Posts tagged ‘welfare’

It's Time to End the ACA (No, a Different One)

No, not the Affordable Care Act, though we need to get rid of that, too.  In this case I am talking about the Arizona Commerce Authority.  This is one of those ubiquitous local / state "development" efforts that mainly consists of handing out corporate welfare to a few well-connected companies who threaten to leave or build their new plant somewhere else.

Dru Stevenson at the Privatization blog has been nice enough to invite me to blog from time to time over at his place, despite the fact that we do not always agree.  But we are in total agreement on this effort:

Even from a conservative, free-market perspective, government subsidies for businesses distort markets, foster monopolies, undermine competition, and reduce efficiency.  The same complaints that business advocates make about the welfare system apply to government programs to help businesses - the vicious cycle of dependence, the lack of incentive to work hard or face difficult choices, the inevitable favoritism (some businesses get taxpayer subsidies, others miss out, and those that do have an unfair advantage over competitors who might otherwise win in a free marketplace).  It has a chilling effect on market-driven innovation, improvements in efficiency, or "creative destruction." The subsidies can cause inflation as the local market prices correct for the infusion of unearned money. The inherent risks in entrepreneurship get externalized onto taxpayers rather than internalized by those who hope to reap the profits if they get lucky.  The conflict-of-interest problem is not just that the businessmen will engage in whitewashed embezzlement, diverting funds to their own businesses or friend's businesses (or to their suppliers, in hopes of getting discounted inputs).

The problem is also that other firms - firms that might be more efficient, providing better goods and services at lower cost - face higher entry barriers when the existing holders of market share are bolstered by government handouts.  In other words, I see little difference in the morality of handouts for poor individuals/families and handouts for businesses.  There is a spiritual virtue in helping the poor, of course, but also a virtue in helping those who are hard-working and who have made sacrifices to become successful.  The problem for me is the unintended consequences of government subsidies for entities that are supposed to compete and succeed in a free market.

I encourage you to check it all out.

The reason this made his privatization blog is that Arizona has actually privatized this function to an independent business group.  Though an advocate of privatization in many realms, this makes me queasy for a couple of reasons:

  • I can't get excited about privatizing an activity that should not be occurring, or is, as Stevenson so ably explains, actually detrimental
  • I am comfortable privatizing operational things -- landscaping, running buildings, cleaning bathrooms, etc -- but privatizing the handing out of political patronage is an odd one for me and I don't really know how to think about it.  On the one hand, this is essentially what the PPACA (Obamacare, the other ACA) is doing with difficult decisions like determining which procedures should be on the must-cover list for insurers by putting them in the hands of independent groups.  But I have criticized those provisions of the PPACA for lack of accountability, and I believe the same arguments apply here

The only quibble I have with the criticism of the Arizona group is that, like many criticisms of privatization, it does not actually make a comparison to government-run efforts.  Sometimes even mistake-riddled private efforts can be better than disasterous public management.  For example this criticism:

According to Arizona PIRG's report, only two of the 13 incentive programs even track how many jobs or other benefits they generate -- and none disclose that information publicly. For all its business-savvy rhetoric, the ACA can't demonstrate performance if it doesn't track results. Only one program publicly discloses what companies promise to deliver for their subsidies. Worse still, only 4 of the 13 programs even disclose which companies received subsidies or how much. And when companies that receive subsidies fail to deliver on promised economic development benefits, the ACA can reclaim taxpayer subsidies for only one program, and there is no way for the public to see if this ever happens.

None of this is good, but note that for most similar state-run development programs, the number of programs that track their results is usually less than 2 in 13, the number is usually none.  And the fact that there is some sort of clawback provision on funds is better than exists in most state relocation and other subsidy programs.  In fact, most third-party reviews of state-run corporate relocation and plant location subsidy awards show that they universally fall well short of their pr0mised benefits, though this analysis is really hard to do because there is so little transparency in state activities of this sort.

My quibble, then, is that I am not sure the bad results here are a function of privatization or just the activity itself, as state-run efforts seem to do no better.

Update:  I have written before about government corporate subsidies and attempts at venture capital investment in the context of the "big shot" effect.  Many times I have come to suspect the biggest beneficiary of these programs is to the administrators themselves, who have no money of their own and wouldn't ever be trusted to manage a private portfolio but get to act as "big shots" with other peoples' money.  They get the psychic benefit of being little junior Donald Trumps.  This seems especially evident to me with Glendale, AZ, but seems to be an element of all these schemes.

Phoenix Coyotes Sale

Well, it looks like the NHL may have a buyer for the Phoenix Coyotes.  I have not seen all the terms, but the problem in finding a buyer has been this:  based on comps from other recent sales (e.g. Atlanta) the price for sunbelt teams is something like $100 million max, but the NHL has promised its owners it would not sell it for less than $200 million.  The NHL has to find a sucker, and if billionaire buyers are not willing to be a sucker, then they have to find a third party sucker to just kick in $1oo million of present value to make the deal work.

Enter the city of Glendale.  It has tried very hard on multiple occasions to be that sucker, and only was stopped from doing so by efforts of the Goldwater Institute to enforce a state Constitutional injunction on corporate welfare.

Glendale has apparently found a new way to subsidize the transaction by promising to pay an above-market stadium management fee.  I have talked to some sports executives, including one very familiar with this stadium, and they have all said that in a free market, a third party might take the stadium management contract for free, because though it carries operational costs, it also yields offsetting revenues (like stadium rentals for concerts).

By paying an above-market rate for stadium management services, Glendale can provide a corporate subsidy but retain the fiction that this is a service contract rather than crony welfare.  Over the last two years, Glendale has paid the NHL $25 million a year in stadium management fees, a payment everyone understands to actually be a subsidy to keep the team in town.

I presume the new buyer has met the NHL's $200 million price tag.  But that is obvriously overpaying.  So Glendale is going to kick a bunch of money back to the buyer to make it work, in the form of $306 million in stadium management fees.  Via the Sporting News:

Longtime Glendale city councilor Phil Lieberman on Monday, in an interview with Sportsnet.ca, estimated that arena management fees paid by the city to Jamison under terms of the deal would total $306 million over the next 21 years, or an average of $14.6 million. A large chunk of that money, Lieberman says, is front-loaded, with Glendale on the hook for $92 million over the next five years. Nearby University of Phoenix Stadium, home to the Arizona Cardinals of the NFL, carries a $9.2-million management fee annually.

