Dispatches from District 48
Archive for the ‘Government’ Category.
As the DOJ's Corporate Fraud Task Force pats itself on the back for the great job it is doing, Tom Kirkendall rips them up in a scathing rebuttal. I encourage you to follow the links -- he has great depth on every point he makes.
Today, the price of gasoline at the pump before taxes is about $2.50 a gallon. The price of milk per gallon is about $3.50 a gallon, and may rise to $5.00 by the fall.
So I will present you with a heresy: Gasoline is an absolutely screaming deal. Having worked a brief stint in the oil industry, it is incredible what has to happen and the investments that are in place to get gas into your car. Offshore oil platforms, dealing with unstable governments, thousand mile long pipelines, fleets of supertankers, huge complex refineries, and massive distribution networks are required to get gas to your car. And yet, it's a buck cheaper than milk, which in comparison is nearly trivial to produce. Sure, the milk needs a little processing and transportation, but compare this to oil, where processing involves reforming the very molecules in the oil to perfect the gas, and where transportation is across distances one to two orders of magnitude greater than for milk. And don't even get me started on production: a) cow b) offshore oil platform in 1000 foot deep water.
It is perhaps even more instructive to see how the government regulates these two commodities. Oil companies are constantly harassed by government as the world's great Satans, with windfall profits taxes and price gouging regulations, all on an industry that barely makes a 10% profit on sales in the best of times. Milk, on the other hand, gets huge government subsidies and handouts, including a price support system that is both arcane and incredibly costly. So Oil: windfall profits taxes. Milk, which is pricier but easier to produce: price supports. Does anyone really want to argue that regulation is a result of real market realities rather than just populist pandering for and against favored and unfavored groups?
In a prior post, I asked the left if they were uncomfortable with liberal judges being on the wrong side of free speech in the recent BCRA-related decision. As equal time, in the spirit of the heinous Fairness Doctrine again raising its ugly head, I will ask the right if they are comfortable with conservative justices being on the wrong side of property rights and government power in Wilkie v. Robbins.
By the way, speaking of the Fairness Doctrine, its instructive that the incumbent political parties consider fairness to mean equal time for all the ... incumbent political parties. Its interesting that no one in Congress takes the law to mean equal time for Greens or Libertarians or White Supremacists.
Though it is nominally called an "energy" bill, the Senate just passed the largest farm-subsidy bill in history:
The legislation would require ethanol production for motor fuels to
grow to at least 36 billion gallons a year by 2022, a sevenfold
increase over the amount of ethanol processed last year. It also calls
for boosting auto fuel economy to a fleet average of 35 miles per
gallon by 2020, a 40 percent increase over current requirements for
cars, SUVs, vans and pickup trucks.
The evidence is absolutely unequivocal that corn-based ethanol doesn't reduce net energy use, since it takes at least as much energy to grow and produce as it provides. It is even worse as environmental policy, since it almost certainly increases total pollution and CO2 production, particularly as ethanol is produced with Midwestern coal-powered electricity. In addition, it is going to cause marginal lands and open space to be brought into corn production, reversing a 70-year trend in the US towards increases in wilderness and forested land. It is going to increase fuel costs to no real purpose. This is dumb, dumb, dumb. So stupid that I can't even get the energy to criticize the new CAFE standards. If they really wanted to meet their goals, a carbon tax would have been cheaper and more effective, but that would have taken political guts.
I understand the environmental logic to tax petroleum -- I don't particularly agree with it, but some sort of carbon-based tax is probably the least-bad way to achieve various environmental goals (I will leave for other posts whether these goals make any sense).
However, the Senate's proposal to tax oil companies directly, rather than the oil or petroleum products themselves, is a gutless chickenshit maneuver that is just so typical of politicians. A tax on oil companies is less efficient than a direct carbon tax on the fuel (because it is operating less directly on price signals), but it makes sense to our political masters for several reasons:
This part is even worse:
Another measure, pushed by Sen. Jeff Bingaman, D-N.M., was aimed at
collected $10.7 billion in royalties the government has been unable to
collect because of flawed oil leasing contracts issued by the Interior
Department in 1998-99. The government would collect an excise tax on
any oil taken from the Gulf of Mexico, subject to royalties not being
paid.
Here is what happened: The government wrote offshore lease/royalty contracts in a certain way. Oil companies read the contract language, and entered into the contract as written, and subsequently invested billions of dollars to develop the leases. More recently, as oil prices rose, the government thinks it made a bad deal, and should have written the contracts differently. The solution for private companies who make a bad deal: live with it. The solution for the government, though, it apparently to use the coercive power of the government to extract the royalties you failed to put in the contract 18 years ago via special excise taxes.
