Eight Questions for Protectionists

Just asking...

Eight Questions for Protectionists

via Big Government by Dan Mitchell on 9/25/11

When asked to pick my most frustrating issue, I could list things from my policy field such as class warfare or income redistribution.
But based on all the speeches and media interviews I do, which  periodically venture into other areas, I suspect protectionism vs. free trade is the biggest challenge.

So I want to ask the protectionists (though anybody is free to provide feedback) how they would answer these simple questions.
1. Do you think politicians and bureaucrats should be able to tell you what you're allowed to buy?

As Walter Williams has explained, this is a simple matter of freedom and liberty. If you want to give the political elite the authority to tell you whether you can buy foreign-produced goods, you have opened the door to endless mischief.

2. If trade barriers between nations are good, then shouldn't we have trade barriers between states? Or cities?

This is a very straightforward challenge. If protectionism is good, then it shouldn't be limited to national borders.

3. Why is it bad that foreigners use the dollars they obtain to invest in the American economy instead of buying products?

Little green pieces of paper have little value to foreign companies. They only accept those dollars in exchange for products because they intend to use them, either to buy American products or to invest in the U.S. economy. Indeed, a "capital surplus" is the flip side of a "trade deficit." This generally is a positive sign for the American economy (though I freely admit this argument is weakened if foreigners use dollars to "invest" in federal government debt).

4. Do you think protectionism would be necessary if America did pro-growth reforms such as a lower corporate tax rate, less wasteful spending, and reduced red tape?

There are thousands of hard-working Americans that have lost jobs because of foreign competition. At some level, this is natural in a dynamic economy, much as candle makers lost jobs when the light bulb was invented. But oftentimes American producers can't meet the challenge of foreign competition because of bad policy from Washington. When I think of ordinary Americans that have lost jobs, I direct my anger at the politicians in DC, not a foreign company or foreign workers.

5. Do you think protectionism would help, in the long run, if we don't implement pro-growth reforms?

If we travel down the path of protectionism, politicians will use that as an excuse not to implement pro-growth reforms. This condemns America to a toxic combination of two bad policies – big government and trade distortions. This will destroy far more jobs and opportunity that foreign competition.

6. Do you recognize that, by creating the ability to offer special favors to selected industries, protectionism creates enormous opportunities for corruption?

Most protectionism in America is the result of organized interest groups and powerful unions trying to prop up inefficient practices. And they only achieve their goals by getting in bed with the Washington crowd in a process that is good for the corrupt nexus of interest groups-lobbyists-politicians-bureaucrats.

7. If you don't like taxes, why would you like taxes on imports?

A tariff is nothing but a tax that politicians impose on selected products. This presumably makes protectionism inconsistent with the principles of low taxes and limited government.

8. Can you point to nations that have prospered with protectionism, particularly when compared to similar nations with free trade?

Some people will be tempted to say that the United States was a successful economy in the 1800s when tariffs financed a significant share of the federal government. That's largely true, but the nation's rising prosperity surely was due to the fact that we had no income tax, a tiny federal government, and very little regulation. And I can't resist pointing out that the 1930 Smoot-Hawley tariff didn't exactly lead to good results.

We also had internal free trade, as explained in this excellent short video on the benefits of free trade, narrated by Don Boudreaux of George Mason University and produced by the Institute for Humane Studies.

My closing argument is that people who generally favor economic freedom should ask themselves whether it's legitimate or logical to make an exception in the case of foreign trade.

NYT Sunday Review Pushes Old “Billionaires Run the Tea Party” Lie

NYT Sunday Review Pushes Old “Billionaires Run the Tea Party” Lie

via Big Journalism by Warner Todd Huston on 9/27/11

It is a lie that serves as the left's basic narrative for the birth of the tea party movement and this weekend it was The New York Times's turn to push that lie claiming that the tea party is "led by veteran conservative activists and bankrolled by billionaires." This bull hockey (yes, I said bull hockey) can't be debunked enough, because to undermine the legitimacy of the tea party movement, extremists and left-wingers pretend to be journalists push this lie for all its worth.

Left-wing Georgetown Professor Michael Kazin, who masquerades as a history professor by day, penned this latest piece for the Times pushing the left's favorite false narrative about the tea party movement. The piece lamented the loss of the spirit of activism and protest in the American left and revealed a taxpayer-funded professor longing for the violent anarchist protests of the early 20th century.
Kazin cries that the left has lost its umpf and wails that "the tea party rebellion" has instead come to the fore:

"Instead, the Tea Party rebellion — led by veteran conservative activists and bankrolled by billionaires — has compelled politicians from both parties to slash federal spending and defeat proposals to tax the rich and hold financiers accountable for their misdeeds."

Of course, his blithe claim that "the tea party" is run and funded by the rich and powerful in conservative circles is simply untrue. It is a claim repeated over and over again by the left and its handmaidens in the Old Media.
The truth is that "the tea party" is no single entity funded by billionaires and run by long-time conservative activists. This is a lie that reflects what some call "projection" because it is the left that operates this way. Left-wingism in America is a top down, big money game and always has been. There are no true grassroots efforts on the left. The tea partiers, however, are not like that and never have been.

