Posts tagged ‘NY’

More Thoughts on Price Gouging

In an earlier post, I wrote a defense of price gouging.  Incredibly, one of the best simple summaries of why "profiting off disaster" is actually a good thing comes from the NY Times of all places:

All this, of course, is capitalism at work, moving quickly to get
resources to where they are needed most. And those who move fastest are
likely to do best.

Exactly (by the way, the above is quoted from an Austin Bay post, which was aimed more at criticizing the NY Times for dropping such pro-capitalist sentences from its European version.)

Higher prices for generators and lumber in the disaster area is what tells Home Depot and others that it makes sense to shift lumber and generator inventory to Louisiana from California.  High prices for gas give the following two messages simultaneously and unambiguously to hundreds of millions of people:  "you can make some good money if you can figure out how to get more gas to consumers right now" and "you might want to drive a little less right now". 

Think about that last statement.  Congress has over the last 30 or so years generated numerous energy "plans" and has spent billions of dollars to figure out ways to promote conservation and increased supply.  All of these plans have been expensive failures.  But now, post Katrina, in less than 48 hours, with no one in charge, the market has achieved what Congress could never do.  The least valuable auto-miles will be eliminated, without years of study by Congress to figure out which miles are the least valuable.  The most economic new sources of gasoline will be tapped, without debating in Washington what those sources are.  All bottom-up, with no one ruling the process, by the voluntary self-interested efforts of hundreds of millions of Americans reacting to a simple price signal.

(previous paragraph best read out-loud with someone humming America the beautiful in the background)

Postscript:  Apparently, according to Austin Bay, Texas and more specifically Houston are now the great Satan.   Since I am a white male in my forties who is fairly well-off, still believes in free markets, and was born Houston, Texas, I guess that makes me the ultimate oppressor.

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More on the Housing Bubble

I can't check the guy's methodology, but Robert Shiller claims in the NY Times to have built a better, more accurate measure of housing prices.  You might ask, don't we already have that - I always see things like "median home sales price" in the paper?  The problem with existing metrics is that they don't correct for mix.  If a lot of large houses in the pricey part of town sell, median home prices will rise just given the mix shift of the sample.  What you really want is a price index for equivalent home sales, something that corrects for things like square feet, inflation, and perhaps zip code.  This is what Shiller claims to have done, and the results are dramatic.  He shows that real housing prices have been flat for most of the century, right up until the last decade, where they have increased dramatically.

Housingprices

I can't think of any structural change that would explain this (except maybe a change in relationship between mortgage rates and inflation) so it certainly creates a flashing red light saying "bubble". 

By the way, isn't it interesting that people can see the graph above and immediately think "prices are due to crash" but when they see this very similar chart:

Oilprice1947

...and think that prices will keep going up and up and up.

Hat tip to Marginal Revolution.  Other posts on housing prices here, here and here.  More on oil prices here.

More on Peak Oil

Everything old is new again.  Back in the late 70's, all the talk was about the world running out of oil.  Everywhere you looked, "experts" were predicting that we would run out of oil.  Many had us running out of oil in 1985, while the most optimistic didn't have us running out of oil until the turn of the century.  Prices at the time had spiked to about $65 a barrel (in 2004 dollars), about where they are today.  Of course, it turned out that the laws of supply and demand had not been repealed, and after Reagan removed oil price controls and goofy laws like the windfall profits tax, demand and supply came back in balance, and prices actually returned to their historical norms.

Today, as evidenced by the long article on "peak oil" in the NY Times Magazine this weekend, we are apparently once again headed for imminent disaster.  The Freakonomics blog has already chimed in with a partial rebuttal, but I wanted to share some of my own thoughts.

Are the Saudis hiding a reserve shortfall?  Much of the peak oil phenomena consists of Paul Ehrlich type doom-saying that takes pains to ignore the laws of supply and demand.  However, the question of Saudi behavior is an interesting one.  Lets for a moment hypothesize that the Saudis were indeed somehow running out of oil.  One thing the article misses is how bad a thing this would be for the Saudi leadership.  The author notes that the ruling family shouldn't care, since it is already rich, so declining oil revenues won't hurt it.  But that misses the point.  With a large percentage of the world's oil, the Saudis are a country that must be treated with respect and deference.  Without oil, Saudi Arabia becomes that Arab nation that virtually enslaves half its population (ie the females) and that funds much of the world's terrorism, including the 9/11 attacks.  Suddenly, without oil reserves, the Saudi's might find themselves moving up the Bush-Rumsfeld priority list for a little visit from the US military.  I have no way of knowing if the Saudis are hiding anything -- the fact that some Saudi fields are using secondary and tertiary recovery methods (as noted in the article) really does not mean much.  But if they were losing reserves, they sure would have the incentive to hide it.

