that Americans have become poorer except for a tiny minority of the very rich __________% (Fill in the blank.) In its most common version the idea is that Americans’ real standard of living has done nothing but decline since sometimes in the seventies. This, whatever the numbers say.

I, for one, know it’s not true. I was there, after all, from the beginning, even from before the beginning! I remember well how bad the good old days were in many respects. I am distressed that some people with apparently conservative or libertarian ideas have now also espoused this false belief. In this essay in two parts, I try to help readers find their way in the midst of often misleading or downright false statements that seem to support this erroneous belief. As usual, I do not address myself to specialists but rather to the intelligent but ignorant. Specialists are welcome to comment if they agree to do it in English or in some other official language.

Two forewords

1 I don’t contend that I understand what happened to American real incomes during the current crisis, say, between 2009 and 2013. I will say nothing about this recent period. (If I told you what I suspect happened, you might be astounded, though.) I refer in this essay only to the period 1975-2007.

2 I believe poverty and prosperity have to be measured in terms of real income, income as experienced by real human beings: It’s not how many dollar bills you have in your wallet, it’s what your paycheck actually buys that matters. This brings up several tough technical problems we will get into presently or in the next episode. If you think of poverty in different terms, I am not sure I have anything useful to say to you.

The superficial facts

General federal statistics, all OECD figures, all World Bank numbers show that on the average Americans have become considerably richer since 1975. Nevertheless, these statistics, contrary to a now common belief – significantly understate the economic progress of Americans. We, in general, have become vastly richer than were were then.

I will deal later explicitly with the issue of possible differences between what the average shows and the economic progress of sub-categories of the US population. In the meantime, I must point out that some common forms of enrichment cannot be confined to a particular group. Cleaner drinking water, for example, is usually cleaner for everyone. It would be impractical to reserve wells of dirty, polluted water for the poor or for racial minorities. (However, if you search a little you might actually find liberal allegations of such segregation or, at least, the intimations of such. National Public Radio is a good bet.)

Here is what I don’t intended to do, don’t do: I do not accuse government statistics of lying. I help others read them and complement them where they need to be complemented. There is not government conspiracy designed to mislead us about the living standards of Americans, I think.

Major (unintended) sources of bias.

There are three major sources of bias in expressing standard of living that understate, underestimate, understate economic betterment. I explain them below.

Ballooning health expenditures

Since the seventies, most employed Americans have taken most of their pay raises in the form of health benefits. This results from a historically accidental peculiarity of the American wage and benefit system going back to WWII. (It may be getting removed by the implementation of Obamacare as I write in 2013). The large increase in health expenditures provided by employers do not appear in wage statistics. Yet, they constitute consumption in a way similar to straight wages. In fact, wherever people are given a choice between more steak and more health care, they seem to chose more steak and more health care. Health care possesses an interesting characteristic all of its own: While there is a limit to how much steak an individual can ingest, there is no limit at all to how much health care -broadly defined – the same individual can absorb. It’s close to infinite. Why, I am considering right now some surgery to correct a nose I have not really liked for more than sixty years!

Whether it is a wise societal choice to spend apparently limitless resources on health care, much of it for the old and economically unproductive is an interesting issue in its own right. However, it’s not my issue here. Health services have been produced in vast quantities since 1975. They were eagerly consumed by Americans. Health expenditures constitute a part of the standard of living. If you don’t believe this, just ask yourself if the withdrawal of all health care would not be a lowering of the standard of living.

Better quality of common goods

Common objects on which comparisons of living standard across time are based have improved tremendously in quality. This is difficult, sometimes impossible to measure. Indices of comparison across time (1975 to 2007) don’t do a good job of it.

Nominal wages, the numbers printed on your paychecks, have to be corrected for inflation. We all know that a dollar does not buy as much as it did in 1975. (Around that time, my salary of $20,000/year was quite comfortable.) Federal international and private organizations in charge of these things do their very best to correct raw numbers in meaningful ways. However, they meet with several limitations because things of 1975 are often radically different from what bears the same name in 2007.

(Note: The agencies in charge do their best and mostly intelligently. Again, I am not faulting their efforts. Also, I think there is little intellectual fraud involved in this work because their results are among the most and best scrutinized in the history of the world.)

Here is an example: I suspect that the average television set of 1975 was like mine was then: It was small, offered only black and white images, often had scratchy sound, and gave access to little more than three national networks. Watching television then was like eating in a mediocre restaurant that offered only three dishes ( and there was maybe a hot dog stand outside).

When economists correct for inflation, they have little choice but to compare that television set with a modern ultra-flat etc… Hence, when they report that the cost of a television set has increased in face dollars by, say, 100%, they are not able to take into account that the actual service (the enjoyment) attached to a contemporary set with precise colors, faithful sound that is a gateway to 300 sources is ten times, or one hundred times, greater than what I derived from my 1975 B&W set.