Firstly, the real truth is that there is no such thing as "the" tea party. Tea party groups are usually small, rarely interconnected, and barely funded by anyone — even their own members, unfortunately. Also, there is no true national organization that can legitimately claim to "be" the tea party, though many are out there trying to urge activism.
So, where does this "billionaires funding the tea party" claim come from? Mostly from two groups. One is Americans for Prosperity and the other is Freedom Works. Both are most certainly heavy activists, both have a large bankroll behind them (one is funded now by the dreaded Koch Brothers), both have big name conservative activists working for them, and both most certainly do coordinate with tea party groups.
But neither actually run any tea party groups. Cooperating with is not the same as running. And more importantly, both were around long before the Tea Party movement started.
Additionally, both were taken by surprise by the fervor of the tea party movement and both had to hustle to catch up with the movement. Far from controlling the tea party movement, both AFP and Freedom Works were swept along with it.
I have worked with both organizations and did so before the tea party movement began. I was also involved with the group that started the first big tea party event in Chicago. So, I know first hand how little the big money and the big names in conservative activism had to do with the tea party movement.
Many of these folks were certain that the tea party would be a flash in the pan that would have no sticking power. They were surprised when the opposite happened and were left on the outside looking in at the beginning.
Few tea party groups have much by way of money. Almost every tea party activist is a true grass roots organizer working out of pocket, for the cause, with only their fervor for America and their principles guiding them. There is no "billionaire" buying them lunch, much less footing the bills for their groups.
So, whenever you see this lie that the tea party is "led by veteran conservative activists and bankrolled by billionaires" know that this is the way the left is attempting to control the narrative. It is a lie, certainly, but, as most leftists believe, the more you yell out the lie, the more people that will come to believe it. So, when you see this lie, debunk it, won't you?

Ms. Warren's Question

Elizabeth Warren has been all over the web because of her statement:

 

There is nobody in this country who got rich on his own -- nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did.

 

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One thing that's interesting to do with Elizabeth Warren's point is turn it around. Lots of people had access to roads. Lots of people were protected by police and military forces. Lots of people had fire protection. The people who went to work for the factory owner would probably have been content to work for anyone else who paid a decent wage. Yet, of the 200 million or so American adults who had access to all this, relatively few of them actually built a factory and got rich. (or was it the other way around?)
What made the difference?
Or to put it another way, why didn't everyone with access to the same goods and benefits also build a factory?
While it's true that without a social order that allows people to create wealth, there'd be a lot less wealth created, it would seem to be true that the social goods Ms. Warren cites may be necessary, but they are not sufficient.
Something extra is at play.

 

 

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The Lonely Island Of Little Green Footballs « The Diary of Daedalus

The Lonely Island Of Little Green Footballs « The Diary of Daedalus

Five myths about millionaires - The Washington Post

Five myths about millionaires - The Washington Post

1. Millionaires are rich.

Being rich has gotten more expensive. A $1 million fortune was unusual in the early 19th century.

2. Millionaires think they’re rich.

“Rich,” like “poor,” is a relative term. A family living on the American median income of $50,000 a year might think that one living on $500,000 is rich. But that second family, which probably knows families far better off than they are, thinks that you need $5 million a year to be truly rich, and so on.

3. Millionaires pay proportionately less income tax than poorer people.

In a speech on Monday, Obama said raising taxes on millionaires isn’t class warfare, but “math.” His math may be off: According to the IRS, those with adjusted gross incomes of more than $1 million paid an average of 23.3 percent in federal income taxes in 2008; those earning between $100,000 and $200,000 paid 12.7 percent; and those earning between $50,000 and $100,000 paid 8.9 percent. Nearly half of American families don’t make enough money to pay federal income taxes at all.

4. Millionaires share the same political beliefs.

That might have been true in pre-revolutionary France, where the nobility was exempt from most taxation (and why so many were subject to a brief meeting with Dr. Guillotin’s lethal invention). But it is certainly not true in 21st-century America, where political opinions among the rich are just as diverse as they are among the less well-off.

Just consider George Soros and the Koch brothers. They are listed high on the Forbes 400 list, but Soros funds Democratic campaigns, while the Koches helped foment the tea party revolution.

5. Obama’s “millionaires’ tax” won’t seriously limit investment.

That’s the line of reasoning that the administration is using. On Monday, Treasury Secretary Timothy Geithner told reporters that the president’s plan wouldn’t hurt growth. “I am very confident that the modest changes we’re suggesting in terms of revenues . . . would make the economy stronger in the long term, not weaker in the long term,” he said. Geithner’s confidence is somewhat misplaced.

According to a 2001 congressional study that confirmed a basic tenet of macroeconomics, “each $1 of marginal tax rate cuts would save the private economy at least $1.25 as deadweight losses fall and economic efficiency increases.” Taxes distort investment decisions. Why throw money into productive assets — corporate securities, a rental property or new employees for a small business — if the income they generate will be taxed away?

Taxes on the rich are taxes on people who create jobs. And jobs are an unalloyed good thing for an economy. Excessively taxing the capital that makes the economy go is poor public policy. And we have a recent example of how the opposite works well: Unemployment declined by a third in the four years after the Bush tax cuts were fully implemented in 2003, dropping to 4.2 percent from 6.2 percent. Meanwhile, federal revenue increased 44 percent in those years. If these tax cuts put people to work and generated money for the government, shouldn’t Obama consider the possibility that tax increases should be avoided?

Private Insurance Is More Efficient than Medicare–By Far | John Goodman's Health Policy Blog | NCPA.org

Private Insurance Is More Efficient than Medicare–By Far | John Goodman's Health Policy Blog | NCPA.org

Supporters of a new government program note that private insurers spend resources on a wide range of administrative costs that government programs do not. These include marketing, underwriting, reviewing claims for legitimacy, and profits. The fact that government avoids these expenditures, however, does not necessarily make it more efficient. Many of the administrative activities that private insurers undertake serve to increase the insurers’ efficiency. Avoiding those activities would therefore make a health plan less efficient. Existing government health programs also incur administrative costs that are purely wasteful. In the final analysis, private insurance is more efficient than government insurance.