Reserve accounting is a tricky thing.  The vagaries of reserve accounting are very difficult for outsiders to understand.  I am not an expert, but one thing I have come to understand is that reserve numbers are not like measuring the water level in a tank.  There is a lot more oil in the ground than can ever be recovered, and just what percentage can be recovered depends on how much you are willing to do (and spend) to get it out.  Some oil will come out under its own pressure.  The next bit has to be pumped out.  The next bit has to be forced out with water injection.  The next bit may come out with steam or CO2 flooding.  In other words, how much oil you think will be recoverable from a field, ie the reserves, depends on how much you are willing to invest, which in turn depends on prices.  Over time, you will find that certain fields will have very different reserves numbers at $70 barrel oil than at $25.

Trust supply and demand.  Supply and demand work to close resource gaps.  In fact, it has never not worked.  The Cassandras of the world have predicted over the centuries that we would run out of thousands of different things.  Everything from farmland to wood to tungsten have at one time or another been close to exhaustion.  And you know what, these soothsayers of doom are 0-for-4153 in their predictions.  Heck, they are about 0-for-five on oil alone:

Most experts do not share Simmons's concerns about the imminence of peak oil. One of the industry's most prominent consultants, Daniel Yergin, author of a Pulitzer Prize-winning book about petroleum, dismisses the doomsday visions. ''This is not the first time that the world has 'run out of oil,''' he wrote in a recent Washington Post opinion essay. ''It's more like the fifth. Cycles of shortage and surplus characterize the entire history of the oil industry.'' Yergin says that a number of oil projects that are under construction will increase the supply by 20 percent in five years and that technological advances will increase the amount of oil that can be recovered from existing reservoirs. (Typically, with today's technology, only about 40 percent of a reservoir's oil can be pumped to the surface.)

One of the problems with oil is that governments have a real problem with allowing supply and demand to operate.  I have wondered for a while why Chinese demand has kept growing so fast in the face of rising prices.  The reason is that the Chinese government still is selling gasoline way below market rates, shielding consumers from incentives to reduce consumption.  On the supply side, I also wondered when I was in Paris why gasoline prices as high as $6 per gallon were not creating incentives for new sources of supply.  It turns out that nearly $4 of the $6 are government taxes, so none of this higher price goes to producers or creates any supply-side incentives.  Instead, it goes to paying unemployment benefits, or whatever they do with taxes in France.

Even in the US, which is typically more comfortable with the operation of the laws of supply and demand than other nations, the government has been loathe to actually allow these laws to operate on oil.  During the 70's, the government maintained price controls that limited demand side incentives to conserve, thus creating gas lines like the ones we are seeing in China today for the same reason.  When these controls were finally removed, a "windfall profits tax" was put in place to make sure that producers would get none of the benefit of the price increases, and therefore would have no financial incentive to seek out new oil supplies or substitutes.  Within a few years of the repeal of these dumb laws, oil prices fell back to historical levels and stayed there for 20 years.

But meddling with prices is not the only way the government screws up the oil market.  I laugh when I see people with a straight face say that we have not opened up any big new fields in this country since Prudhoe Bay.  This is in large part because the three most promising oil field possibilities in this country -- ANWR, California coast, and the Florida coast -- have all been closed to exploration by the government.

In addition, the government has, through a series of energy bills that are each stupider than the last, managed to divert valuable energy investment capital into a range of politically correct black holes.  All we seem to get are unsightly windmills in Palm Springs that always seem to be broken and massive ethanol subsidies that actually increase oil consumption rather than decrease it.  It should come as no surprise that  despite government subsidies for a range of automotive technologies like fuel cells and all-electric cars, the winning technology to date has been hybrids, which weren't on the government subsidy plan at all.

Don't Ignore Substitutes.  All the oil doomsayers tend to define the problem as follows:  Oil production from current fields using current methods and technologies will peak soon.  Well, OK, but that sure defines the problem kind of narrowly.  The last time oil prices were at this level ($65 in 2004 dollars), most of the oil companies and any number of startups were gearing up to start production in a variety of new technologies.  I know that when I was working for Exxon in the early 80's, they had a huge project in the works for recovering oil from oil shales and sands.  Once prices when back in the tank, these projects were mothballed, but there is no reason why they won't get restarted if oil prices stay high.  At $65 a barrel, even nuclear starts looking good again, though we would have to come up with a more sane regulatory environment.  Look for venture capital to steer away from funding the next shoelace.com and start looking for energy investments.

Dueling Catastrophes.  As a final note, its funny seeing the New York Times crying "disaster" over the peak oil scenario.  Those who read this blog know that I am skeptical that the harm from man-made global warming is bad enough to justify large, immediate Kyoto-like reductions in hydrocarbon consumption.  However, the New York Times is on record as a big believer in and cheerleader for immediate cuts in hydrocarbon consumption to head off global warming.  So why is peak oil so bad?  Shouldn't they be celebrating an ongoing drop in oil availability, which would force the world to produce less CO2?  Along the same vain, it is funny seeing a publication that has decried over and over again our dependence on Saudi Arabian and other foreign oil at the same time lamenting the fact that Saudi Arabia is running out.  If that's true, won't Saudi reserve declines solve the whole dependence problem, one way or another?