And don't even get me started on this farm subsidy program masquerading as energy policy:
The bill would funnel about $11 billion over 10 years into the
development of renewable fuels such as ethanol, biodiesel and power
from wind turbines in a combination of extensions of existing tax
breaks and new tax benefits. An additional $18 billion in tax breaks "”
from tax credits to clean and renewable energy bonds "” also were
approved.
We are making a mistake of epic proportions pouring money and regulatory breaks into ethanol. Ethanol, in the form we ar investing in it in this country, does NOTHING to reduce our oil use or improve the environment or reduce CO2 emissions. Nada. All it does is increase taxes, increase fuel prices, increase food prices, and, soon, cause environmental problems as marginal lands are brought into corn production. I made a plea to stop this before it is too late, ie before the industry becomes so entrenched it will be politically impossible to cut it off. I fear we are rapidly approaching this point of no return.
From a USA Today story on All-Star Ballot counting:
The technology used is so advanced that not even the government has caught up.
Maybe the govenrment might be assumed to lead the private sector in missile defense systems and such. But in ballot counting?
From Watts Up With That:
The discovery of the heaviest chemical element yet known to science. The new element has been tentatively named Governmentium.
Governmentium has 1 neutron, 12 assistant neutrons, 75 deputy neutrons, and 224 assistant deputy neutrons, giving it an atomic mass of 312. These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons.
Since Governmentium has no electrons, it is inert. However, it can be detected as it impedes every reaction with which it comes into contact. A minute amount of Governmentium causes one reaction to take over four days to complete when
it w ould normally take less than a second.
Of course, there is much more. Enjoy.
And, don't miss the chance to contribute to Watt's grass roots climate project / scavenger hunt. Its fun and it contributes a lot to climate science. I have contributed two sites so far -- I wrote about the first one here.
Truck and Barter points to this article reporting that many government wi-fi efforts are encountering problems. No! Who would have predicted that?
Federal Price Gouging Prevention Act - Makes it unlawful for any person
to sell crude oil, gasoline, natural gas, or petroleum distillates at a
price that: (1) is unconscionably excessive; or (2) indicates the
seller is taking unfair advantage unusual market conditions or the
circumstances of an emergency to increase prices unreasonably.
Well, since they establish such a bright-line legal standard like "unconscionably excessive," I guess it is OK.
I am reading a fabulous book called "The Rise and Fall of Society" by Frank Chodorov. It was apparently first published in 1959 and has been republished recently by the . Here is an early bit I particularly liked:
One indication of how far the integration [between state and society] has gone is the disappearance of any discussion of the State qua State -- a discussion that engaged the best minds of the eighteenth and nineteenth centuries. The inadequacies of a particular regime, or its personnel, are under constant attack, but there is no faultfinding with the institution itself. The State is all right, by common agreement, and it would work perfectly well if the "right" people were at its helm.
His next line is clearly aimed at his conservative contemporaries
It does not occur to most critics of the New Deal that all its deficiencies are inherent in any State, under anybody's guidance, or that when the political establishment garners enough power a demagogue will sprout.
I offered up similar observations here, though aimed at the left, who at the time were the minority opposition party:
I am reminded of all this because the technocrats that built our
regulatory state are starting to see the danger of what they created.
A public school system was great as long as it was teaching the right
things and its indoctrinational excesses were in a leftish direction.
Now, however, we can see the panic. The left is freaked that some red
state school districts may start teaching creationism or intelligent
design. And you can hear the lament - how did we let Bush and these
conservative idiots take control of the beautiful machine we built? My
answer is that you shouldn't have built the machine in the first place
- it always falls into the wrong hands. Maybe its time for me to again invite the left to reconsider school choice.Today, via Instapundit, comes this story about the GAO audit of the decision by the FDA to not allow the plan B morning after pill to be sold over the counter.
And, knock me over with a feather, it appears that the decision was
political, based on a conservative administration's opposition to
abortion. And again the technocrats on the left are freaked. Well,
what did you expect? You applauded the Clinton FDA's politically
motivated ban on breast implants as a sop to NOW and the trial
lawyers. In
establishing the FDA, it was you on the left that established the
principal, contradictory to the left's own stand on abortion, that the
government does indeed trump the individual on decision making for
their own body (other thoughts here).
Again we hear the lament that the game was great until these
conservative yahoos took over. No, it wasn't. It was unjust to scheme
to control other people's lives, and just plain stupid to expect that
the machinery of control you created would never fall into your
political enemy's hands.
If I owned a newspaper, in the style guide I would ban the term "public service" as a synonym for political career, and I would ban the words "public servant" when describing a politician.