....

Time magazine’s Joe Klein argues that “the profits made by insurance companies are a good part of what makes health care so expensive in theU.S.and that a public option is needed to keep the insurers honest.” All else being equal, the fact that a government program would not need to turn a profit suggests that it might enjoy a price advantage over for-profit insurers. If so, that price advantage would be slight. According to the Congressional Budget Office, profits account for less than 3 percent of private health insurance premiums. Furthermore, government’s lack of a profit motive may not be an advantage at all. Profits are an important market signal that increase efficiency by encouraging producers to find lower-cost ways of meeting consumers’ needs. The lack of a profit motive could lead a government program to be less efficient than private insurance, not more.

Moreover, all else is not equal. Government programs typically keep administrative expenditures low by avoiding activities like utilization or claims review. Yet avoiding those activities increases overall costs. The CBO writes, “The traditional fee-for-service Medicare program does relatively little to manage benefits, which tends to reduce its administrative costs but may raise its overall spending relative to a more tightly managed approach.”7

....

Also, Medicare’s administrative costs should be understood to include the deadweight loss from the taxes that fund the program. Economists estimate that it can easily cost society $1.30 to raise just $1 in tax revenue, and it may sometimes cost as much as $2.36 That “excess burden” of taxation is a very real cost of administering (i.e., collecting the taxes for) compulsory health insurance programs like Medicare, even though it appears in no government budgets.

Comparing administrative expenditures in the traditional “fee-for-service” Medicare program to private Medicare Advantage plans can somewhat control for these factors. Hacker cites a CBO estimate that administrative costs are 2 percent of expenditures in traditional Medicare versus 11 percent for Medicare Advantage plans. He writes further: “A recent General Accounting Office report found that in 2006, Medicare Advantage plans spent 83.3 percent of their revenue on medical expenses, with 10.1 percent going to nonmedical expenses and 6.6 percent to profits—a 16.7 percent administrative share.”

....

Hacker’s comparison commits the fallacy of conflating spending and costs. Even if government contains health care spending better than private insurance (which is not at all clear), it could still impose greater overall costs on enrollees and society than private insurance. For example, if a government program refused to pay for lifesaving medical procedures, it would incur considerable nonmonetary costs (i.e., needless suffering and death). Yet it would look better in Hacker’s comparison than a private health plan that saved lives by spending money on those services. Medicare’s inflexibility also imposes costs on enrollees. Medicare took 30 years longer than private insurance to incorporate prescription drug coverage into its basic benefits package. The taxes that finance Medicare impose costs on society in the range of 30 percent of Medicare spending. In contrast, there is no deadweight loss associated with the voluntary purchase of private health insurance.

Hacker nods in the direction of non-spending costs when he writes, “Medicare has maintained high levels of . . . patient access to care.” Yet there are many dimensions of quality other than access to care. It is in those areas that government programs impose their greatest hidden costs, on both publicly and privately insured patients.

The Texas Story Is Real

The Texas Story Is Real

via Daily Policy Digest on 9/23/11

As his primary pitch to a nation starved for jobs, Texas Governor Rick Perry entered the Republican presidential nomination race bragging about the job creation record of Texas during his term.  This triggered a flurry of debate on whether or not Texas is really all Perry claims for it.  But while there is certainly nuance in numbers, and Texas doesn't win on every single measure, on the whole it seems indisputable that Texas did very, very well during the 2000s, says Aaron M. Renn of New Geography.
The following information offers a comparison of Texas to U.S. national averages over the last decade:

• Texas' population grew by 20.6 percent, more than doubling the national growth rate of 9.6 percent.
• While Texas had an unemployment rate that was approximately 10 percent greater than the national average in 2000, that same rate was approximately 10 percent lower than the national average by the decade's close.
• Considering gross domestic product per capita, while Texas was above the national average in both 2000 and 2010, its lead dwindled slightly over the course of the decade as Texas fell from 104.7 percent of the national average to 103.7 percent.
• With personal income, the opposite effect can be seen: while Texas lagged behind the national average at both the open and close of the decade, it closed the gap from 94.0 percent of the national average in 2000 to 97.3 percent in 2010.
• The poverty rate in Texas (17.2 percent) is still substantially higher than the national average (14.3 percent), though Texas did close this gap slightly during those 10 years (approximately 0.2 percent).

It bears mention that these statistics are commonly used throughout the country to compare cities and states, and while every statistic isn't a winner for Texas, most of them are, notably on the jobs front.
Source: Aaron M. Renn, "The Texas Story Is Real," New Geography, September, 19 2011.
For text:
http://www.newgeography.com/content/002448-the-texas-story-is-real
For more on Economic Issues:
http://www.ncpa.org/sub/dpd/?Article_Category=17

Is the Income Tax System Fair?