Postscript:  The other day, I found one of Paul Ehrlich's doomsday books from the 70's in a used book store.  When I have a chance, I am going to post some of its predictions, which were treated with breathless respect by most of the media, including the NY Times.

OOPS

Nicholas Kristof reported in the NY Times (via Reason)that Portland had found the secret to eternal motion, cutting CO2 emisions while paying no price and growing the economy:

Officials in Portland insist that the campaign to cut emissions has entailed no
significant economic price, and on the contrary has brought the city huge
benefits: less tax money spent on energy, more convenient transportation, a
greener city and expertise in energy efficiency that is helping local businesses
win contracts worldwide.... Portland's experience is so crucial. It confirms the
suggestions of some economists that we can take initial steps against global
warming without economic disruptions. Then in a decade or two, we can decide
whether to proceed with other, costlier steps....

Here's his big conclusion:

Perhaps eventually we will face hard trade-offs. But for now Portland shows we
can help our planet without "wrecking" our economy--indeed, at no significant
cost at all.

No one, particularly the science-challenged press who oh-so-wanted this to be true, asked themselves if this made any freaking sense at all.  Apparently, it doesn't:

In response to data requests from the Cascade Policy Institute, a Portland-based
think tank, the [Office of Sustainable Development] admitted that a math error
resulted in a 2004 carbon dioxide calculation that was 74,561 tons too low. The
re-stated total puts Multnomah County above the 1990 levels by more than 68,000
tons.

The implication?

What's more, Cascade's prez, John Charles, argues that, beyond bad math, there
are more basic methodological flaws that lead to an undercounting of
transportation-related emissions. "Portland's claim of painlessly reducing
carbon dioxide has been repeated over and over by journalists, bloggers, and
even some scientists for the past month, without any attempt to verify the
accuracy of the OSD's report," he writes. "In fact, actual carbon emissions have
been well above the level claimed by Portland, and any regulatory program
imposed by the government to lower emissions to pre-1990 levels is going to be
costly to consumers, something elected officials apparently don't understand."

More Free Market Environmentalism

My support for the Nature Conservancy and other land trusts who buy land for preservation rather than just expropriate the current holder through changed use regulations in this post garnered more comments than any of my other recent posts.  Presuming this is an indicator of interest in the topic, I point your attention to this article in the NY Times about environmentalists and grazing in southern Utah.  I no longer have much trust in the NY Times to portray such stories correctly, but from what they write, it looks like another great example of environmental activism using markets and consensual agreements rather than public coercion:

Mr. LeFevre wants the ranchers to win this range war against the lawyers and
politicians trying to restrict grazing on the plateau north of the Grand Canyon.
He fought unsuccessfully to stop the Clinton administration from declaring it
the Grand Staircase-Escalante National Monument because he knew the designation
would mean more regulations, more hikers and fewer cows....

But he is not bitter when he talks about the deal he made with an
environmentalist named Bill Hedden, the executive director of the Grand Canyon
Trust. Mr. Hedden's group doesn't use lobbyists or lawsuits (or guns) to drive
out ranchers. These environmentalists get land the old-fashioned way. They buy
it.

To reclaim the Escalante River canyon, Mr. Hedden bought the permits that
entitle Mr. LeFevre's cows to graze on the federal land near the river. He
figures it was a good deal for the environment because native shrubs and grasses
are reappearing, now that cows aren't eating and trampling the vegetation.

I love to see this.  The alternative Mr. LeFevre faced was steady expropriation of his grazing permits via creeping regulation and legal action:

Mr. LeFevre likes the deal because it enabled him to buy grazing permits for
higher ground that's easier for him and his cows to reach than the canyon. (He
was once almost killed there when his horse fell). He's also relieved to be on
land where hikers aren't pressuring the Bureau of Land Management to restrict
grazing, as they did for the canyon.

"I was afraid the B.L.M. would add so many restrictions that I wouldn't be
able to use the land anyway, and I'd be out the $100,000 I spent for the
permits," he said. "The B.L.M. just shuts you down. Bill said, 'Let's try to
resolve this peacefully and make you whole.' I respect that."

Ironically, this win-win environmentalism is being opposed by the Bush administration. 

The Interior Department has decided that environmentalists can no longer
simply buy grazing permits and retire them. Under its reading of the law - not
wholly shared by predecessors in the Clinton administration - land currently
being used by ranchers has already been determined to be "chiefly valuable for
grazing" and can be opened to herds at any time if the B.L.M.'s "land use
planning process" deems it necessary.

But why should a federal bureaucrat decide what's "chiefly valuable" about a
piece of land? Mr. Hedden and Mr. LeFevre have discovered a "land use planning
process" of their own: see who will pay the most for it. If an environmentalist
offers enough to induce a rancher to sell, that's the best indication the land
is more valuable for hiking than for grazing.

I have no idea why a grazing permit can't be retired - certainly that's legal and proper with emissions permits.  I never, ever thought I would find the NY Times writing something like "why should a federal bureaucrat decide what's "chiefly valuable" about a
piece of land", but I love it. And raspberries to the Bush Administration, who yet again are demonstrating that their lack of dedication to markets and private action.  Its time to admit that the republicans have returned to the bad old days of their 1970's support for big government crony capitalism.