By the way, University of Phoenix Stadium is far larger and more expensive to operate, so one would expect the Coyotes arena management payment to be less than $9.2 million.   And the $9.2 million, since it comes from Glendale as well, likely has a subsidy built in.  But let's for a second assume something like $8 million a year is the high end for what a market rate for such a contract would be.  This would be $168 million over 21 years, implying $138 million minimum in subsidy built into the management contract.  There you go, there is the sucker payment to make up the difference between market value of the team and the NHL's price.

In fact, according to numbers at the WSJ, the city would have been better off leaving the stadium empty and just paying off the note  (and they certainly would have been better taking Jim Balsillie's offer to move the team but help them pay down their note).

The NHL has announced a tentative sale to a group headed by former San Jose Sharks executive Greg Jamison, under terms that would essentially institutionalize Glendale's commitments. Under the proposal that the NHL has laid out for city council members, the city would continue paying an arena-management fee that would average about $14.5 million a year.

On top of the city's average $12.6 million in debt service, that amounts to annual expenses of about $27.1 million—to be offset by anticipated Coyotes-related revenue of $14.2 million, according to projections by Glendale's city management department. That adds up to a projected annual loss for Glendale of $12.9 million.

Of course, Glendale wants to keep the team because it cut a crony deal with a few real estate developers to build a retail and condo complex around the stadium.  Of course, these ventures have also gone bankrupt.  So the city is trying to bail out and keep a bankrupt hockey team to sustain an already bankrupt retail developer.

The logic of course is that Glendale wants to attract retail businesses to Glendale from nearby Peoria and Phoenix.  But in the end, they are just messing up their own goal:

Some Glendale business owners may also oppose the deal, including David Kimmerle, owner of Sanderson Ford car dealership in Glendale. A longtime sponsor and fan of the Coyotes, Kimmerle felt betrayed when Glendale officials recently proposed raising the city's sale tax, in large part to support the cost of the team. The proposed increase would make a $30,000 car on Kimmerle's lot $330 more expensive than in the neighboring suburb of Peoria. "No one is going to pay a premium to shop in Glendale," Kimmerle said. "If it is choosing between the Coyotes or a business that is been in my family since 1955 and employs 500 people, I have to choose my business."

So, which would you bet on:  That retail buyers will choose a location based on prices and taxes, or based on its proximity to a hockey team?  Glendale is betting hundreds of millions of dollars its the latter.  Which is why they are idiots.

Oh, and those Goldwater folks.  Per the Sporting News article:

As for Goldwater Institution opposition to the deal, the league, Jamison and Glendale are aggressively striving to craft a sale that avoids Goldwater opposition and possible legal action.

And how are they doing this?

The NHL, city and Jamison are also not producing public documents on their deal so they can avoid records falling into Goldwater's hands.

Your transparent government at work.  Its not breaking the law if no one can prove it.

Eating Your Seed Corn

I found this to be one of the most immoral statements I have read in a long time (bold added)

Saez and Diamond argue that the right marginal tax rate for North Atlantic societies to impose on their richest citizens is 70%.

It is an arresting assertion, given the tax-cut mania that has prevailed in these societies for the past 30 years, but Diamond and Saez’s logic is clear. The superrich command and control so many resources that they are effectively satiated: increasing or decreasing how much wealth they have has no effect on their happiness. So, no matter how large a weight we place on their happiness relative to the happiness of others – whether we regard them as praiseworthy captains of industry who merit their high positions, or as parasitic thieves – we simply cannot do anything to affect it by raising or lowering their tax rates.

The unavoidable implication of this argument is that when we calculate what the tax rate for the superrich will be, we should not consider the effect of changing their tax rate on their happiness, for we know that it is zero. Rather, the key question must be the effect of changing their tax rate on the well-being of the rest of us.

From this simple chain of logic follows the conclusion that we have a moral obligation to tax our superrich at the peak of the Laffer Curve: to tax them so heavily that we raise the most possible money from them – to the point beyond which their diversion of energy and enterprise into tax avoidance and sheltering would mean that any extra taxes would not raise but reduce revenue.

Another way to state the passage in bold is, "if one can convince himself he will be happier with another person's money than that other person would be, it is not only morally justified, but a moral imperative to take it."

This is the moral bankruptcy of the modern welfare state laid bare for all to see.  Not sure if this even deserves further comment.  Either you see the immorality or you bring a lot of very different assumptions about morality to the table than I.  For those of you who accept the quoted statement, how are you confident you will always be the taker, the beneficiary?  You might be if the box is drawn just around the US, but from a worldwide perspective all you folks in the American 99% may find yourselves in the world's 1%.

And from a purely practical standpoint, while I suppose one might argue that the total happiness in this particular instant could be maximized by taking most all the rich's marginal income, what happens tomorrow?  It's like eating your seed corn.  Taking capital out of the hands of the folks who have been the most productive at employing capital and helicopter dropping it on the 99% feels good right up until you need some job creation or economic growth or productivity improvement.

To this day, over 30 years after I had it explained in economics class, I am still floored by the line I read in the introductory macro textbook describing the Keynesian manipulation of Y=C+I+G+(X-M) to demonstrate a "multiplier" effect.  The part that I never could get over was at the very beginning when they said "I, or Investment, is considered exogenous" - in other words, the other variables could be freely manipulated, the government could grow and deficit spend as much as it liked, and investment would be unaffected.  Huh?

My memory was that Keynesians considered "I" a loser.  They felt anything that was not G or C actually acted as a drag, at least in the near term (in the long run we will all be dead).  This despite the fact that "I" is the only thing that grows the pie over time.

Raise the Payroll Tax

Yesterday, Congress agreed to extend the payroll tax reductions for another period of time.  I have been thinking about this for a while, and I am slowly coming to the conclusion these taxes should be raised.  I am still thinking this through so I welcome feedback.

I don't think I have to convince regular readers of this site that I am against government-run and mandated-for-all retirement funds (income via Social Security, medical via Medicare).  But if we are going to have such programs, and maintain the pretense that they are insurance programs and not welfare/transfer programs, then the "premiums" we are forced to pay should reflect true costs.

I don't think Medicare premiums are covering anywhere near the actuarial-expected costs of one's future medical care.  And while Social Security rates may be set correctly if trust funds were truly held securely, the fact of the matter is that past Social Security premiums that were paid to support future benefits have all been spent by a corrupt Congress.  Rates are going to have to be raised to replace this theft.

I don't like raising taxes.  I wish these two programs would go away or else be restructured drastically.  If they exist, though, there is nothing more dangerous than an incorrect price.  Prices help consumers make price-value tradeoffs -- the Keanu Reeves lifetime DVD collection may be a deal at $6.99 but not at $99.99.  So charging the wrong prices for these programs not only royally screws up the government's finances, but it also misleads Americans about the value of these programs in comparison to what they pay for them.