Though I have a number of people I pay for services, I consider each of these too honorable a relationship to say these folks are my "servants." But if I did have servants, I absolutely guarantee that:
A while back I profiled my most abusive and annoying vendor, which turned out to be .. the government. After profiling some of their practices in a quiz format, I wrote:
Give up? Well, most of you have probably guessed that this vendor
is... the government! Or specifically, the Colorado Department of
Wildlife and the specific product discussed is fishing licenses. That
is why this particular vendor can get away with practices that no
company that actually has to compete in the market place would ever
attempt, and, in a couple of cases, gets aways with practices that
would be illegal for a private company.
I have an update, again for fishing license sales but this time from the Arizona Department of Fish and Game. My business only sells fishing licenses. We have no call for hunting licenses, and in fact hunting is illegal on the lands surrounding the store in question. But in January each year, the government FORCES me to take a whole pile of hunting license and duck stamp inventory as a prerequisite to get the fishing license inventory. I have to hold this inventory, unused, in my safe all year. I cannot return it until the end of the year, and if I lose it or forget to return it (12 long months after it was sent to me) then I have to pay for it all. Lovely.
How many of you think you could get out of jury duty to go fish?
Senior U.S. District Judge James Lawrence King,
overseeing jury selection for a civil trial at the Key West courthouse,
asked prospective jurors if anyone had cause to be excused...A third fellow stepped forward and said his name was James Johnson.
He knew the importance of jury duty, he said, but he had a special
houseguest and, please, if he wasn't really needed, could he be excused?...King looked at him funny. ''Did you coach?'' ``Yes.''
''Where?'' King asked.
Miami Dolphins, Dallas Cowboys, University of Miami, Oklahoma State. He rattled off others -- Iowa State, Wichita State.
''That's enough,'' said King as folks in the courtroom laughed. By then, the judge realized it was Jimmy Johnson....
Johnson, 63, an Islamorada resident, told King his houseguest was Bill Parcells, who recently retired as Dallas head coach. He planned to take the Big Tuna fishing.
King excused Johnson, but not before asking him to predict the Gators' record for next season.
Looks like Urban Meyer is probably safe from jury duty in this court too.
I value many of the same things - open space, wilderness, wildlife - that environmental activists value. The difference is that I do not wish to achieve my goals by force. For years I have donated money to various environmental funds that focus on using private funds to buy land for preservation (the Nature Conservancy being the most famous of these, though it has had some problems of late). I particularly eschewed donating to groups who used most of their funds for lobbying. These groups are using their funds to try to buy government coercion to back whatever goals they are seeking, often including taking more money from me by force and limiting my rights to manage my own property as I see fit. I hate that.
Which is why I am very disappointed in the recent actions of Bill Gates. To date, Gates has dumped billions of his own money into trying to improve public schools. I personally think that to be useless**, that the management and incentives of government monopoly schools are broken and no amount of money can fix them. However, it was his money and God bless him for trying.
However, it appears Gates is tired of the slow progress, and is taking the great second-rater escape clause, using his money now not to fund improvement programs but to lobby the government to spend more of my money:
Eli Broad and Bill Gates, two of the most important philanthropists in
American public education, have pumped more than $2 billion into
improving schools. But now, dissatisfied with the pace of change, they
are joining forces for a $60 million foray into politics in an effort
to vault education high onto the agenda of the 2008 presidential race.
** I have written several times about the dynamics of organizations and management, but it is my belief that there comes a time when certain managements and cultures are beyond saving, and the only solution is for the market to let them fail and have their assets and people be taken in by more dynamic organizations. I wrote about this in the most depth in the context of GM, in a post on corporate DNA and value creation:
A corporation has physical plant (like factories) and workers of
various skill levels who have productive potential. These physical and
human assets are overlaid with what we generally shortcut as
"management" but which includes not just the actual humans currently
managing the company but the organization approach, the culture, the
management processes, its systems, the traditions, its contracts, its
unions, the intellectual property, etc. etc. In fact, by calling all
this summed together "management", we falsely create the impression
that it can easily be changed out, by firing the overpaid bums and
getting new smarter guys. This is not the case - Just ask Ross Perot.