Is the Income Tax System Fair?

via John Goodman's Health Policy Blog by John Goodman on 9/26/11

No one in the health policy community has been more critical of the unfair way the tax code treats health expenses and no one has been more diligent in suggesting alternatives to it than yours truly. Also, no think tank has been more aggressive in promoting fairer, more progressive alternatives to the current tax system than the NCPA. (See the John Goodman/Larry Kotlikoff "progressive flat tax" proposal, for example.)
That said, Barack Obama's critique of the income tax system is way off the mark. Since the days of Ronald Reagan, says the president, Republicans have been protecting the rich at every opportunity — shielding them from the obligation to pay their fair share. Yet here are some facts about U.S. income taxes that most people don't know:

• Over the past quarter century, our income tax system has become increasingly progressive — with the tax burden almost continuously shifting through time  from the bottom half to the top half of the income distribution. (See the graph below.)
• As a result of this seismic shift in the tax burden, more than half of U.S. households (taxpayer units") pay no income tax at all and 30% of all households actually make money off the income tax system (pay "negative taxes") through the Earned Income Tax Credit.
• More than one-third of all income taxes are now paid by the top 1 percent and almost three-fourths of all income taxes are paid by the top 10%.
• According to an OECD report, the U.S. currently has the most progressive tax system among all developed countries.
• Although it's hard to assign responsibility to the two political parties, Republicans are probably responsible for 80 percent of the increase in progressivity.

If you find any of this surprising, the obvious question is: why? If the president wants to have a national discussion about the distribution of the tax burden, why are the American people not better informed? There are three reasons: Republicans, Democrats and the news media.
The most important reason for the increasing progressivity of income taxes is that virtually every Republican tax bill over the past 25 years has taken more and more people off the tax rolls. Democratic opponents inevitably point to the lowering of the highest tax rates as a "giveaway to the rich." They conveniently ignore the fact that in lowering the rates, these same tax bills also widened the base. By allowing fewer deductions, exemptions and loop holes, the bills exposed more income to taxation. More importantly, if people at the bottom of the income ladder are completely taken off the tax rolls, the burden of the tax system will shift to those at the top, no matter what rates they pay or what deductions they take.
The problem with Republicans is that it is not in their nature to promote redistribution from rich to poor. It's as though they are too embarrassed to say, "Look what we did." If you made a gift to the needy or engaged in some other charitable act, would you go around and brag about it? Of course not. Well, that's the way a typical Republican politician feels about Republican tax policies. I honestly can't remember the last time I heard a Republican boast about the fact that Republican tax bills have liberated half the population from the burden of the income tax.

Let me tell you how it will be,
There's one for you and nineteen for me,
Cause I'm the taxman.

Democrats, by contrast, tend to be redistributionists by nature. They have no reluctance to talk about taking from the rich and giving to the non-rich, whether through tax policy or any other means. And if Republicans choose to say nothing, few Democrats are going to gratuitously compliment them for engaging in more redistribution than even Democratic politicians were willing to enact. Instead, the natural tendency for everyone in public office is self-serving spin. The Democratic line, therefore, has been: Republican tax policy is benefitting the rich. It has been a distortion that Republicans have been unwilling to challenge.
The news media tends to be basically lazy. They don't dig much deeper that the latest press release. So if Democrats claim that Republican tax policies favor the rich and the Republicans don't deny it, don't expect to read anything different in tomorrow's newspaper.
Now for the facts of the matter. We don't need to dwell on anecdotes about Warren Buffett's tax return versus his secretary's. We know, very broadly, who earns what and who pays what because the IRS keeps track of it. Here, courtesy of the Tax policy Center are the effective tax rates by income level.
Looking at changes over time, Michael Stroup, an economist at Stephen F. Austin State University, has taken the IRS data and constructed a "progressivity index." It's a sophisticated way of measuring how even or uneven is the tax burden as a whole. Here's what it looks like:

In 1986, Reagan era tax reform brought the highest tax rate down from 50% to 28% and at the same time removed millions of people from the tax rolls. Stroup finds that the overall effect was no change in progressivity in the short run. But after a dip in the index (which is natural in recessions), these changes over time led to a tax burden that increasingly shifted to above-average-income earners. A Republican capital gains tax cut signed by President Clinton accelerated the trend (Yes, lower tax rates really did produce higher capital gains revenues.)
Tax changes under George W. Bush moved essentially in the same direction: lower taxes — especially on dividends and capital gains — combined with provisions that let millions of additional families escape taxes altogether. The net effect was to even more dramatically shift the burden of taxation to higher income earners. In fact, Stroup finds that the increase in progressivity was greater under Bush than at any time in the previous twenty years. He concludes:

Since the 2001 and 2003 Bush tax re­forms, the share of total income received by the wealthy has increased; however, their share of the total tax burden has increased even more than their income share… Bush's reforms have helped mitigate the income gap between rich and poor by increasing the progressivity of the income tax system.

So what is the Obama Administration proposing? They claim to be proposing a "Buffett rule," under which the wealthy would pay at least the same tax rate as middle-class taxpayers. But, as Megan McArdle points out:

[T]he Obama Administration itself has not outlined anything of the sort. At least in the White House document that I read, I saw no proposal to set some sort of AMT on millionaires. Instead, it [is] rehashing a bunch of things that the administration has long proposed: allowing the Bush tax cuts to expire for those making more than $250,000; changing the treatment of carried interest income accrued from capital gains; and altering the treatment of deductions for very high earners. If all of these things were passed, guess who would still pay a lower effective tax rate than his secretary? Hint: his initials are WB, and he lives in Omaha, Nebraska.

In case you don't keep up with these things, most of Warren Buffett's "income" is in the form of unrealized capital gains. That means during the tax year the value of his stocks and bonds and other unsold assets rises.
Under the current system, and under the new Obama tax regime, the tax rate on unrealized capital gains is ….  you guessed it …. exactly zero.
See David Henderson and Alan Reynolds on these issues as well.