David Brooks Big Idea: Learning About Self-Reliant Productive Culture in the DMV

Apparently, the gap between the productive and hard-working and those with less productive habits is growing larger.  David Brooks suggests that the productive be forced into a couple of years of government servitude.  The idea, as I understand it, is for the productive to teach the less fortunate how to be more diligent and productive in the context of a shared experience in an unproductive government make-work program.  Sort of like teaching your teenager good work habits by putting him in DMV internship.

Seriously, I suppose I understand how class-mixing at the point of a gun might expose the wealthy to classes and cultures they have never encountered.  But how is working together in some service brigade with a post office-trained manager on a government paycheck going to teach the welfare-and-food-stamp set anything new about productive work and self-reliance?

Crony Capitalism

Perhaps I do not give Sarah Palin enough credit, because this is a really good passage, from one of her recent speeches (emphasis added by Mickey Kaus)

We sent a new class of leaders to D.C., but immediately the permanent political class tried to co-opt them – because the reality is we are governed by a permanent political class, until we change that. They talk endlessly about cutting government spending, and yet they keep spending more. They talk about massive unsustainable debt, and yet they keep incurring more. They spend, they print, they borrow, they spend more, and then they stick us with the bill. Then they pat their own backs, and they claim that they faced and “solved” the debt crisis that they got us in, but when we were humiliated in front of the world with our country’s first credit downgrade, they promptly went on vacation.

No, they don’t feel the same urgency that we do. But why should they? For them business is good; business is very good.  Seven of the ten wealthiest counties are suburbs of Washington, D.C. Polls there actually – and usually I say polls, eh, they’re for strippers and cross country skiers – but polls in those parts show that some people there believe that the economy has actually improved. See, there may not be a recession in Georgetown, but there is in the rest of America.

Yeah, the permanent political class – they’re doing just fine. Ever notice how so many of them arrive in Washington, D.C. of modest means and then miraculously throughout the years they end up becoming very, very wealthy? Well, it’s because they derive power and their wealth from their access to our money – to taxpayer dollars.  They use it to bail out their friends on Wall Street and their corporate cronies, and to reward campaign contributors, and to buy votes via earmarks. There is so much waste. And there is a name for this: It’s called corporate crony capitalism. This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk. No, this is the capitalism of connections and government bailouts and handouts, of waste and influence peddling and corporate welfare. This is the crony capitalism that destroyed Europe’s economies. It’s the collusion of big government and big business and big finance to the detriment of all the rest – to the little guys. It’s a slap in the face to our small business owners – the true entrepreneurs, the job creators accounting for 70% of the jobs in America, it’s you who own these small businesses, you’re the economic engine, but you don’t grease the wheels of government power.

So, do you want to know why the permanent political class doesn’t really want to cut any spending? Do you want to know why nothing ever really gets done? It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed – a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.

More Corporate Welfare, in the Form of a Currency War

From the Hill, the ghost of Hawley-Smoot returns

 The Senate voted Monday to advance legislation pressuring the Chinese government to stop undervaluing its currency, a practice most economists agree is giving the country an unfair trade advantage and is costing the U.S. jobs.

The Senate voted 79-19 to end debate on a motion to proceed to the bill, the Currency Exchange Rate Oversight Reform Act of 2011. While the vote does not mean the bill has passed, the strong show of support suggests it could well be approved in the upper chamber by the week’s end. Passage through the House is less clear, however, and GOP leaders have given no indication they will move forward with it.

Senate Democratic leadership, responsible for bringing the legislation to the Senate floor, heralded it as a way to create jobs and right a long-standing trade imbalance with China.

“China is by far the biggest exploiter of predatory currency practices,” Sen. Charles Schumer (D-N.Y.) said Monday. “[T]hese currency policies artificially raise the price of U.S. exports and suppress the price of imports into the United States, undermining the economic health of American manufacturers and their ability to compete at home and around the globe.”

This is a great example of how a group, in this case the Democratic Party, can say they are against corporate welfare, but in fact be 100% behind it simply by changing the terms used.

Look at the sentence in bold.  Another way to write this would be "we want a law to help a few visible and influential manufacturers who most compete with China, but hurts consumers (ie every single American) and every business that uses imported raw materials.

Protectionism like this is corporate welfare for a few large manufacturers.  I find it amazing the reporter can say that "most economists agree" an undervalued Chinese currency is costing us jobs.  My sense is that most economists don't agree with this statement.  All this law will do is unilaterally increase consumer prices and raw material costs, and I know few economists who think this is stimulative.

A cheap yuan is a direct subsidy of American consumers by the Chinese, and I am not sure why we shouldn't let it continue as long as they are dumb enough to keep doing it.

Silly Economic Plans

Via Kevin Drum, from Dylan Matthews

Second, the president should do more to help the American worker. He should establish a jobs program. Do the simple math: We are spending more than $110 billion annually in Afghanistan. Stop it. Or scale it back to the sort of covert operations and drone war that is warranted. Savings? Perhaps about $100 billion—per year. Use that money to create up to 5 million jobs at $20,000 each....Just as FDR did during the Great Depression, put these Americans to work in states, counties, schools, parks.

Even Drum considers this unrealistic, though for the wrong reasons (i.e. the evil Republicans in the House would never let us do it).  I have a series of thoughts on this

  1. FDR had low paying jobs programs in part because this was the only form of relief -- there was not welfare or food stamps or medicaid or unemployment or EITC or social security.  A $20,000 dig-a-hole-and-then-fill-it-in government make-work job would likely just displace about the same amount of other government transfer payments.  I can't see this doing squat.
  2. We are really going to kick-start the consumer market with $20,000 jobs?
  3. The Left needs to get its story straight on the stimulative effects of wars.  Democrats blame Bush for the current economy in large part because of his wars, and the author here implies that moving spending out of wars would be a net plus.  But Keynesians believe WWII ended the Great Depression and Krugman wrote just the other day that what we really need is a war with space aliens (I kid you not) to end the Great Recession.  So which is it?

By the way, I think wars are a total economic waste and drag on the nation.  Dedicating scarce resources to blowing stuff up is the worst possible use of capital.  However, diverting this into politically correct, politician-selected make-work projects is not really a lot better.

The $529 Million Family Car

Ray Lane of Kleiner Perkins has helped score hundreds of millions of dollars of taxpayer money from the Obama administration to help subsidize Kleiner investments.  More corporate welfare for billionaires.