You could fire the top 20 guys at GM and replace them all with the
consensus all-brilliant team and I still am not sure they could fix
it.All these management factors, from the managers themselves to
process to history to culture could better be called the corporate
DNA. And DNA is very hard to change. Walmart may be freaking
brilliant at what they do, but demand that they change tomorrow to an
upscale retailer marketing fashion products to teenage girls, and I
don't think they would ever get there. Its just too much change in the
DNA. Yeah, you could hire some ex Merry-go-round executives, but you
still have a culture aimed at big box low prices, a logistics system
and infrastructure aimed at doing same, absolutely no history or
knowledge of fashion, etc. etc. I would bet you any amount of money I
could get to the GAP or the Limited faster starting from scratch than starting from
Walmart. For example, many folks (like me) greatly prefer Target over
Walmart because Target is a slightly nicer, more relaxing place to
shop. And even this small difference may ultimately confound Walmart.
Even this very incremental need to add some aesthetics to their
experience may overtax their DNA.Corporate DNA acts as a value multiplier. The best corporate DNA
has a multiplier greater than one, meaning that it increases the value
of the people and physical assets in the corporation. When I was at a
company called Emerson Electric (an industrial conglomerate, not the
consumer electronics guys) they were famous in the business world for
having a corporate DNA that added value to certain types of industrial
companies through cost reduction and intelligent investment. Emerson's
management, though, was always aware of the limits of their DNA, and
paid careful attention to where their DNA would have a multiplier
effect and where it would not. Every company that has ever grown
rapidly has had a DNA that provided a multiplier greater than one...
for a while.But things change. Sometimes that change is slow, like a creeping
climate change, or sometimes it is rapid, like the dinosaur-killing
comet. DNA that was robust no longer matches what the market needs, or
some other entity with better DNA comes along and out-competes you.
When this happens, when a corporation becomes senescent, when its DNA
is out of date, then its multiplier slips below one. The corporation
is killing the value of its assets. Smart people are made stupid by a
bad organization and systems and culture. In the case of GM, hordes of
brilliant engineers teamed with highly-skilled production workers and
modern robotic manufacturing plants are turning out cars no one wants,
at prices no one wants to pay.Changing your DNA is tough. It is sometimes possible, with the
right managers and a crisis mentality, to evolve DNA over a period of
20-30 years. One could argue that GE did this, avoiding becoming an
old-industry dinosaur. GM has had a 30 year window (dating from the
mid-seventies oil price rise and influx of imported cars) to make a
change, and it has not been enough. GM's DNA was programmed to make
big, ugly (IMO) cars, and that is what it has continued to do. If its
leaders were not able or willing to change its DNA over the last 30
years, no one, no matter how brilliant, is going to do it in the next
2-3.
TJIC has a great response to an article describing how Nigerian politicians take money from the oil industry and use it as payments to 10% or so of the voters in order to get re-elected in perpetuity. He says:
The difference between corrupt Nigerian democracy and glorious American
democracy is that (a) OUR government does not steal oil money, it
steals money from all sorts of industries; (b) closer to 50% of the
populace gets bought off with the loot.
What the hell is the difference, really, except we do it up front, within the "law", while Nigerians do it under the table. Based on this, I would add a third difference to TJIC's two: (c) at least the Nigerians treat the behavior as wrong and do it under the table -- our politicians are right up front about it.
Given my emails, I don't think I explained my first point in this post on Social Security very well:
If you are below 50 and in the top 40% of earners, do NOT expect to get
any Social Security benefits. Live with it. Up until now, wealthy
people have received SS retirement benefits as an expensive PR campaign
to convince everyone that SS is an insurance program, not a welfare
program. Well, I have run the numbers, and it is at least 83% welfare.
The only alternative to defending these benefits will be to suffer
through substantial tax increases which will be disproportionately paid
for by the same richest 40% who would lose their benefits. Given the negative rates of return that SS pays
on your payroll taxes, each extra dollar that taxes are raised will
only yield well under a dollar (present value) in benefits. So give up
on the benefits, campaign to keep taxes down, and start saving on your
own.
Let me try again. When the crunch comes in a decade or so, the first thing that is going to happen is that the wealthiest people are going to lose their benefits. Yeah, I know, not fair, but does it surprise you? For years, Social Security advocates have desperately clung to the argument that Social Security is not welfare, it's insurance. That is why benefits for the wealthy still exist at all. But when crunch time comes, the wealthy, as usual, are going to get thrown overboard first.
If you are in the wealthiest 40% or so, here is what it will take to save your Social Security benefits: New taxes. These taxes will either be additional payroll taxes or additional income taxes. If they are payroll taxes, my guess is that the main tax increase will be eliminating the top cap on earnings subject to the tax; in other words, most of the new payroll taxes will be on the highest earners. If the new taxes are income taxes, then rest assured that they will be on the top 40% of earners, since it is the top 40% who pay virtually all of the income taxes in this country today.