This example can pretty much be turned into a general rule: Everything is better, works better, tastes better, gives more service than its equivalent back then. When you find a seeming exception, you soon discover that it’s not real. Two examples of exceptions that don’t resist examination:

A     Cars are more expensive now than then by several measures. This means that it takes more days of mean (average) American wages to buy the cheapest car in American than it did then. But the cheapest car on American roads today are vastly better in every way than their supposed equivalent back then. They break down less often; they are safer (weight for weight); they require much less maintenance. (Older people will remember the days when every car required an oil change every 5,000 miles and when prudent car owners changed oil every 3,500 miles.)

In addition, much of the rise in real car prices is due to mandated safety and environmental buffers now built into them that did note exist in 1975. (It’s startling to see in not-so-old movies parents getting into the family car with their children and driving off with no one buckling safety belts because there aren’t any.) No matter how one feels about the current health and environmental restrictions pushing upward car prices, they are undeniably form of consumption. It’s useless to cry,” I don’t want it” when you imposed it on yourself through the political process you deem legitimate in every way.

B     Many older people, and I am often tempted to join them, believe that any number of produce just tasted better back then, produce such as tomatoes and strawberries, for example. This is pure delusion. Here is how I know: Several times, I have steeled my resolve, put cash in my pocket and directed my steps to the local farmers’ market. There, against all my instincts, I purchase a pound of organic tomatoes or a tiny basket of grossly priced strawberries. Now organic produce is not better for you (See “organic food” on this blog.) but it’s often fresher, and often handpicked. Each time, I recovered in my mouth the taste of produce of my youth. Each time, I did the calculations only to rediscover anew that the outrageous cost of the farmer’s market produce was actually less, as a percentage of any income, or in inflation-corrected dollars, than the equivalents did when I was young.

We have become used to paying little for mediocre produce, the better produce of yesteryear are still available. They are not even especially expensive. They appear expensive because we are spoiled by general low food prices.

An then, of course, there is the coffee. It was so vile then, coast-to-coast, in 1975 that if anyone but a drunks’ bar served it today he would probably be indicted. And then, there is bread that would have qualified as light construction material. The list is endless: In the good old days, most things were mediocre to very bad and they were, in fact expensive. Current measures are seldom able to take improvement in quality into account. For this reason, they understate average economic progress in America between 1975 and 2007.

I repeat that this average economic progress is also mostly widespread, available to all parts of the population. There are, in fact, few corner bakeries operating especially in the ghetto and specializing in nutritionally unsound, bad-tasting bread for African-Americans.

There may be an exception to the general rule that things have become cheaper in thirty years with constant quality I am not able to deal with here. It may be a major exception: Housing in all its forms may be more expensive in real terms now than it was in 1975. Much housing is the same now as it was then, so prices matters a great deal. Thus, better quality would not explain superior cost. I am eager to see sources on this issue and to publish them here.

New goods, new services

When comparing the prices of things and services then and now, economists are not able, of course, to take into account objects and services that simply did not exist then. This inescapable fact also understates the real progress in living standards. I repeat: Some good things are not counted at all in comparisons of the standard of living then and now because they did not exist at all then. This fact in itself constitutes an overstatement of the standard of living of then. The Internet and its many manifestations, its many subordinate services, such as Google, are a case in point.

I hasten to add that this judgment does not depend on how much you, personally value the Internet and its multiple offerings. To demonstrate that it’s a form of consumption, it’s enough to observe that few of those who can have access to the Internet actually turn it down. I, for example, like most residents of developed societies probably know more than one thousand people. Of the people I know, only three refuse to gain Internet access (and they periodically cheat by catching a ride on a relative’s network tool!)

I can hear some older readers grumble ( as one did recently on this blog) that newfangled technical innovations, such as the Internet and hugely better television, actually made life worse. I smile sarcastically inside for the following reason: Very few Americans seem to be following the primitivist dream implicit in such judgment and make for the wilderness. This, although it would be easy because there is probably more and more undeveloped, empty space in America as the population become more concentrated in a few mega cities. This is too has improved since 1975: There is more and wilder wilderness.

Summary

Large health expenditures, better products, more products have increased the general standard of living of Americans considerably beyond what wage and income statistics show. This statement is implicitly based on averages. The demonstration above does not exclude the logical possibility that some sectors of American society were worse off in 2007 than they, or their equivalents were in 1975. This issue is dear to liberal sensitivity. I deal with it in Part 2, soon forthcoming.