It is a nice touch, therefore, that the first tangible result of these sizable public subsidies will be... a new family car for Ray Lane (the car is from Fisker Automotive, a Kleiner investment and recipient of $529 million in taxpayer subsidies.  It appears to be a cool car, but an iPhone is a cool piece of tech too but you don't see me advocating taxpayer money for Apple.

Power Imbalance: The Difference Between Liberal and Libertarian Philosophy

My new column is up at Forbes, and it is one of my favorites I have written for a while  (at least it seems so with my current scorpion-induced double vision).  It begins with Krugman's recent statement that the Left understands the Right and libertarian positions better than the Right and libertarians understand the Left.

I first demolish this as a pretentious crock, but then wander to more important topics

But I do understand the leftish position well enough to identify its key mistake.  As I mentioned earlier, we libertarians are similarly concerned with aggregations of power.   We have, at best, a love-hate relationship with large corporations, for example, enjoying the bounties they can bring us but fearing their size and power.

But what the Left ignores is that there is absolutely no power imbalance as large as that between the government and its citizens.    After all, you may get ticked off when Exxon charges you $4.00 a gallon for gas for reasons that aren't transparent to you, but you can always tell Exxon to kiss off and buy from someone else, or ride a bike, or stay home.    Because Exxon does not have armies and police and guns and prisons.

Every single time we give the government the power to right a perceived imbalance, we give the government more power than the private entity we are trying to contain.  In effect, we make things worse.   Because we want the government to counter-act the power of oil companies, Congress now has the power to dump large portions of our food supply into motor fuel, to the benefit of just a few politically connected ethanol companies.

One of the reasons the Left often cannot adequately articulate the libertarian position is that the notion of bottom-up emergent order tends to be difficult for many to understand or accept (this is mildly ironic, since the Left tends to defend the emergent order of Darwinian evolution against the top-down Christian creation vision).

The key to much of libertarian economics is not that libertarians trust private actors, but that libertarians trust natural correction mechanisms in free markets far more than it trusts authoritarian power of the government.   When, for example, large corporations become sloppy and abusive and senescent, markets will eventually bring them down.

In fact, when government is given power, nominally to correct such imbalances, they tend to use it to protect those in power as often as they do to protect the disenfranchised. Government restrictive licensing of hair dressers, interior designers, and morticians; bailouts of GM, Chrysler, and AIG; corporate welfare to GE and ADM; and use of imminent domain to hand private property to favored real estate  developpers -- all are examples of finding government cures for perceived private power imbalances that are worse than the disease.

Isacc Asimov, in a book called Foundation that Paul Krugman recently rated as one of the most influential on his life, related this fable:  Once there was a man and a horse, who were both imperiled by a wolf.  The man approached the horse, and said that if the horse would put its superior speed at his disposal, he could kill the wolf.  And so the horse agreed to take the man's saddle and bridle, and helped the man kill the wolf.  The horse said, "great job, now remove your saddle and we can both be free," and the man said "never!"

I hope the moral of the story is clear.  In trying to deal with the threat of the wolf, the horse gave the man so much power he became an even bigger threat.  So too when we look to government to solve our problems.

Read the whole thing, as they say

The Looming Failure of Obamacare. Part 1: Information

My new column is up at Forbes.com, and it is the first in a three-part series on Obamacare.

In order to protect the core of Obamacare, Congressional Democrats have recently begun to acquiesce to a few incremental changes to the legislation that fix some of the most egregious parts of the plan (e.g. the burdensome 1099 requirements).  The implicit message is that yes, the legislation was rushed and has some flaws, but these flaws can be fixed by targeted tweaks around the edges.

Today I will begin the first of a three-part series explaining several reasons why any health care law that relies on the fundamental assumptions of Obamacare is doomed to fail, even if crafted by the smartest people through the best process.  In this first installment, we will discuss information problems inherent in the law’s top-down approach.  In the second segment, we will cover incentives issues that will breed a myriad of unintended consequences.  In the final part, we will discuss the ever-powerful urge to rent-seeking among certain businesses that will likely turn Obamacare into the largest single corporate welfare program in the history of this country.

Post Office: Mail Delivery or Welfare?

The management of the Post Office is a joke, and it is hardly worth the electrons to write more about it.   But I did find this factoid in Tad DeHaven's commentary on the Post Office's hopeless efforts at cost reduction interesting.

Traditional post offices, which number about 27,000, cannot be closed “for solely operating at a deficit” and the closure process is burdensome.

Wow, that is a bad law (though no worse than 10,000 others like it).  This sounds similar to the military base problem, where every facility that needs closure has a Congressperson desperately trying to keep it open against all economic reality, merely as a jobs/welfare program once its true utility is over.   Apparently, the Post Office has an overcapacity problem that rivals the US Military's after the Cold War (and really to be honest after WWII)

Full post offices are more costly to operate than other means of serving customers. The average post office transaction cost 23 cents per dollar of revenue in 2009 while the average transaction at a contract postal unit cost just 13 cents. Post offices used to generate almost all postal retail revenue, but 29 percent is now generated online through usps.com and other alternative channels.

In 2009 post offices recorded 117 million fewer transactions than in 2008. Four out of five post offices are operating at a loss. However, the postal network’s overcapacity has drawn little corrective action from Congress. In fact, legislation introduced in the House with 102 cosponsors would apply the burdensome procedures for closing post offices to other postal outlets as well. Congress is actively working against the modernization of the U.S. postal system.

The amazing thing is that they have tons of extra capacity and still provide poor service.  Just compare the process of mailing a package UPS vs. USPS.  I have a UPS account, I can print my own labels, I get billed automatically, I get package tracking, and I can send the package from the drop box downstairs in my building.

It is almost impossible to do this with the USPS.  To mail anything larger than 13 ounces, to buy postage without an expensive meter, to get a greatly inferior sort of tracking -- all require a grim trek to the post office.

My guess is that just like Pemex is not longer really about producing oil, the USPS mission is no longer primarily about delivering mail, its a welfare program.

PS - my USPS delivery guy is great.  Nicest guy in the world.  The mistake for years in criticizing the USPS has always been about criticizing the people.  Not only is that wrong, but it distracts from the problem.  By implying the problem is bad, surly people, it implies the problem is fixable with new people.  But in fact, the problem, as with all government, is information and incentives .... and in this case Congressional meddling in their mission.