The Moocher's Credo

The "crab bucket syndrome", also known as the politics of envy.

The Moocher's Credo

via The American Spectator and AmSpecBlog by Green Lantern on 9/26/11

Elizabeth Warren has become an instant celebrity among liberals for her rant before what appeared to be a small coffee klatch of supporters captured on YouTube in her bid to replace Scott Brown as the Senator from Massachusetts.
The former Harvard professor, who blazed the trail for President Obama's new Consumer Credit Financial Protection Bureau (although Republicans in Congress blocked her being appointed the first head), puts forth a spontaneous declaration of liberal and Democratic claims on the American economy. I'm going to print the whole thing because I think it's worth deconstructing, word-by-word. You don't have to look any further to see why Obamaism points straight towards Greece.

I hear all this, you know, "Well, this is class warfare," this is whatever." No. There is nobody in this country who got rich on his own -- nobody.
You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police-forces and fire-forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did.
Now look, you built a factory and it turned into something terrific, or a great idea. God bless -- keep a big hunk of it. But part of the underlying social contract is, you take a hunk of that and pay forward for the next kid who comes along.

Got that? OK, let's take a look at what she's saying.
My first reaction on reading this is, "Wow, this is the crab bucket syndrome." It's well known among police officers, social workers and community organizers (like Barack Obama) that one of the most difficult and tragic phenomena in African-American ghettoes is that when one individual starts succeeding at something, like crabs hanging onto the legs of another crab trying to escape the bucket, everybody will impede his or her progress to the point making it impossible for them to escape into the outside world. For a while there was a practice in eastern cities known as "kneecapping," where a young athlete who was showing promise as a basketball player would have his kneecaps broken so that he could not leave his buddies behind. Any student who tries hard to succeed at school is accused of "acting white."
"We're the ones who made you what you are!" "You never would have gotten anywhere without us!" "You owe us!" These are the common cries of people who are afraid they will come up short. And of course all this glides easily into, "You're not going anywhere unless you take us."
It's not an isolated phenomenon. It's common enough in families, particularly the extended families of developing countries. People who study immigration have found that the Senegalese salesmen who sprout on the sidewalks of New York selling umbrellas whenever it rains or the Guatemalans trying to make a living mowing people's lawns are usually sending half their income back home to their extended families in West Africa or Central America. It's an admirable act of loyalty but also a real impediment to any individual success, since workers are constantly being drained of their savings.
Developmental economists who studied the Third World in the 1960s and 1970s found this one of the most difficult roadblocks to growing a commercial economy. It is, in fact, the age-old problem of capitalism -- whenever an individual succeeds at something, they immediately earn the resentment of their neighbors who believe that if someone is getting rich then other people must be getting poor. Anyone who starts a business is immediately overwhelmed by the claims of friends and relatives -- and government officials -- demanding their share.
This produced what seemed an extremely puzzling anomaly -- that throughout the Third World the entrepreneurial sectors were run largely by foreigners, often immigrants from other Third World countries. The small business sector in Latin America was dominated by Japanese and Chinese immigrants. Cuba had a large complement of Chinese entrepreneurs who, when chased out by the Cuban revolution, moved to New York and opened a string of restaurants advertising "Comidas Cubana y Chinoise." The commercial sector in East Africa was run largely by Indian immigrants. The most important step in development, the economists argued, would be to get native peoples to accept entrepreneurial success among their own countrymen. This is what Deng Xiaoping was trying to do when he told his fellow Chinese that it didn't matter what color a cat was as long as it could catch mice.
What Elizabeth Warren is trying to do, then, is bring this Third World mentality to America. "Nobody in this country ever got rich on their own. Nobody!" "You only made it because of the rest of us." Which is to say, "You owe us, buddy -- big time."
To her way of thinking, things such as roads, law enforcement, and education can only be provided by the government. Without the state, every private business in America would be besieged by mobs trying to rip off their inventory and sell their machinery for scrap. (That "community organizers" such as Elizabeth Warren and Barack Obama would probably be leading such mobs will pass notice for now.) Let's look at the examples Warren offers:
Roads and transportation. The fact that government now owns most of the roads in the country does not mean without government there would be no roads. It simply means that road building and maintenance are mundane and unimaginative tasks that have been turned over to the government because nobody sees any chance of making money at it-- or rather that the government would undoubtedly prevent anyone from profiting at it if they tried. Many of America's first roads were toll roads built by private companies. Ferries, bridges, and commuter railroads were also private. Eventually people began to resent paying these fares and asked the government to take them over "for the good of the people." Road building has also devolved to the government because, as the landscape becomes more settled, it requires the power of eminent domain to push roads through populated areas. This is a compromise most people accept, although the details of "taking private property without due compensation" are still being worked out in the courts.