The new policy may make short-term political sense for the Bush
administration by pleasing its Republican allies in Utah and lobbyists for the
ranching industry. But it's not good for individual ranchers, and it ensures
more bitter range wars in the future. If environmentalists can't spend their
money on land, they'll just spend it on lawyers.

Here is Mr. Hedden's site at the Grand Canyon Trust, which unfortunately seems to support lobbying for government coercion at least as much as market-based solutions.

Hat tip to Nature Noted, a great blog on land trusts.

More "Government Coersion = Freedom" Arguments

The other day, I posted on a NY Times editorial that attempted to make the point that a .

This aggressively ridiculous position is none-the-less repeated by statists every day in many contexts.  Today I will focus on a post by David Sirota on the Huffington Blog.  Its premise is that government ownership of commercial assets is more conducive to freedom that private ownership.  I could probably have found a more serious writer to Fisk, but I am bored this afternoon and needed some fun.  Besides, its fun to see someone actively channeling some of the minor characters in Atlas Shrugged.

First, to be fair, I have to start with a strong point of agreement with Mr. Sirota:  Both of us are frustrated with the corporate welfare, subsidies, eminent domain land grabs, new stadiums, and incumbent protection laws handed by all levels of government to various corporations.  Mr. Sirota cites the stadium example in particular, which has always been a pet peeve of mine as well:

Usually, government is in the business of handing over huge amounts of
our taxpayer money to corporations, so that the corporations can just
take all the profits, and charge whatever they want to the customers.
That's been the backbone of the recent spate of high-profile stadium
deals, whereby city and state governments just fork over cash to private pro sports teams,
while getting no share of the massive profits in return, and letting
those teams charge higher and higher ticket prices to the fans whose
tax dollars are supporting them.

I feel fairly well protected on the price angle by the fact that I can just choose to not go to the games, but he is right that the government is handing over stadium money with little to show for it in return.

But this is where he and I diverge.  My answer is to stop crony capitalism, and to stop using government money and regulatory authority to support favored businesses.  Mr. Sirota goes the other direction, which one might call "in for a penny, in for a pound", of having the government continue investing in businesses but to do so on the government's own account.

ordinary Americans are realizing that there's an alternative path,
whereby community ownership of certain economic institutions and
businesses are a pretty good deal. Instead of allowing Corporate
America to reap the windfalls of everything, more and more communities
are trying to get a piece of the action "“ all while making sure the
public is adequately served, and not abused.

The highest profile example of this is in municipal broadband, where city governments are developing taxpayer-owned high speed Internet networks.
Instead of allowing Verizon or other corporations to control Internet
access and rake in all the profits from it, these communities are
making Internet access a public utility and sharing in the profits.
These communities can make some money at it, while doing the public a
service by keeping rates low.

I will accept his chosen example of broadband networks. I will also, for today, give the author a break and not challenge the bizarre notion that replacing a private company like Verizon who has a 5-10% profit margin with an inefficient government bureaucracy can yield substantial cost savings for customers AND fat profits for the municipal government.  In fact, I will leave the obvious efficiency arguments behind entirely and only discuss the morality, the right and wrong involved in his proposition.

Ownership and Capital Investment
Corporations like Verizon are owned by communities of millions of ordinary people through a mechanism we call "stocks".  Even the few large shareholders of Verizon tend to be investment funds, which are really just vehicles for aggregating ownership of many many ordinary people via mutual funds and/or the pension obligations they back.  Owners of Verizon provide capital to the company through their stock investment in an uncoreced transaction and of their own free will.  Their ownership is evidenced by actual paper shares, and is portable, such that they retain ownership anywhere they live, even overseas.  Investors at any time, if they don't like the company's performance or prospects, are able to cash out at the market price, and companies routinely return a portion of their surplus to them in the form of dividends.  Investors elect a board of directors to steward their investment in the company, and can throw these directors out any year with a 51% vote.  The company they have invested in must provide them clear reports quarterly using GAAP accounting rules about how their investment is fairing.

Contrast this to a municipal-owned broadband network.  In some sense, all members of the municipality have an ownership interest in the network, but they receive no documented evidence or guarantee of this ownership.  Local citizens are required by law to contribute capital to the enterprise via their taxes.  Their investment is mandated by the state, is not optional, and non-investment (via non-payment of taxes) is met with a prison sentence.  Once their money is invested, they may not sell their interest or in any way recover their investment.  History has shown that surpluses in municipal owned business seldom exist, but when they do, they are never returned to the citizens, but are spent in other government functions at the whim of the local authorities.  If the citizen moves, he loses any benefit of his investment.  Municipal authorities seldom produce financial statements for these enterprises, and, when they do, they would never pass GAAP muster.  Since the author mentions Enron, I will say that Enron had cleaner financial statements than most government entities.

The author clearly prefers the latter.  Does someone who chooses the latter over the former really care about freedom and individual rights?