Green Jobs & Public Investment = Corporate Welfare

The recent naming of GE's Jeffrey Immelt to head a presidential commission on, err, something or other seems to have been an occasion for bipartisan gnashing of teeth about what I call the growth of the American corporate state.  I was encouraged by the bipartisan negative reaction from the left, right, and of course the libertarians, the latter of whom have always understood the difference between being pro-capitalism and pro-business.

But all it takes is a nomenclature change of this corporate welfare to "green jobs" or "investment in the future" or "bridge to the future" or similar bullsh*t and suddenly many of the exact same people, at least on the left, are swooning again.  Why is it not obvious that, for example, green energy subsidies are just the same old corporate welfare?

Here is one aggravating example

Despite millions in government grants and subsidies, the Manitowoc company President Barack Obama called a glimpse of the future lost $4.2 million last year and cannot promise shareholders it will be profitable in the foreseeable future....

“We may continue to incur further net losses and there can be no assurance that we will be able to increase our revenue, expand our customer base or be profitable,” the report indicates.

Investors have responded to the company’s volatility, and Orion stock has plummeted in the past four years.  It closed 2007 at $18.82 a share.  By the end of 2010 it was $3.34.

Regardless, President Obama is putting his, and the U.S. taxpayers’, money on companies like Orion.

“It’s important to remember that this plant, this company has also been supported over the years not just by the Department of Agriculture and the Small Business Administration, but by tax credits and awards we created to give a leg up to renewable energy companies,” Obama said at the Orion plant on Wednesday.

The State of Wisconsin has also given its share trying to help Orion to succeed.  Since 2005, the state has given the company $350,000 in community development zone tax credits, $506,000 in economic development funds, and $420,000 from the Wisconsin Energy Independence Fund.  Plus the company got another $260,000 in stimulus funds for a State Energy project.

In addition to direct aid, public policy has also helped the struggling company.  Wisconsin law requires that 10 percent of all electricity sold in the state come from renewable sources by 2015.  Orion knows that without government intervention like that, there would be little prospect for the green economy.

“The reduction, elimination or expiration of government mandates and subsidies or economic or tax rebates, credits and/or incentives for alternative renewable energy systems would likely substantially reduce the demand for, and economic feasibility of, any solar photovoltaic and/or wind electricity generating products, applications or services and could materially reduce any prospects for our successfully introducing any new products, applications or services using such technologies,” the SEC report states.

By the way, in 2010, while the government was pouring taxpayer money into Orion, its founder and CEO was pulling his out, selling (by my count of SEC filings) 130,000 shares, despite equity prices that were at a five year low.    It is dangerous to draw conclusions form insider sales (we don't know what personal financial issues may be driving their actions) but it is interesting that the president and founder is taking the exact opposite point of view on the company's prospects than is President Obama.

Rent-Seeking Gold Rush

The Thin Green Line reports that Renault recently fired a number of employees for espionage related to electric vehicles.  The site concludes:

The stakes are high: The French automaker, now partnered with Nissan, is betting its future on the popularity of the electric vehicle. It plans to introduce no fewer than three electric cars in Europe this year: a sedan, a light commercial vehicle, and a city car.

Unless the espionage thwarts its plans, Renault's gamble is probably a good one. Also last week, the judges of the Detroit auto show gave all their top awards to EVs and hybrids — proof, according the Guardian, that "analysts [are] bet[ting] on rising oil prices and wider acceptance of electric cars." Nissan's Leaf took second place to the Chevy Volt.

As I wrote in the comments, electric cars are a huge opportunity - there are tens of billions of dollars of corporate welfare from countries around the world to be captured. When it is the Left that is actively supporting huge transfers of funds from taxpayers to large corporations, that is an unprecedented rent-seeking opportunity that European companies, already well-schooled in how to be successful within a corporate state, are sure to avidly pursue. Not since corn ethanol has there been a similar gold-rush for taxpayer funds.

A Plea to Conservatives on Immigration

My Forbes column this week is up, and it is a sort of open letter to Conservatives, trying to demonstrate that their stance against immigration is inconsistent with many of their other principles.  A quick exceprt:

Just to be clear, it is perfectly reasonable that the government might set restrictive or difficult eligibility requirements for participation in government activities we normally associate with citizenship, such as voting, holding office and receiving welfare benefits. But selling one's labor or participation in commerce are natural rights to which happenstance of birth location should be irrelevant. It should mean no more to these rights that someone is born today north or south of the Rio Grande river than it meant to our founding fathers that someone was born with or without a hereditary title.

Immigration Debate May Get Uglier (and Nuttier) Here in Arizona

Readers know I oppose recent Arizona immigration legislation and enforcement initiatives.  I don't think government should be stepping in to effectively license who can and can't work in this country, and am thus a supporter of open immigration (which is different from citizenship, please note).  As I support open immigration, both from a philosophic standpoint as well as a utilitarian perspective, I don't support laws to get tougher on illegal immigrants, any more than I support laws to get tougher on the failed practice of drug prohibition.

That being said, reasonable people can disagree, though some for better reasons than others.  But I don't see how all these folks who support tougher laws on immigration with the mantra that it is all about the rule of law can justify this piece of unconstitutional garbage:  (Hat tip to a reader)

Buoyed by recent public opinion polls suggesting they're on the right track with illegal immigration, Arizona Republicans will likely introduce legislation this fall that would deny birth certificates to children born in Arizona "” and thus American citizens according to the U.S. Constitution "” to parents who are not legal U.S. citizens. The law largely is the brainchild of state Sen. Russell Pearce, a Republican whose suburban district, Mesa, is considered the conservative bastion of the Phoenix political scene....

The question is whether that would violate the U.S. Constitution. The 14th Amendment states that "all persons, born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States. No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." It was intended to provide citizenship for freed slaves and served as a final answer to the Dred Scott case, cementing the federal government's control over citizenship.

But that was 1868. Today, Pearce says the 14th Amendment has been "hijacked" by illegal immigrants. "They use it as a wedge," Pearce says. "This is an orchestrated effort by them to come here and have children to gain access to the great welfare state we've created." Pearce says he is aware of the constitutional issues involved with the bill and vows to introduce it nevertheless. "We will write it right."

I didn't like SB1070 that much, but as ultimately amended it was not nearly as radical as this.  I think those of us who feared SB1070 as a first step on a slippery slope should feel vindicated by this.

The Most Outlandish Historical Revisionism I Have Ever Seen

First, the background.  Veronique de Rugy writes something that is undeniably true, though the Left has played semantic games with words like "trust fund" and "lockbox" for years to try to "shelter" the public from this reality:

In practice, [] the trust fund and interest payments it receives are simply accounting fiction. For years, the federal government has been borrowing the Social Security Trust Fund assets for its daily spending. The fund has nothing left in it except IOUs from the federal government. In fact, even the interest is paid in IOUs.