So, to save your benefits, you are going to have your taxes increased. And since Social Security, like every government program, is leaky, and since it pays a negative rate of return, you are going to have to pay present value of more than a dollar of taxes to save present value of a dollar of benefits. That is a bad investment. If you are still in your productive years, be ready to see your benefits go bye-bye and fight like hell to keep taxes down. And save, save, save.
I have never been very excited about the concept of "net neutrality." Various bills in Congress trying to enforce this strike me as Trojan horses for regulation of the Internet, and are at best the attempts by one segment of the population to enforce their vision of the Internet via the coercive power of the government. But more on this in a second.
The City of Boston has a free municipal Wi-Fi network (I aired some of my objections to this here). By using this "free" wi-fi network (which is free only in the sense that you paid for it via taxes rather than use fees) you apparently must accept government filtering of the content, which caused Boing-Boing to get blocked the other day, for some "arbitrary and capricious" reasons. Readers may remember I already dinged Boston once when it used its government power to try to block free competitors.
So despite all the panic that evil capitalist broadband suppliers will somehow block or skew content from certain content suppliers, it turns out that the government, acting as broadband supplier, is the first to do so. Fortunately, Bostonians have many free competitors to the municipal service that provide uncensored access to the Internet. But without those private options, they would be enjoying the Chinese Internet experience.
Which gets us back to the issue of accountability. In short, socialists distrust individual self-interest and the market as accountability tools, and believe the government is much more accountable, and therefore trustworthy, than any private institution. What amazes be is that anyone with a working knowledge of history can continue to believe this. Take any issue:
Getting back to the issue of net neutrality, let's take a look at what accountability-enforcement tools a private individual has over a private vs. a public broadband supplier. If I don't like my private broadband supplier, I can make a phone call and switch to one of several others. Time elapsed: About 30 minutes. If I don't like my public broadband supplier, I could switch to a private company. But this is really a libertarian end-around to the socialist problem. To be fair, we need to look at a pure socialist system and evaluate the accountability tools in this system. So, assuming the government entity has enforced a monopoly position for itself (like in education or the postal service), I would have to muster a grass roots campaign and likely millions of dollars to force any changes through an entrenched and brain-dead legislative body. Time elapsed: From 3 years to never.
I have no problem if someone wants to compete out there in the free market producing fuel from corn or switchgrass or whatever. But we have got to stop the subsidies right now, before it is too late. Biofuels do absolutely nothing, zero, zippo to change CO2 production, and some studies show they make CO2 output worse when you consider the whole production cycle. This is not to mention the effect biofuels will have in putting more wild and forest land under the till.
I can't see any conceivable benefit to the economy from subsidizing biofuels, except some hazy notion of energy independence which has limited economic value and which will never be achieved with biofuels (we will have jacked up the price of corn so high we can't feed cattle long before biofuels make even a minor dent in oil imports). My only guess as to true motivation is that people want to spite Exxon and Shell, but if you don't like those companies, you really aren't going to like Archer Daniels Midland.
Biofuels, given current technology, are a pure product of politics. They are a massive subsidy of Midwestern farmers that the recipients can claim is not really a subsidy. If the first presidential primary were in Nevada rather than Iowa, you would never hear a word from politicians about ethanol.
But here is the reason we need to end the subsidies right now. [emphasis added]
A $400-million integrated biodiesel and ethanol refinery the first
complex of its kind in North America will be built in central Alberta.Led
by Dominion Energy Services, LLC a Florida-based group with pioneering
ties to Calgary's natural gas marketing sector investors that include
$45-billion US private equity fund The Carlyle Group LLC and affiliate
Riverstone Renewable Energy Infrastructure Fund I, LP said Monday they
have finalized plans for the facility....Alberta Agriculture Minister Doug Horner noted the "world-class"
Dominion plant follows the provincial government's recent, $239-million
over five years initiative to boost biofuels production. The province
will provide a 14-cent per litre production credit to the facility. [for those rusty on the metric system, that is 56-cents per gallon or $23.53 per barrel]
Companies are currently building massive subsidy-magnets biofuel plants. Once these investments are in place, there is going to be a huge entrenched base of investors and workers who are going to wield every bit of political power they can to retain subsidies forever to protect their jobs and their investment. Biofuel subsidies will be as intractable as peanut and sugar subsidies and protections.
Update: Radley Balko mentions another great example. For various post-prohibition reasons that may or may not have made sense at the time, state laws prohibit retailers from buying alcoholic beverages straight from the manufacturer - e.g. Costco cannot buy direct from Anheiser-Busch. Wholesalers who emerged to fill the legally required middleman role became rich. Since then, even thought this 3-layered distribution requirement makes zero sense, it has become impossible to change it because the wealthy distributors who owe their fortunes to the requirement block every move to deregulate.