Competition and Evolution

A private company, particularly in an industry like broadband with rapid technology change, is constantly subject to getting beaten by a competitor with better technology or a lower cost position.  In the absence of government intervention, the private company has to constantly match competitive technology changes and cost improvements, or die.  Its interesting that the author would choose broadband, because the corpses of literally hundreds of failed broadband companies litter the American landscape.  Broadband has historically been a brutal business, with most companies failing to repay their investment in their infrastructure.  I will confess that many of the major communications players have been slow to move in this area, but in large part it has been government incumbent protection, not market incentives, that have slowed progress.  Wireless broadband providers and equipment producers have to move rapidly -- they have already migrated from proprietary designs to A to B to G and now to N in just five years or so.  A private company without government protection in this environment is faced with two choices:  constantly upgrade, or die.

Now, lets look at municipally-owned broadband company.  Like the private company, it will have to make a large start-up investment to get the infrastructure in place.  Also like the private company, repaying this investment (and thereby avoiding hitting their taxpayers with new charges each month for operations, ala Amtrak) will require putting a lot of volume on the network.  Finally, also like the private company, it will be facing new technologies and new potential competitors almost before the network is complete.  So what does it do?  It could begin to reinvest in the infrastructure, earning the ire of local citizens because it goes back for yet more taxes for the development.  It could cut prices and drive for market share, lengthening the time before it breaks even and eliminates the tax subsidy it will require. 

Or, it has a third option that the private company does not have:  It can use its government authority to block new entrants.  I will tell you right now - the government will use this third option every single time.  Take another large government network business: The Post Office.  The USPS tried like hell to get the government to block Fedex, and almost succeeded.  The government continues to block competition to the USPS for first class local mail.  Heck, the USPS has tried at various times to argue that it should have authority over email and the Internet.  The government blocks new cigarette manufacturers to protect the settlement money it gets from the old-line tobacco companies and it blocks usage of Love Field in Dallas to protect D/FW airport.  Bureaucracies never, ever let themeselves die, and there is no way a municipal broadband business will ever let itself be killed by a competitor - that competitor will be blocked, even if that likely means that local broadband consumers have to stick with higher costs and outdated technologies.

Gee, that sounds great, huh?

Pricing
My sense is that this is what gets the socialists and community ownership guys excited.  You can see from the quotes above, the author sees the world of private enterprise as this enormous price gouging domain, with no accountability on prices.  Though he does not say it explicitly, I am sure if asked he would say that private corporations have no accountability to the public (ie consumers)on pricing, whereas the local municipal government would.  This pricing issue is I think at the heart of his support for public over private ownership:

People know corporations right now have far too much power
and far too much leeway to rip off ordinary citizens - but there is a
feeling that that's "just a fact of life." The Community Ownership
movement shows it doesn't have to be a fact of life, and that there is
an alternative

The obvious response is that private companies have a tremendous accountability on price, from two directions.  First, consumers, if prices are too high, can choose not to buy.  Second, if prices remain "too high" for long, then competitors emerge to undercut them.  Like most socialists or "progressives", the author doesn't understand or trust these mechanisms - he prefers top down rather than bottom-up accountability.

In this sense, he prefers the comfort of the municipal business where elected officials that the consumer votes for set prices, and trusts these elections to provide more accountability than the market  (how ). Even forgetting that government inefficiency will make price savings impossible in such a thin margin business, how can anyone look at Congress or this administration and believe that electoral accountability is stronger than the market.  Do you really feel that you can do more about to affect government set rates like local sales tax rates than you can in response to say rising cell phone rates?  If I don't like my cell phone rate, I can switch plans, switch companies, or switch to other technologies (land lines, VOIP, etc).  If I don't like the sales tax rate, the best I can do is move to New Hampshire.

Conclusion

Wow, this piece really went on for a long time, and certainly far longer than Mr. Sirota's article deserved.  As a final comment on the author's grasp of reality, note this quote, where he refers to:

the out-of-touch confines of the Beltway where free market extremism reigns supreme

LOL.  I would love to find even a little bit of free market extremism inside the Beltway.  And if by free-market extremism he means crony capitalism of the sort I described at the top of the post, well, he should be more careful with his word choice. 

For too long, our side has rolled over and died when it comes to
questions about how to manage the free market so that it works for
ordinary people.

Here is a hint - if you want to participate in the profits of the free market just like the fat cats, try this.

NY Times: Democracy Should Be Painful

A recent editorial in the NY Times by Stanford professor David Kennedy really has me flabbergasted. So much so that I have rewritten this post three times and still not been able to adequately communicate my horror of this editorial.   Mr. Kennedy argues that the all volunteer, non-drafted, non-coerced-service army is a huge threat to America.

But the modern military's disjunction from American society is even more
disturbing. Since the time of the ancient Greeks through the American
Revolutionary War and well into the 20th century, the obligation to bear arms
and the privileges of citizenship have been intimately linked. It was for the
sake of that link between service and a full place in society that the founders
were so invested in militias and so worried about standing armies, which Samuel
Adams warned were "always dangerous to the liberties of the people."