Hence, the only way Social Security will not go into the red this year and in future years is if the federal government pays back Social Security. But since the money has long ago been consumed, it must borrow money from the public or raise taxes to pay its Social Security debts.

In response, Kevin Drum whips out this absolutely stunning statement:

Back in 1983, we made a deal. The deal was this: for 30 years poor people would overpay their taxes, building up the trust fund and helping lower the taxes of the rich. For the next 30 years, rich people would overpay their taxes, drawing down the trust fund and helping lower the taxes of the poor.1

Well, the first 30 years are about up. And now the rich are complaining about the deal that Alan Greenspan cut back in 1983. As it happens, I agree that it was a bad deal. If it were up to me, I'd fund Social Security out of current taxes and leave it at that. But it doesn't matter. Once the deal is made, you can't stop halfway through and toss it out. The rich got their subsidy for 30 years, and soon it's going to be time to raise their taxes and use it to subsidize the poor. Any other option would be an unconscionable fraud.

I really had a WTF moment when reading this.  Its hard to know where to start, so here are some reactions in semi-random order:

  • For those of you over 40, do you remember such a deal?  No, you don't, because there never was one.  What happened was that Congress decided to sweep the Social Security surplus into the deficit calculation in order to disguise the magnitude of unsustainable spending, to help prevent the kind of electoral backlash we may well see later this year.  This is Soviet-style history making.
  • Here is a thought problem: Picture Tip O'Neil, Speaker of the Democrat dominated House of Representatives at the time, publicly signing on to a deal that the poor would pay higher taxes for 30 years to give the rich a tax break.  It is a total joke to even consider.   The absurdity of such a notion is mind-boggling.
  • It took me a while to parse this and figure out what he was even talking about.   For example, there was never a tax increase to the poor during the 1980's, so what does he mean that the poor would pay more for 30 years?  The only way this can even be the correct view of the world is if one makes two assumptions:
      1. Everything Congress chooses to spend money on is perfectly, morally justifiable and therefore spending levels are a fact of nature beyond our ability to challenge or question
      2. Rich people have the moral obligation to pay for all incremental government programs, and all budget gaps will be closed by new taxes on rich people.  Taxes on rich people, as a corollary, are never too high.

      Given these assumptions, then the "Deal" sort of kind of makes sense.  By the progressive "logic" of these two assumptions, social security taxes in an alternate world would have been reduced during the surplus and the general budget deficit would have been filled not with social security surpluses but higher taxes on the rich.

      • The previous logic depends on treating social security taxes as unfairly regressive taxes as part of an income transfer / welfare program.  If you treat them as premiums in an insurance program, the retroactive logic trying to cast this as a "deal" in 1983 doesn't work.  Interestingly, many on the left in other forums have argued against calling social security taxes anything but insurance premiums, including....Kevin Drum

      The men in my family of my father's generation returned home after serving their country and got jobs in the local steel mills, as had their fathers and their grandfathers. In exchange for their brawn, sweat, and expertise, the steel mills promised these men certain benefits. In exchange for Social Security taxes withheld from their already modest paychecks, the government promised these men certain benefits as well.

      "¦.These were church-attending, flag-waving, football-loving, honest family men. They are rightfully proud of providing homes and educations for their children and instilling the sorts of values and manners that serve them well as adults. And if I have to move heaven and earth, now that they've retired, the Republican party is NOT going to redefine them as welfare recipients.

      • Note by the way, that if this really is an insurance program, any private insurer or private pension fund managers in America would be in jail had they done what our trustworthy federal government did.  In effect, they spent other people's pension money on current operations.

      If we want to describe the last 30 year history of Social Security surpluses as a deal, here is what the actual deal was without ex post facto varnish:  Congress in the eighties said that they were going to spend that surplus money now to get themselves re-elected, and some other Congress 30 years hence would have to figure out how to deal with the bare cupboard.   That was the deal.  It was a simple screw you to future generations.

      Drum, given his progressive assumptions, fantasizes a deal based on his assumption that the only way to fill in the hole is with higher taxes on the rich, because his mind is incapable of wrapping itself around any other alternatives (see the two assumptions above).

      But it is worth noting that the surplus was in the main handed away by the Democrats to the poor and middle class through new entitlement spending.  Its hard to figure how a series of actions that took seniors pensions and frittered it away in a variety of programs that at best helped the poor and in reality probably helped no one but government bureaucrats somehow obligates the rich to pay 30 years of new taxes to clean the whole mess up.

      Dispatches from the Corporate State

      The NY Times has a fairly ugly story, though hardly unique, of a project to restore water flow to the Everglades turning into a corporate welfare project for United States Sugar.   The short story is that in a time when United States Sugar was in desperate financial straights and when real estate prices in Florida were tumbling, the Florida government treated USS like it had all the power, rolling over to paying above-market prices and letting USS pick and choose the land parcels to be purchased.  The story did not mention much about it, but there is a second large sugar producer in the area who it strikes me could have been played off against USS to get the best deal.

      Remember that the US Sugar operation likely exists only because of sugar tariffs and import quotas that raise the price of sugar in the US well above the world norm.  So consumers are paying extra, and drinking soft drinks with crappy HFCS, so that US Sugar can screw up the Everglades and get bailed out by taxpayers.   Readers will understand it is the purest coincidence that US Sugar's attorney is chief of staff to the state's governor.

      From running my recreation privatization blog, I know that there are many folks who will ascribe this to a failure of private enterprise and an excess of corporate speech and money in politics.   But to my mind this is a great example of why election and speech limits don't have any utility.  This is all back room lobbying, cronyism, and quid pro quo politics that doesn't show up in any monetary ledger, and thus are not and have never been subject to any limits.  As I wrote here:

      when the stakes of government are so high, money and influence never goes away.  Just as in any economy, when you ban money, a barter economy arises.  So if we ban large campaign spending, then the quid pro quo becomes grass roots efforts and voter mobilization.  Groups like the UAW become more powerful (we are seeing that already).  They are trading their member's votes for influence.  Connected companies like GE are doing the same thing, trading their support for legislation that is generally hostile to commerce for specific clauses in said legislation that exempts GE and/or makes the laws even more punishing on their competition.  The problem with all this activity is it is hard to see and totally unaccountable "” at least with advertisements we see people out in the open with their agendas.