Perhaps the best example of this is the New York City subway system. The original subway line -- the Interborough Rapid Transit (IRT) -- was built in 1905 on contract by a private corporation and then leased back to it by the city government. The Brooklyn-Manhattan Transit (BMT), built shortly after, was entirely private. During the 1920s the Independent (IND) line was built by the city government to prove it could do things just as well as private enterprise. The big problem was the "5-cent fare." Because the fare had been 5 cents in 1905 when the first line was built, New York City politicians decided it should be 5 cents forever. Whole mayoral campaigns were run around "saving the 5-cent fare." Finally, just before World War II, the 5-cent fare bankrupted both the IRT and the BMT and the city took over. The fare stands at $2.50 today but must be hugely subsidized in order to pay the wages and pensions of the Transit Workers Union.
Police protection. The police power has indeed been ceded to governments for as long as there have been governments. One of the most succinct definitions of government is that it is the "entity that has the official monopoly on force." When those police disperse the mobs outside the factory owner's building, they are exercising the powers of the state. But that does not mean government is the only form of protection. In Haiti, where government authority has completely broken down, a private guard with a machine gun stands outside every shop in what is left of the commercial sectors. All over America, major corporations and many small businesses contract for private security. Nor is it just the business and commercial sector that sometimes looks beyond the gendarmes. One growing practice in upscale suburbs is for subdivisions to wall themselves off with private roads and police forces.
The alternative to government law enforcement is not no law enforcement but private law enforcement. Public authority is simply the fairest and most efficient way of achieving domestic tranquility. But if people find it inadequate, they will not succumb to violence. They will look for private security.
Education. Education? What can we say? Warren may think "the rest of us paid to educate" today's workers but the poor state of education in the workforce is now regarded as one of the greatest vulnerabilities of the American economy. The government monopoly on education is being challenged on all fronts, through home schooling, charter schools, and the campaign for vouchers. People choose these alternatives because they believe the government isn't doing a very good job.
The unraveling of public education corresponds precisely with the rise of teachers' unions, which, like all dominating unions, run a business for their own benefit rather than the benefit of consumers. Teaching assignments are made on seniority rather than merit, labor contracts calculate teachers' break time and lunchroom duties to the second, and colleges of education participate in the charade of awarding graduate credits for courses offered on weekends or during spring break so teachers can move up the "grid" to higher pay. In the classroom, first graders study the rainforest and chant "Man did it" to an honor role of extinct and endangered species almost before they learn their ABCs. For this we should be thankful?
Warren's is making the Hobbesian argument that without the government life would be solitary, poor, nasty, brutish and short. So shut up and pay. It worked well to justify the absolute monarchies of the 17th century. Forty years after Leviathan, John Locke published Two Essays on Government, which posited the doctrine of Natural Rights. The Natural Rights argument says people have a right to choose differently if they don't like their governments and has proved to be much more compatible with democracies.
The problem with defending "you'd-be-nowhere-without-us" government is that government is no different from any other organization in society -- it seeks its own aggrandizement. AT&T, General Motors, and Microsoft would love to have world monopolies, controlling all the resources and expanding into every corner of people's lives. But they are limited by competition, the dynamics of the marketplace, and the need to win people's consent in order to market their products.
Government is different. It expands by fiat, through legislation, through taking advantage of emergencies, and by declaring that private entities can't be trusted and government intervention is necessary. Most of all it grows by raising taxes and hiring more and more people so that soon its voter base approaches a majority of the electorate. In Greece, 14 percent of workers are employed by the government. In New York City the figure is slightly higher. Add in family members dependent on a government paycheck and you're getting close to a third of the population. And that doesn't even count the people who live off government benefits. When you reach this kind of critical mass, all kinds of things become possible. In Greece, the government is now trying to balance its budget by raising the property tax. It has given up tax collection, however, since evasion is already endemic. Instead it is trying to collect the property tax on the bills from the government-owned electrical company. But the electric workers are unionized and are refusing to collect the tax! Carry mooching to its logical conclusion and you end up where Greece is now.
What Elizabeth Warren is expressing, then, is the moocher's credo, updated to fit contemporary America. In the 1930s, liberals argued that government could run businesses better than private companies. They didn't need to make a profit and could eliminate "greed." They would install college-educated engineers and professionals to replace the ignorant plutocrats and cowboy capitalists that ran corporate America. Now liberals are content to regulate business instead of owning it. They have become parasites instead of carnivores. And so the rallying cry has become: "You couldn't do it without us! Where's our fair share?"
The enemy of all this is individuality -- individual enterprise, individual responsibility, individual initiative, and individual creativity. There is nothing more difficult in the contemporary world than starting your own business -- having the courage to risk your savings and years of work effort and defying some traditional way of doing things by saying, "I'll bet I can do this differently, and better."
It is hard to imagine America without this.