By the way, his words "disjunction from American society" are his coy way of saying a volunteer army is not somehow as representative of America as a draft army.  This
article, as far as I can tell, is totally and completely about the
benefits of
draft (without ever actually using the word).  He is arguing that
forced compulsory military service is somehow more democratic and more appropriate for a free society than voluntary
service.  Forgetting how stupid this is for a minute, why is the volunteer army so "disturbing" to him?   It is really hard to figure out.  He keeps saying things like "the danger is obvious" but I guess I am just stupid - I can't find a clear statement of the danger in his editorial.  The closest I get is this:

But thanks to something that policymakers and academic experts grandly call
the "revolution in military affairs," which has wedded the newest electronic and
information technologies to the destructive purposes of the second-oldest
profession, we now have an active-duty military establishment that is,
proportionate to population, about 4 percent of the size of the force that won
World War II. And today's military budget is about 4 percent of gross domestic
product, as opposed to nearly 40 percent during World War II.

The implications are deeply unsettling: history's most potent military force
can now be put into the field by a society that scarcely breaks a sweat when it
does so. We can now wage war while putting at risk very few of our sons and
daughters, none of whom is obliged to serve. Modern warfare lays no significant
burdens on the larger body of citizens in whose name war is being waged.

This is not a healthy situation. It is, among other things, a standing
invitation to the kind of military adventurism that the founders correctly
feared was the greatest danger of standing armies - a danger made manifest in
their day by the career of Napoleon Bonaparte, whom Jefferson described as
having "transferred the destinies of the republic from the civil to the military
arm."

So in other words, its bad that wars are much less costly in lives and property.  If wars are less costly, and the combatants volunteers rather than conscripts, then we as a nation are more susceptible to military adventurism.  His bio says he is a historian, but what possible historical evidence does he bring forward for this?  None.   

In fact, there is no evidence that the government is any less likely to send a non-volunteer army (e.g. Korea, Vietnam) into harms way than a volunteer army (e.g. Afghanistan, Iraq).  In fact, we may actually be starting to see, via reenlistment rates, that the volunteer army provides a useful check against unpopular wars.  The author wants to imply that we would fight fewer bad wars with a draft, non-volunteer army.  But does anyone think we could have fought the increasingly unpopular Vietnam War with a volunteer army?  Only the draft made continuation of that war possible.  So where is his argument now?

Beyond the fact that his logic does not hold together, how morally bankrupt is it to long for the day when wars were much more costly in terms of lives and property?  Oh for the good old days of the 1960's when we could watch those much higher draft army body counts on the nightly news.  My guess is that he is not actually arguing that we should go back to higher body counts, but that the bodies we do have should represent a broader cross section of America.  In other words, he wants more elite rich white bodies (but not elite rich white Stanford bodies, since he and the Stanford faculty actively oppose all sorts of military recruiting and ROTC programs on campus). 

I have zero tolerance for this kind of forced-to-be-free fascism.  I have no idea what the author's politics are, but his argument reeks of collectivism and totalitarianism.  Think I am exaggerating?  Here is how he concludes:

The life of a robust democratic society should be strenuous; it should make
demands on its citizens when they are asked to engage with issues of life and
death. The "revolution in military affairs" has made obsolete the kind of huge
army that fought World War II, but a universal duty to service - perhaps in the
form of a lottery, or of compulsory national service with military duty as one
option among several

Sorry, but in a free society, there is not universal duty to service.   There is not "link between service and a full place in society."  When someone starts arguing that you have a "duty to service" and that government should "make demands on its citizens" rather than the other way around, run the other way because they are selling totalitarianism.

Update:  This is a pretty compelling article about a volunteer army at work.  Would they really be better off with a draft?

The south gate of Muthanna army barracks in Baghdad is one of the most
frequently bombed sites in Iraq.

Suicide bombers have killed 198 people here since last year.
Almost all were potential recruits to the country's fledgling armed forces.
Another 465 have been wounded.

Body parts that had been hurled by an explosion over the 30ft
high concrete wall a week earlier were still being picked up when the second
suicide bomber struck last week.

But, in an extraordinary display of optimism, the youngsters
hopeful of being recruited into the forces still come to queue....

The young men and handful of women in the queues say they are as
keen for the private's salary of $400 a month as they are to serve their country
to rid it off insurgents.

There are others who have had friends and relatives among the
estimated 25,000 civilians killed over the past two years. Some also believe
that the only way to get an American withdrawal from Iraq is to build a secure
and substantial security force.

But all have an air of defiance, and in some of the fresh
recruits there is a hint of gratitude for just making it through the queue at
the murderous south gate, on Zawraa Road.

Postscript:  I'm not really into the patriotism finger-pointing exercises so many people are into nowadays, but if you want some of that, try conservative blogger Captains Quarters writing on this same editorial.

I'm Confused About this Interstate Commerce Thing

In Raich, the Supreme Court determined that marijuana grown, harvested, and consumed at the same house in California constituted interstate commerce and therefore was subject to federal rather than state regulation (via the Consitution's commerce clause).