John Sugg at Reason has a review of corporate relocation subsidies down South, and the picture is not pretty:
Jurisdictions across the nation offer such inducements, which
include tax abatement, land acquisition, construction subsidies,
training subsidies, and outright cash grants. Nationally, relocation
incentives total about $50 billion a year, according to the WHR Group,
SIRVA, and other relocation consultants. (Such consultants often
collect as much as 30 percent of the grants they negotiate for the
businesses.)...It's hard to get a precise total of the dollars
involved, but almost every major business relocation in the South is
accompanied by a cornucopia of publicly funded grants, despite ample
evidence that the subsidies have little impact on corporate site
selection. Other regions of the nation, especially ones experiencing
protracted economic downturns, are increasingly emulating the South.
The politicians involved rarely consider broader tax and regulatory
changes that would make their states more attractive to all businesses,
outside and homegrown....Trendy businesses"”particularly technology firms"”have the greatest
leverage in demanding government subsidies. In February, for example,
biofuel manufacturer Range Fuels, based on little more than its word
that it could deliver a economically competitive product, was offered
$6 million in state cash, a 97-acre tract in central Georgia, and a set
of tax abatements. At best, the company will employ 70 people.
He's got tons of examples, so you should read it all, but this one sounded just like something out of Wisconsin in Atlas Shrugged:
One business that benefited from such subsidies was the Real Silk
Hosiery factory, which opened in Durant, Mississippi, in the late
1930s. Real Silk rented its factory from a state agency for $5 a year,
enjoyed tax incentives, and had public agencies train its employees and
even build their homes. The Durant plant was shuttered in the mid-'50s.
Like many other Southern industrial facilities abandoned by owners
seeking better deals elsewhere, it closed before the industrial revenue
bonds were paid off. Writing in Time in 1998, reporters Donald Bartlett
and James Steele noted that Mississippi "was the poorest state in the
nation when its corporate-welfare program began in 1936."¦62 years and
hundreds upon hundreds of millions of dollars in economic incentives
later, it remains dead last in per capita income."
In the past, I have observed that the "game" of competitive relocation subsidies between local authorities is very similar to a prisoner's dilemma game. In the prisoner's dilemma, two prisoners are given a choice: To confess and rat out their partner or to stay silent. If both stay silent, they get 10 years each in jail. If one rats out the other, but the other stays silent, the talker gets 5 years and the silent one gets 30 years. If they both talk, then they both get 20 years. In this game, each person has the incentive to talk, since for any set of actions of their partner, they are better off talking than not talking. The irony is that when they both inevitably talk, they end up worse off than if they had stayed silent.
I see the relocation subsidy game as very similar, replacing "state official" for prisoner and "subsidize" for "talk." Quoting from myself:
In a libertarian world where politicians all just say no to
subsidizing businesses, then businesses would end up reasonably evenly
distributed across the country (due to labor markets, distribution
requirements, etc.) and taxpayers would not be paying any subsidies.
However, because politicians fear that their community will lose if
they don't play the subsidy game like everyone else (the equivalent of
staying silent while your partner is ratting you out in prison) what we
end up with is still having businesses reasonably evenly distributed
across the country, but with massive subsidies in place.To see this clearer, lets take the example of Major League Baseball
(MLB). We all know that cities and states have been massively
subsidizing new baseball stadiums for billionaire team owners. Lets
for a minute say this never happened - that somehow, the mayors of the
50 largest cities got together in 1960 and made a no-stadium-subsidy
pledge. First, would MLB still exist? Sure! Teams like the Giants
have proven that baseball can work financially in a private park, and
baseball thrived for years with private parks. OK, would baseball be
in the same cities? Well, without subsidies, baseball would be in the
largest cities, like New York and LA and Chicago, which is exactly
where they are now. The odd city here or there might be different,
e.g. Tampa Bay might never have gotten a team, but that would in
retrospect have been a good thing.The net effect in baseball is the same as it is in every other
industry: Relocation subsidies, when everyone is playing the game, do
nothing to substantially affect the location of jobs and businesses,
but rather just transfer taxpayer money to business owners and workers.
I conclude with this from Sugg's piece:
Holladay, who has headed state economic development agencies in
Georgia, Mississippi, and South Carolina, remembers a conversation with
Zell Miller, then governor of Georgia, at a National Governors
Conference in the '90s. "The topic of subsidies came up," he recalls.