The “Christianist” Nightmare: It’s Just A Bad Dream | Via Meadia

The “Christianist” Nightmare: It’s Just A Bad Dream | Via Meadia

About that booing at the debate...

http://www.sunshinestatesarah.com/2011/09/truth-about-booing-at-debate.html

The standard seem to be that any person at a large event is responsible for everything anyone in the crowd says or does.  I wonder how even-handely this standard will be applied....

--

The Wheel of the Year: Now available on Amazon Kindle

The Official Manual for Spice Cadets: Now available on Amazon Kindle

More on Warren

http://pajamasmedia.com/instapundit/128434/

Yup.

Also this:

Group of friends of Stanford football post on a board called thebootleg.com On the current events board, we have debated the Warren comments. here was my response:



“You built a factory out there? Good for you,” “Built a factory” is a summary for a lot of work. Put up equity, designed a business, took risk to buy land, get permits, pay property taxes and use taxes and permit fees. Then, bought a bunch of equipment and had it installed …and paid sales taxes. Hired some employees and paid them a bunch of money and paid payroll taxes on top of that. Bought a bunch of raw materials from companies that paid a bunch of salaries and a bunch of taxes. Building a factory is a huge private investment that pays the public a lot of taxes for the right to be built.



“But I want to be clear: you moved your goods to market on the roads the rest of us paid for.” Between fuel taxes, license fees, tolls and various taxes on transportation related activities, the roads budget is smaller than the total tax take.



you hired workers the rest of us paid to educate; No, you did not educate them. You babysat them for 12 years. Then I hired them, taught them how to be responsible and show up for work, taught them how to communicate in clear sentences, taught them that there are rights and wrongs and (unlike with your schools) wrongs have consequences in the workplace. Then paid for extended education for my employees so they could continue to improve themselves and better add value to what we do around here.



“You were safe in your factory because of police forces and fire forces that the rest of us paid for.” Funny, my factory has 24/7 security guards because the last time it was broken into, the police did not even bother to take a report, they just said “call your insurance company”. As for fire? The closest fire department is 10 miles away. My insurance company requires that I have a full wet sprinkler system to qualify for insurance because there is no local fire protection.



“You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.” Well, that is not exactly true. When the AFL-CIO tried to unionize my workforce, they staged three days of noisy protests outside my factory. The police forces just stood around and watched as the protesters intimidated my workers, vandalized their cars and destroyed my property.



You say “we” like the government and society are the same. They aren’t. My company and my community and you politicians are not “we”.

Warren on prosperity and taxes

Elizabeth Warren's Non-Sequitur

If you spend any time on a social network, you're bound to come across this video of Elizabeth Warren, who's running for the U.S. Senate in Massachusetts. In her remarks she says:

There is nobody in this country who got rich on his own. Nobody. You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did. Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

Just goes to show, you can start with a valid premise and end up with an invalid conclusion.

As Rush Limbaugh once proposed, it's time to Tax The Poor. 

The rich may benefit from public services, but they can afford to buy their own services.  The poor benefit much more directly, and in much greater proportion, than the rich do.  Let them pay a proportionate share of the upkeep.

The Texas Miracle Is No Myth - John R. Lott Jr. - National Review Online

The Texas Miracle Is No Myth - John R. Lott Jr. - National Review Online
A look at some of the underlying numbers, and why "high poverty rate" is not an apples-to-apples comparison.

The Texas Story Is Real

Unless declared integer.

 The Texas Story Is Real | Newgeography.com

Actually, lots of charts.

Texas Governor Rick Perry entered the Republican presidential nomination race bragging about the job creation record of Texas during his term as his primary pitch to a nation starved for jobs. This triggered a flurry of debate on whether or not Texas is really all Perry claims for it. But while there is certainly nuance in numbers, and Texas doesn't win on every single measure, on the whole it seems indisputable that Texas did very, very well during the 2000s.

Tim Groseclose - Ricochet.com

Tim Groseclose - Ricochet.com

Saddam: What We Now Know - Jim Lacey - National Review Online

Saddam: What We Now Know - Jim Lacey - National Review Online

9/11 and the Successful War

9/11 and the Successful War | STRATFOR

The United States has done as well as can be expected. Over the coming years there will be other terrorist attacks. As it wages war in response, the United States will be condemned for violating international laws that are insensate to reality. At this point, for all its mistakes and errors — common to all wars — the United States has achieved its primary mission. There have been no more concerted terrorist attacks against the United States. Now it is time to resume history.

Burning Man: The Ultimate Celebration of Capitalism

» Burning Man: The Ultimate Celebration of Capitalism - Big Government

I suggested that my Marxist friend might have things exactly backwards. I proposed that there is no such thing as “excess” in a capitalist system; what he had identified was actually “surplus.” And it is the very concept of surplus that enables events like Burning Man. Around the country, Burners are productive enough fifty-one weeks a year to spend the fifty-second “gifting” the bounty that they have accumulated. No one leaves for Burning Man, I noted, wondering whether the gifts they are distributing would render them incapable of affording food or rent upon their return. Furthermore, I suggested that the manner in which Burning Man motivated artists to conceptualize grand installations, trained numerous organizers in logistics, and promoted the professional development of event planners, DJs, and lighting specialists throughout the year, was precisely the capitalist system in action.

My Marxist friend hung his head. It seems that at no point in his academic career had anyone ever suggested that capitalism did any of these things. But to my surprise, my survey of the crowd—heavier in sex educators, radical lesbians, aficionados of fine pharmaceuticals, and spiritual healers than academics—revealed a fair amount of head nodding. While they may not have characterized it as such, they all seemed to possess an inherent understanding of the importance of motivation and surplus.

How Bias Works

How Bias Works: Over at the Volokh Conspiracy, Tim Groseclose is spending the week guest-blogging his new book, Left Turn: How Liberal Media Bias Distorts the American Mind.  In one of the posts he recounts his experience with a distorted LA Times article which made it seem as if the underrepresentation of blacks at UCLA after the passage of Prop 209 was much more dramatic than it actually was.  Groseclose attributes this to liberal media bias; some of his critics in the comment attribute it to the time pressures of reporting.  As it happens, I think they're both right.

While it's undoubtedly true that some reporters consciously repress facts which threaten their ideological priors, I don't think that's really the issue in most cases.  What bias does--in science, in media, in any situation where information is gathered--is affect what questions you ask.

Of course, I don't know that the author of that article thinks affirmative action is swell, and Proposition 209 was a bad idea, one gets the strong feeling from the article that this is indeed the case.  What I'm fairly sure of is that she wasn't a supporter of Proposition 209.  Because if she had been, she would have looked harder for evidence that things might not be all that dire.  She would have discovered, for example, that the number of black transfer students had actually risen, so that the total number of blacks enrolled at UCLA was about the same (up by 2 students, in fact).