However, apparently cigarettes purchased over the Internet from an Indian Nation within the boundaries of NY state and consumed in Washington state are not interstate commerce and are therefore subject to Washington State sales tax:

On Thursday, a federal judge ordered tribal Internet
cigarette vendor Scott Maybee to turn over his list of Washington
customers who purchased cigarettes through his Web site,
SmartSmoker.com between November 7, 2004 and April 1, 2005, writes the Buffalo News.
The Washington Department of Revenue is sending letters to those
appearing on Maybee's list asking for full payment of uncollected taxes
from their purchases.

Actually, it is probably not sales tax involved but "use tax", the cutesy way most states get around limitations on taxing interstate commerce.  Basically, they invented a thing called use tax that applies only on goods that you use in state and on which no sale tax was paid to any state.  While the use tax legal evasion is common to most states,  I have written before about other such cute evasions Washington State uses to collect taxes where they are not supposed to.

Some Final Observations from Paris (with Pictures!)

Its good to be back in the USA, though my wife and I had a great time in Paris.  In the extended post, I have some pictures from our trip.  However, don't expect any tourist sites.  My business-related travelogue includes pictures of a gas station, a few cool new cars, my restaurant bill from hell, and other stuff...

Continue reading ‘Some Final Observations from Paris (with Pictures!)’ »

More Evidence We Are Lacking A Strong Opposition Party

This is another in a series of my lamentations on this country not having a strong and credible opposition party.  Previously, I have derided the Democrats for not coming up with a viable foreign policy alternative, but they appear just as week on domestic policy issues.

I have made my disdain for Kelo fairly clear.  It has taken a while, but someone other than a major beneficiary of eminent domain (e.g. the NY Times, which got their new HQ building courtesy of an eminent domain condemnation) has tried to defend it.  The defender is Nancy Pelosi, and boy has it become clear why we don't have a stronger opposition party in this country.  The Democrats have chosen this mental midget as their Congressional leader?  Check out this interview, via NRO:

 

"Q: Later this
morning, many Members of the House Republican leadership, along with
John Cornyn from the Senate, are holding a news conference on eminent
domain, the decision of the Supreme Court the other day, and they are
going to offer legislation that would restrict it, prohibiting federal
funds from being used in such a manner.

Two questions: What was your reaction to the Supreme Court decision
on this topic, and what do you think about legislation to, in the minds
of opponents at least, remedy or changing it?

Ms. Pelosi: As a Member of Congress, and actually all of us and
anyone who holds a public office in our country, we take an oath of
office to uphold the Constitution of the United States. Very central to
that in that Constitution is the separation of powers. I believe that
whatever you think about a particular decision of the Supreme Court,
and I certainly have been in disagreement with them on many occasions,
it is not appropriate for the Congress to say we're going to withhold
funds for the Court because we don't like a decision.

Q: Not on the Court, withhold funds from the eminent domain purchases
that wouldn't involve public use. I apologize if I framed the question
poorly. It wouldn't be withholding federal funds from the Court, but
withhold Federal funds from eminent domain type purchases that are not
just involved in public good.

Ms. Pelosi: Again, without focusing on the actual decision, just to
say that when you withhold funds from enforcing a decision of the
Supreme Court you are, in fact, nullifying a decision of the Supreme
Court. This is in violation of the respect for separation of church --
powers in our Constitution, church and state as well. Sometimes the
Republicans have a problem with that as well. But forgive my
digression.

So the answer to your question is, I would oppose any legislation
that says we would withhold funds for the enforcement of any decision
of the Supreme Court no matter how opposed I am to that decision. And
I'm not saying that I'm opposed to this decision, I'm just saying in
general.

Q: Could you talk about this decision? What you think of it?

Ms. Pelosi: It is a decision of the Supreme Court. If Congress wants
to change it, it will require legislation of a level of a
constitutional amendment. So this is almost as if God has spoken. It's an elementary discussion now. They have made the decision.

Q: Do you think it is appropriate for municipalities to be able to use eminent domain to take land for economic development?

Ms. Pelosi: The Supreme Court has decided, knowing the particulars
of this case, that that was appropriate, and so I would support that.

(emphasis added)

This is just crazy.  I guess as a Kelo-hater, I should be happy in this case that the opposition is so weak, but my god it is a depressing revelation for the future on other issues.

Parochialism from the NY Times

I was reading the NY Times' International Herald Tribune today here in Paris, and saw something funny at the end of an article about the crazy process underway to select the 2012 Olympic venue.  By the way, this is the big issue in Paris right now - you can't walk anywhere without finding yourself in the middle of some sort of Paris promotional event, presumably being simulcast back to the selection committee in Singapore.

Anyway, the IHT had this funny line:

The last days of the race drew the president of France, the prime minister of Russia and the queen of Spain here.  New York City pulled Senator Hillary Rodham Clinton away from a busy schedule to lend her star power.