"Zell asked me, "˜Is there any way to end this foolishness?' I answered,
"˜The only way I know is to not elect any more governors.'"‰"
In my earlier post, I commented that one reason a number of foreign oil fields may be "peaking" is not necesarily because they are hitting their production limits, ala "peak oil theory," but because state run companies tend to be terrible at making the intelligent long-term investments that are needed to maintain oil production in aging fields. I observed:
There are a lot of things you can do to an aging oil field,
particularly with $60 prices to justify the effort, to increase or
maintain production. In accordance with the laws of diminishing
returns, all of them require increasing amounts of capital and
intelligent management.Unfortunately, state owned oil companies like Pemex (whose assets,
by the way, were stolen years ago from US owners) are run terribly,
like every other state-owned company in the world. And, when
politicians in Mexico are faced with a choice between making capital
available for long-term investment in the fields or dropping it into
yet another silly government program or transfer payment scheme, they
do the latter. And when politicians have a choice between running an
employment meritocracy or creating a huge bureaucracy of jobs for life
for their cronies they choose the latter.
So today, via Hit and Run, we see this exact same effect in Venezuela:
No one sees an immediate crisis at Petróleos de Venezuela. But its
windfall from high oil prices masks the devilish complexity and rising
costs of producing heavy oil. Meanwhile, the company acknowledged last
month that spending on "social development" almost doubled in 2006, to
$13.3 billion, while its spending on exploration badly trailed its
global peers. And Petróleos de Venezuela's work force has ballooned to
89,450, up 29 percent since 2001 even as production declined
...
Petróleos
de Venezuela's cash is said to be running short as Mr. Chávez uses its
revenue to cement political alliances with Bolivia, Cuba and Nicaragua.
The company has borrowed more than $11 billion since the start of the
year, a rapid debt buildup that reflects a wager by Mr. Chávez that oil
prices will remain high indefinitely.
Like many libertarians, I lose interest quickly in politics, watching partisans of the Coke party argue why they are so much different than the Pepsi party. You don't have to watch the whole farce for very long as a neutral observer before you see the same people taking the opposite tack on an issue than they did a few years earlier, only because their guy is in office, so now its more OK than when the other party's guy was doing it.
But I do read a few political blogs from both sides, just to keep abreast of what is going on. This weekend, both sides managed to irritate me over the same issue. First, Kevin Drum, from the left, railed on what he called "the GOP economy," complaining that the economy has grown without increasing median wages (note he carefully avoids "total compensation," which has gone up.) Then Captains Quarters wrote from the right that "The economy continues its growth under the stewardship of the Bush administration."
George Bush does not run the economy. George Bush does not even make day-to-day decisions that affect the economy. He has made a few major moves that have economic consequences, with the positive effects of tax cuts probably mostly offset by unrestrained deficit spending, random protectionist acts and new bloated government services. Bill Clinton, while we have to credit him for NAFTA (see below), was not responsible for the incredible economic expansion of the 90's. In fact, neither Bill Clinton nor his wife have ever held a job where they produced anything.
All of which is fine - I am not accusing president's of somehow falling down on the job. I am merely stating what I thought was obvious. Wealth is created by the actions and the minds of hundreds of millions of people, to whom the occupant of the White House is largely irrelevant except insofar as the President substantially increases or reduces the artificial burden of efficiency-sucking government mandates, reporting, and taxes.
I will go into more depth on this in my annual tax day post, but I am increasingly confident of my theory of wealth creation. Wealth is increased as two things happen:
- More individuals are more free to (and more likely to) question established beliefs, either scientific (e.g. the earth-centric universe), social (e.g. racial prejudice) or business (e.g. primacy of mainframe computing).
- More Individuals are more free to act in their own self-interest to pursue the results of their insights and to keep for themselves the proceeds of their efforts.
Since the 1970's, we have seen an explosion in the global economy, which has greatly increased the number of people working on any given economic problem. For example, instead of just people in Detroit and Germany thinking about how to design and produce cars, we have folks in Japan and South Korea and even China and Brazil questioning the established wisdom from Detroit. This has resulted not just in better, more affordable cars, but in production and supply chain management techniques that have made nearly every industry you can name more productive.
Whenever such a change occurs, there are conservative (lower-c) forces that try to halt them. The Church used its power for a time to resist the heliocentric view of the solar system. Southern states used Jim Crow laws to resist post Civil War racial and social reforms. And any number of groups wanted (and still want) to slam the door on the global economy. Many countries in Europe went down this path. What has saved the US from the same low-growth fate they have in Europe (and Japan) is that the government, and Bill Clinton in particular, at a critical time resisted the technocratic urge to have the government "do something" about the economic changes flowing from globalization. Some wanted protectionism, while some wanted a more active hand by the government in "choosing winners" in the economy, like it was perceived that Japan had. Bill Clinton resisted resisted these voices, most of whom were powerful in his own party, and in fact doubled down on globalization by pushing NAFTA. For this act of vision, Clinton should be credited, but I still wouldn't call it "his" economy.