      The other obvious point is that no private entity would ever allow themselves to get rolled so badly by US Sugar.  They would have sense USS's weakness and broken its knees in the negotiation.  One US Sugar manager even says as much:

      For its board members, Mr. Crist's overture was appealing in part because they figured a government purchase would be far more lucrative than a private deal.

      "It wasn't another company coming in and bottom-fishing you," Mr. Wade said. "They knew it would be for fair-market appraisals."

      Over at my privatization blog, I wrote about a deal in Chicago where the government made four or five huge mistakes in issuing a private contract that a private company (or at least one that is not going to go bankrupt) would never make.  So of course the problems are blamed on privatization.

      Congress and Obama Enticing States Further into Bankruptcy

      I missed this in the original discussion of the stimulus.  I was one of the first to point out that most of the stimulus was earmarked for maintenance of state government budgets rather than the infrastructure projects people thought they were getting  (here and here).  But I missed this part of the law, which basically made acceptance of these funds a suicide pact for many states:

      Worst of all, at the behest of the public employee unions, Congress imposed "maintenance of effort" spending requirements on states. These federal laws prohibit state legislatures from cutting spending on 15 programs, from road building to welfare, if the state took even a dollar of stimulus cash for these purposes.

      One provision prohibits states from cutting Medicaid benefits or eligibility below levels in effect on July 1, 2008. That date, not coincidentally, was the peak of the last economic cycle when states were awash in revenue. State spending soared at a nearly 8% annual rate from 2004-2008, far faster than inflation and population growth, and liberals want to keep funding at that level.

      A study by the Evergreen Freedom Foundation in Seattle found that "because Washington state lawmakers accepted $820 million in education stimulus dollars, only 9 percent of the state's $6.8 billion K-12 budget is eligible for reductions in fiscal year 2010 or 2011." More than 85% of Washington state's Medicaid budget is exempt from cuts and nearly 75% of college funding is off the table. It's bad enough that Congress can't balance its own budget, but now it is making it nearly impossible for states to balance theirs.

      These spending requirements come when state revenues are on a downward spiral. State revenues declined by more than 10% in 2009, and tax collections are expected to be flat at best in 2010. In Indiana, nominal revenues in 2011 may be lower than in 2006. Arizona's revenues are expected to be lower this year than they were in 2004. Some states don't expect to regain their 2007 revenue peak until 2012.

      So when states should be reducing outlays to match a new normal of lower revenue collections, federal stimulus rules mean many states will have little choice but to raise taxes to meet their constitutional balanced budget requirements. Thank you, Nancy Pelosi.

      Apparently a couple of states (no surprise, Texas is among them) were smart enough to turn down some of the money.

      The Corporate State, Illustrated

      Couldn't have illustrated the new corporate state that Obama is building better than this -- at state where large corporations, unions, and government officials conspire to use government power to enrich their contituencies to the detriment of smaller businesses, consumers, and taxpayers.  WSJ via Tad DeHaven:

      The government has taken on a giant role in the U.S. economy over the past year, penetrating further into the private sector than anytime since the 1930s. Some companies are treating the government's growing reach "” and ample purse "” as a giant opportunity, and are tailoring their strategies accordingly. For GE, once a symbol of boom-time capitalism, the changed landscape has left it trawling for government dollars on four continents.

      "˜The government has moved in next door, and it ain't leaving,' Mr. [GE CEO Jeffrey] Immelt said at the International Economic Forum of the Americas in Montreal in June. "You could fight it if you want, but society wants change. And government is not going away.'

      A close look at GE's campaign to harvest stimulus money shows Mr. Immelt to be its driving force"¦ Inside GE, he pushed his managers hard to devise plans for capturing government money.

      By January, Mr. Immelt had become a leading corporate voice in favor of the $787 billion stimulus bill, supporting it in op-ed pieces and speeches. Reporters who called the Obama administration for information on renewable-energy provisions in the legislation were directed to GE.

      When the stimulus package was rolled out, Mr. Immelt instructed executives leading the company's major business units "to put together swat teams to get stimulus money, and [identify] who to fire if they don't get the money," says a person who heard him issue the instructions.

      In February, a few days after President Obama signed the stimulus plan, GE lawyers, lobbyists and executives crowded into a conference room at GE's Washington office to figure out how to parlay billions of dollars in spending provisions into GE contracts. Staffers from coal, renewable-energy, health-care and other business units broke into small groups to figure out "how to help companies" "” its customers, in particular "” "get those funds," according to one person who attended.

      From Henry Payne, in an article on the auto industry:

      The Left likes having Big Industry straw men to bash whenever their socialist plans run aground, but the fact is, Big Industry is embracing the U.S.'s leftward lurch. Better to secure your place at the Rentseekers Roundtable, to lock out new competition and guarantee a never-ending stream of government welfare.

      The Corporate State: A Love Story

      Via John Stoessel:

      Moore declares capitalism evil, but he's never clear about what "capitalism" means. Considering how much time he spends documenting the cozy relationship between business and government, I thought he might mean "state capitalism."

      But then he uses the term "free market" as a synonym for what he doesn't like.

      What does the free market have to do with businesses manipulating government and strong-arming Congress for bailouts? Moore properly condemns both.

      A libertarian student at GWU pushes Michael Moore on this issue, captured on video.

      In the movie, Moore apparently:

      visits the National Archives to see if the Constitution establishes capitalism as the country's economic system. Seeing the words "people," "union," and "welfare" in the document, he says, "Sounds like that other ism."

      The reason is because free-market capitalism is not a system.  It is the un-system.  It is the lack of a system.  It is the chaotic, anarchic, bottom-up actions of 300 million people acting to direct their lives as they see fit and improve their own financial well-being.  The fact that it works without top-down coordination, that the right number of pencils get manufactured each year without a pencil czar, is a testament to the power of a few simple tools, particularly price, in signaling to individuals where they might best employ their own time and capital.

      A Third of Welfare Recipients in California?

      I had trouble believing this chart (ht Maggies Farm) until I looked at the HHS data here and saw it was dead on.  On the chart below, the width of the band at the left is percentage of the US population, and to the right is percentage of the US welfare roles.

      The second biggest band, in green, I believe is New York.  Its incredible that California's financial problems can be in the news for months and I have never seen a whiff of this in the media.

      Another Example of "Reduced Rationing on the Basis of Price and Ability to Pay"

      Previously, I used 1970s gas price lines as an example of a situation where the government, as Uwe Reinhardt puts it, "reduce[d] rationing on the basis of price and ability to pay."

      Here is another example:  The Pruitt Igoe housing project in St. Louis, which was abused so badly by its occupants it had to be torn down less than 20 years after it was built.