I don't know that this is the "right" way to tell the story, or that these are the most important omissions.  But Groseclose is almost certainly right that her ideological priors greatly influenced what facts she found, and the stories she told.  And at least as presented by Grosclose, that that story did, in fact, objectively overstate the extent of the problem.

I think that she did not report those facts because she didn't know they existed.  Unless you know a whole hell of a lot about the California public college system, there was no particular reason to wonder whether almost half of UCLA undergraduates are transfers rather than incoming freshman, or whether the NCAA had changed its rules about academic standards  for athletes in a way that reduced the number of African American athletes could admit.  The thing is, someone who supported Proposition 209 would have gone looking to see if there was a deeper story here, rather than looking at the obvious superficial metrics.

Before I was a journalist, I used to wonder why journalists were suppressing obvious important facts; after I became a journalist, I realized that it's often incredibly hard to know that there's a fact you're missing.  I seem to recall a scathing editorial about mortgage financing in maybe 2005, in which the outraged writer pointed out that banks were booking the asset value of the loans as if they were going to realize 100% of the payments . . . even though some of those loans would go bad!  Fraud!  Malfeasance!

. . . er, accounting.  Anyone who knows anything about accounting knows that what the writer was saying is absolutely true . . . and that if you look on the other side of the balance statement, you find that they have booked a corresponding allowance for bad debts.  You can argue that in 2005, those allowances weren't big enough--hell, I think at this point, it's not an argument, but a fact.  Nonetheless, the opinion column was ludicrously wrong.

And yet, understandably wrong.  I'm sure that the writer had been fed the story by a consumer activist (I can probably name the group).  He looked at the financial statements, and the numbers checked out.  He'd never heard of such a thing as an allowance for bad debts, so how was he to know it was there?

Bias matters not because liberals deliberately slant their stories, but because they are much more likely to interrogate the facts that contradict their ideological beliefs, than the ones that support them.  When they come across an uncomfortable fact, they'll go out of their way to figure out why it isn't really true.  When they come across a fact that confirms what they believe, they'll be more likely to accept it at face value.

I'm not claiming that liberals do this more than conservatives (I think that being human, they're equally prone to this phenomenon)--only that in the media, liberal bias is mostly what matters, because the media is overwhelmingly somewhere to the left of the American center.  Even if you have a conservative reporter prone to insufficient interrogation of convenient facts, those same facts are going to set off alarm bells with his editors, who are quite likely to question the whole story.

This is why I think liberal media bias is worrisome--not because it's a vast conspiracy, but because it creates a giant store of pseudofacts that "everyone knows", like all those ludicrous statistics about abortion and domestic violence that used to appear everywhere.  And new pseudofacts are being created, or resurrected, all the time.  Longtime readers of the blog have endured my jeremiads against Republicans who say that cutting tax rates raises revenue.  A few weeks ago I was flabbergasted to find out that a very smart left-of-center blogger I admire seemed to think it was common knowledge that there's really no evidence that tax cuts provide stimulus . . . a belief that I then find out seems to be common among some of the left commentariat.  This is not at all what any mainstream economist I'm aware of believes (the debate is over the relative size of secondary and tertiary effects of various kinds of stimulus, not whether tax cuts are stimulative at all.)  But somehow this belief had become common . . . presumably because in the milieu where it was transmitted, no one was disposed to question something that fit so neatly with what they already believed.  Add in a few hundred repeitions from people you like, and voila, "Everyone knows . . . "

This is not a problem that can be overcome by us all resolving to be better, which--along with denial--is the usual response to conservative complaints about the media's skew.  Journalistic ethics, a committment to truth, and so forth, are supposed to compensate for the fact that yes indeed, 95% of my peers vote Democratic in almost every national election.  

But intention is no substitute for that fiery, almost angry "that can't be right" reaction which drives us to dredge for more information--you'll quickly get a pretty sophisticated rebuttal of Laffer Curve nonsense from a run of the mill liberal blogger, and I'm fairly sure that it wouldn't have taken an ordinary conservative blogger more than half an hour to learn enough Keynesian economics to be able to explain why the same model that shows that deficit spending stimulates the economy, also shows stimulative effects from deficit-financed tax cuts.  

But we don't investigate things that everyone knows--reporters do not start off each new story by checking if gravity is still in operation.  The more things that everyone knows, the more unnoticed holes there will be in stories.  And there is no one without blind spots--the best you can achieve is getting together a bunch of conscientious people who all have different blind spots.

For all the laments over partisan media, there are actually ways in which it is a check on this sort of blindness.  Of course there's no guarantee that at any moment, the partisans raising questions will be right--and often they aren't.  So of course they're reviled by people who are sick of contesting, over and over, questions that, um, everyone knows the answer to.

But the process itself is healthy--yea, even though it frequently produces its own misinformation.  A while back, a friend of mine asked what he called an "epistemological question" about the journalism of the financial crisis.  A lot of things, he pointed out, are reported only once, and then they become the basis of other reporters' stories. How, he asked, do we prevent wrong "facts" from entering into the data stream and corrupting our understanding of what happened?

I had two answers, neither of them perfectly satisfactory. The first is that journalists are competitive, and overturning, say, Andrew Ross Sorkin's account of an important meeting is a pretty major journalistic coup.  But the second is that this is actually what ideological journalism is good for: when facts appear that contradict peoples' world views, partisans frequently go out and exhaustively investigate those facts to see if they can be in any way mitigated or disproven.

Both of these things have ugly side effects, of course.  But in the end, I think that both of them provide the only check we have against the tyranny of the things we all know that ain't so.