Seldom do I plagiarize editorial titles - I usually try to make up my own post title, even if mine is not as good as the original. But how can you not give kudos to an MSM editorial like this:
An iPod for every kid? Are they !#$!ing idiots?
The Detroit News
We have come to the conclusion that the
crisis Michigan faces is not a shortage of revenue, but an excess of
idiocy. Facing a budget deficit that has passed the $1 billion mark,
House Democrats Thursday offered a spending plan that would buy a MP3
player or iPod for every school child in Michigan.No cost estimate was attached to their hare-brained idea to "invest" in education. Details, we are promised, will follow.
It is good to see a MSM outlet treating this type of stupid populist government proposal with all the seriousness it deserves. I wish they would cry foul more often. Via Hall of Record.
Five years from now, one issue is going to dominate the news on the state and local level. It's not going to be civil marriages or abortion of light rail. It's going to be unfunded pension liabilities. Nearly every city, county, and state government body has promised over-generous pensions to millions of their employees, and almost none of them have been putting any money aside to fund these future liabilities (unlike those evil and untrustworthy private companies, who may not always put enough aside but are at least doing something).
Most of us know that the government uses accounting methods and practices that would put private individuals in jail. For example, Enron managers have gone to jail for accounting practices that allegedly attempted to hide liabilities and keep them off financial statements. The government does this all the time, and routinely.
Over the next few years, the GASB will require that governmental bodies reveal the size of these unfunded liabilities. And you heard it here first, the numbers are going to be MASSIVE. I am almost sure that the numbers will dwarf the shortfalls in Social Security and maybe Medicare as well. Anyone want to be that politicians will propose to close these gaps by intelligent spending cuts rather than new taxes? HAH!
From Cato@Liberty:
A common criticism of Social Security choice
(and defense of the Social Security status quo) is that there
are dishonest actors in private markets who would put people's private
account assets at risk of (in the words of the AFL-CIO) "corruption, waste and Enron-ization." These critics argue that society is much better off keeping Social Security in the honest, benevolent hands of Uncle Sam.What must these critics be thinking about today's NYT above-the-fold article on teacher pension fund shenanigans in New Jersey? The lede says it all:
In 2005, New Jersey
put either $551 million, $56 million or nothing into its pension fund
for teachers. All three figures appeared in various state documents "”
though the state now says that the actual amount was zero.Like many state and local government pension systems,
New Jersey's is woefully underfunded compared to the benefits it will
have to pay in the future. (This situation will make headlines in the
coming years, as state and local governments begin to disclose their
pension fund and retirement benefit system shortfalls in accordance
with a recent GASB
requirement.) In New Jersey's case, the shortfall is more than has been
publicly acknowledged, however: "an analysis of its records by The New
York Times shows that in many cases, New Jersey has overstated even
what it has claimed to be contributing, sometimes by hundreds of
millions of dollars."
I couldn't me more pleased that Congress is about to enter an orgy of hearings on the US Attorney firings. Not because of the issue itself, since I really don't have a clue what is going on. But nothing would make me happier than to see Congress dissipate itself on this crap for a couple of years. Maybe we could even revive interest in impeachment hearings. Anything that soaks up time from passing new boneheaded legislation and gives Congressmen a chance to demagogue without threatening my individual freedoms is OK by me.
Update: OK, I am catching up and learning bit by bit about this case. I found this in particular to be hilarious:
One of those attorneys was Paul Charlton of Arizona. Adult Video News (link NSFW) did some sleuthing, and found some interesting stuff. Charlton did
in fact bring one federal obscenity case in Arizona. But while he was
bringing that particular series of indictments, it turns out that
another chain of adult video stores based in Arizona continued to sell
and rent the same titles the other store was indicted for selling.The
kicker is that the unindicted store had recently declared bankruptcy,
and was being run by trustees from the federal government. So while the
federal government was indicting one business for breaking federal
obscenity laws, the government itself was breaking those same laws just
a few miles away, in order to recoup federal taxes owed by a rival
store.Even more interesting, it looks like Charlton may have
balked on the case after learning about the discrepancy via a brief
from attorneys for the indicted store. And that balk may have cost him
his job.
By the way, I was a bit flip up top, because I was trying to make a separate point. However, I do believe strongly that principled prosecutorial discretion is absolutely critical in this world where everything is illegal. If the Bush administration turns out to have fired these guys for exercising sensible discretion, then they deserve to be toasted for it, though I have a number of other issues I would tend to toast them for first.