      I will remind you of my earlier comparison of universal health care to public housing:

      Lyndon Johnson wants to embark on a futile attempt to try to provide public housing to the poor?  Our taxes go up, a lot of really bad housing is built, but at least my housing did not get any worse.  Ditto food programs "” the poor might get some moldy cheese from a warehouse, but my food did not get worse.  Ditto welfare.  Ditto social security, unemployment insurance,and work programs.

      But health care is different.  The author above is probably correct that some crappy level of terribly run state health care will probably be an improvement for some of the poor.  But what is different about many of the health care proposals on the table is that everyone, not just the poor, will get this same crappy level of treatment.  It would be like a public housing program where everyone's house is torn down and every single person must move into public housing. That is universal state-run health care. Ten percent of America gets pulled up, 90% of America gets pulled down, possibly way down.

      Do Your Care About Brackets, or People?

      A lot of the lefty sites are gearing up the "poor aren't sharing in the benefits" bandwagon again.  This is usually brought out of the garage whenever someone wants to put a really progressive soak-the-successful tax plan on the table.  So get ready.

      The key to parsing their argument is to understand the following distinction:  Do you care about quintiles, or individuals?  Because if you care about quintiles, then there is no doubt that the real median income of the lowest income quintile has not advanced much over the last 15-20 years.  But quintiles are not individuals, and the evidence is that individuals are still doing well, whatever bracket they begin in.  Because you see, while the average for the bottom quintile may not be much higher than the average for that bracket a decade ago, the fact is that the people in that bracket have changed.   As Mark Perry writes:

      A common misperception is that the top or bottom income quintiles, or the top or bottom X% by income, are static, closed, private clubs with very little turnover - once you get into a top or bottom quintile, or a certain income percent, you stay there for life, making it difficult for people to move to a different group. But reality is very different - people move up and down the income quintiles and percentage groups throughout their careers and lives. The top or bottom 1/5/10%, just like the top or bottom quintiles, are never the same people from year to year, there is constant turnover as we move up and down the quintiles.


      He quotes some stats from Jeffrey Jones and Daniel Heil:

      How much income mobility exists in America? Research consistently affirms that there is substantial upward income mobility in the United States, with the lowest income earners typically showing the strongest results. A Treasury Department study of the 1996"“2005 period used IRS income tax data to discern considerable mobility: more than 55% of taxpayers moved to a different income quintile. More than half the people in the lowest fifth of earners moved to a higher quintile over this period (29% to the second, 14% to the third, 10% to the fourth, and 5% to the highest).

      Moreover, there is a great deal of movement in and out of the top income groups. The Treasury data show that 57% "of households in the top 1% in 2005 were not there nine years earlier." The rich sometimes get richer, but they get poorer as well. The study also reveals that income mobility has increased, not decreased, during the past twenty years. For example, 47.3% of those in the lowest income quintile in 1987 saw their incomes increase by at least 100% by 1996. That number jumped to 53.5% from 1996 to 2005.

      The Pew Economic Mobility Project tried to track actual people, and not brackets, from tax returns.  This is an imperfect science, but the only real way to look at income mobility.  They found that 90% of white children and 73% of black children whose parents were in the lowest income quartile in the base period were later to be found in higher income quartiles.  But this chart, from the same study, is really telling:

      (click to enlarge)

      That is a pretty amazing picture, marred only by something apparently bad occurring with the kids of middle class African Americans.

      So how can there be so much income gain everywhere without the averages for the lower quintile increasing.  I would offer at least two explanations:

      1. Immigration. As people gain skills and seniority, they progress to higher income brackets and out of the lower quintile.  However, there is a constant stream of low-skill immigrants moving to this country to fill in the bottom quintile.  It we were to do a quintile analysis apples to apples leaving out new immigrants in the period, I guarantee you would see the median income for the lower quintile increase.  As I wrote before:

        Frequent readers will know that I am a strong supporter of open immigration....However, I am tempted to become a close-the-border proponent if the left continue to use numbers skewed by immigration to justify expansions of taxation and the welfare state.  Whether they are illegal or not, whether they should be allowed to stay or not, the fact is that tens of millions of generally poor and unskilled immigrants have entered this country over the last several decades.  These folks dominate the lower quintile of wage earners in this country, and skew all of our traditional economic indicators downwards.  Median wages appear to be stagnating?  Of course the metric looks this way "” as wages have risen, 10 million new folks have been inserted at the bottom.  If you really want to know what the current median wage is on an apples to apples basis back to 1970, take the current reported median wage and count up about 10 million spots, and that should be the number "” and it will be much higher.

        By the way, even for these immigrants, their position in the lower quintile represents upward mobility for them.  Being in the middle of the lower quintile probably is a huge improvement over where they were in their home country - almost by definition, or they would not be working so hard to get here.

      2. Safety Net. Some large portion of the bottom quintile are supported by the US government's safety net.  And there are pretty good fiscal reasons why the typical real incomes generated by that safety net have not increased over the last 20 years.  And even beyond the fiscal issues, there are incentives issues as well -- at some point, increasing how lucrative the safety net is can reduce the incentive to get off the safety net and find a job.  Just ask the Swedes.  There is a delicate balance between humanity and sustaining folks vs. killing their motivation.In some ways the left's use of the lack of lower quintile progress as an indictment of American capitalism is wildly ironic.  Basically what they are saying is that the 80% of people who support themselves through capitalist endeavor are doing progressively better but the 20% of the people supported by the government are stagnating -- and therefore we need to increase the role of government.

      More Expensive Than Welfare

      Obama and Congressional Democrats seem to have hit upon a way of helping the unemployed that is even more expensive than Welfare.  Many of the stimulus-related jobs programs turn out to spend millions of dollars to preserve just a few jobs.  Their only net benefit is to politicians -- by making certain preferred corporations the intermediary for these funds, these corporations will in turn line politicians' campaign coffers with money, something welfare recipients were never very good at.

      A good example is the ongoing fight by Congressman Maurice Hinchey to force the Obama Administration to accept a new helicopter as part of an $835 million dollar program that supports 800 jobs in Mr. Hinchey's district.  TJIC has a very apt counter-proposal:

      Instead of spending $835 million, why not just cancel the program and hand each of the workers a $500,000 check with the memo line "welfare - because you produce something no one wants" ?

      That'll put food on the table of these 800 workers (for a decade), save us $435,000,000 and maybe teach 800 workers and 1 Democratic politician something about economics.

      Yes, but Travis, in your model, who is going to write checks back to Mr. Hinchey?