Extremist Republicans Did the Right Thing

There is a poll suggesting that the Republican Party is taking a public opinion thrashing for provoking a government so-called “shutdown.” I don’t think there is much of a shutdown. And I don’t think a single poll means anything. If there were four convergent polls showing the Republicans being blamed, I would still support Republican e “extremists”, including Ted Cruz.

We will not get Obamacare defunded. That was hardly ever in the cards. It was just a good time to draw the American’s people attention to the abnormality that it the federal government. It’s a good time because its own actions right now illustrate both its pettiness and its gross incompetence. Keep veterans out of veterans’ monuments and fail just about 100% on the implementation of a vast ambitious program legislated on a completely partisan basis.

In addition, thanks to the crisis, many young people will be astonished to discover that, like them with their credit cards, the Federal Government cannot pay its bills to Peter without borrowing from Paul. Nothing new here; its’ just that many citizens don’t know this simple fact.

I don’t buy the argument that, of course, there was going to be technical glitches with Obamacare. Implementation of Obamacare is a big big project, of course, but it does not involve any novel technical challenge. And they had four years. And they could have asked Facebook, for example, to take charge. The federal government rarely does a small trivial thing well. There was no reason to believe it could do a big important thing well.

The main things Pres. Obama said four years ago about reforming health care turn out to be wrong, false. I don’t think he was lying then. I believe he and his advisers never had any idea of what they were talking about. They still don’t.

I am glad there were members of the Republican Party in Congress who manned up enough to point to the obvious.

If the Republican Party suffers as a result of the present crisis, I think it will have been worth it. Personally, I am not much invested in a Party that’s a little of everything and of anything. It’s conservatism that matters, the conservative perspective on the world. It’s the perspective that says that the best government is that which governs least. It used not to be a radical thought.

Yesterday, we buried my friend Filip. I had only known him for a few years but his departure leaves a hole in my mind and in my heart. At first, he was just a needed financial adviser. Then, we became friends around conservative politics and braised sweetbreads. We had both in common because we were both immigrants. We both detested authoritarianism and we both liked earthy foods. I was reared in France. My earthy food talents are good. Filip was reared in Communist Romania. His authoritarianism detector was superb. We were complementary.

What Obamacare is Really About

The good folks at the Reason Foundation, who have the stomach to follow such things, tell us that the bureaucrats entrusted with implementing Obamacare have missed half their deadlines. Even well-connected consultants, they tell us, remain largely in the dark. And for sure, the general public is totally in the dark and generally suspicious.

This I can predict with confidence: there will be train wrecks but some parts will work well. Some people will be happy and others won’t. Republicans will holler I-told-you-so while Democrats will hail the successes and call for patience while the glitches are fixed. How could it be otherwise? Such a complex piece of legislation, even as it falls way short of Obama’s initial promises, will inevitably stumble into a few successes, if only for the short term.

But does anyone believe the perpetrators of Obamacare didn’t know that? While playing up its seeming successes, feeble as they might be, they will blame its failures on the greedy private sector. A mixed system won’t work, they’ll say, and they’ll be right. (A central theme of the great Ludwig von Mises was the instability of a mixed economy.) They will then trumpet the slogan they’ve kept under wraps for some years: single payer!

Single payer, of course, means total government seizure of the health care sector. Having already achieved near total control of the education and financial industries and a heavy grip on energy, they will be one step further along the road to their real goal: the extinguishment of the last of our freedom and prosperity and the establishment of total fascist dictatorship. That’s what Obama, Hillary, et. al. are really after, folks.

A Libertarian Moment in the US?

I think you’re seeing a growth of self-conscious libertarianism. The end of the Bush years and the beginning of the Obama years really lit a fire under the always-simmering small-government attitudes in America. The TARP, the bailouts, the stimulus, Obamacare, all of that sort of inspired the Tea Party. Meanwhile, you’ve simultaneously got libertarian movements going on in regard to gay marriage and marijuana. And I’ll tell you something else that I think is always there. The national media were convinced that we would be getting a gun-control bill this year, that surely the Newtown shooting would overcome the general American belief in the Second Amendment right to bear arms. And then they pushed on the string and it didn’t go anywhere. Support for gun control is lower today than it was 10 or 15 years ago. I think that’s another sign of America’s innate libertarianism.

This is from David Boaz, who is being interviewed by Molly Ball for the Atlantic. Read the whole interview. There is stuff on Rand Paul, Ted Cruz, Marxism, the politics of welfare and some recent SCOTUS rulings.

There is a lot to be pessimistic about, but I can see a more libertarian US in 15 or 20 years, provided we do something about ObamaCare and Social Security. One thing we must be very vigilant about is the inevitable push for a more isolated society. Protectionist tendencies are probably going to get stronger if the economy continues to perform as dismally as it has been, and protectionism is the bane of prosperity and cooperation.