Uhh, you mean the president of France and the prime minister of Russia don't have busy schedules?  And wouldn't a more correct formulation be "while other cities were represented by their head of state, NY City could only muster a junior member of Congress"?  I hope any city but New York wins, because, given past history, NYC will likely get themselves into some financial hole hosting the Olympics that the rest of the country will have to bail them out of.

By the way, apparently in a bid to head off past corruption, the International Olympic Committee has banned its members from actually visiting host cities and their facilities ahead of the selection.  This seems kind of extreme - you have to pick between cities but you can't learn anything useful about them.  Its depressing that the members of the Olympic committee are so untrustworthy that the only way to prevent them from collecting bribes from potential host countries is to not allow them anywhere near the country.

Random Impressions of Paris

After a couple of days here, some impressions:

  • The airline flights that dump you off in Europe at 7am which seemed so convivial when I was consulting are less so when I am a tourist.  We had the experience of arriving at our hotel about 8am, which of course did not yet have a room anywhere near ready.  We had a nice day walking around, but we sure were exhausted by the time we got to our room and had a nap.  Note:  American Airlines 767's have very very uncomfortable business class seats - really a disgrace nowadays.
  • The Louvre is magnificent, but is ridiculously big.  It is impossible to digest.  You really have to find a branch of art, like the Flemish painters, and stay in that area.  The Musee d'Orsay, which focuses on 19th century French art, is much more digestible.  Also, it has a cool location in a train station, which was a very important part of 19th century life.
  • The French smoking thing has been joked about so much it is almost a caricature, but it is still a shock the first time in a restaurant.  We observed many American smokers reveling in their smoking freedom.  I wonder if there is a business opportunity to sponsor smoking trips to Paris, much like those Asia sex trips to Thailand.
  • Wow, the food is expensive!  $50-80 entrees in some places, and for that you can get two slices of tenderloin.  It was good though, and we have yet to have a bad, or even so-so, meal.
  • I would feel safer in a golf cart than some of the cars here.  You can really see the trade-offs with fuel economy we make in the US by having crash test standards.  Over here with no crash tests and $6.00 gas, you get lots of tiny cars.  Mini-coopers look average to large-sized here.
  • The Champs d'elysees was amazing on Sunday afternoon - a sea of people going up the hill.  It looked like those pictures of the start of the NY marathon, but it went as far as the eye can see.  Amazingly, with all this foot traffic past the door, half the businesses were closed that day (welcome to Europe, I guess)
  • There are more shoe stores here than fast food restaurants in Phoenix.  And my wife has stopped in every one of them

More on School Choice

A while back, I made a plea to the left to "come to the dark side" and consider school choice.  In this post, I didn't argue about quality or efficiency improvements, but about diversity:

At the end of the day, one-size-fits-all public schools are never
going to be able to satisfy everyone on this type thing, as it is
impossible to educate kids in a values-neutral way.  Statist parents
object to too much positive material on the founding fathers and the
Constitution.  Secular parents object to mentions of God and
overly-positive descriptions of religion in history.  Religious parents
object to secularized science and sex education.  Free market parents
object to enforced environmental activism and statist economics.   Some
parents want no grades and an emphasis on feeling good and self-esteem,
while others want tough grading and tough feedback when kids aren't
learning what they are supposed to.

I have always thought that these "softer" issues, rather than just
test scores and class sizes, were the real "killer-app" that might one
day drive acceptance of school choice in this country.  Certainly
increases in home-schooling rates have been driven as much by these
softer values-related issues (mainly to date from the Right) than by
just the three R's.

So here is my invitation to the Left: come over to the dark side.
Reconsider your historic opposition to school choice.  I'm not talking
about rolling back government spending or government commitment to
funding education for all.  I am talking about allowing parents to use
that money that government spends on their behalf at the school of
their choice.  Parents want their kids to learn creationism - fine,
they can find a school for that.  Parents want a strict, secular focus
on basic skills - fine, another school for that.  Parents want their
kids to spend time learning the three R's while also learning to love
nature and protect the environment - fine, do it...

Today, Jeff Jacoby, via Cafe Hayek, is making much the same argument:

From issues of sexuality and religion to the broad themes of US history and
politics, public opinion is fractured. Secular parents square off against
believers, supporters of homosexual marriage against traditionalists, those
stressing ''safe sex" against those who emphasize abstinence. Each wants its
views reflected in the classroom. No longer is there a common understanding of
the mission of public education. To the extent that one camp's vision prevails,
parents in the opposing camp are embittered. And there is no prospect that this
will change -- not as long as the government remains in charge of educating
American children....

Imagine how diverse and lively American education would be if it were
liberated from government control. There would be schools of every description
-- just as there are restaurants, websites, and clothing styles of every
description. Parents who wanted their children to be taught Darwinian evolution
unsullied by leaps of faith about an Intelligent Designer would be able to
choose schools in which religious notions would play no role. Those who wanted
their children to see God's hand in the miraculous tapestry of life all around
them would send them to schools in which faith played a prominent role.

Sounds good?  Well, unfortunately, as Cafe Hayek points out, Stacy Schiff in the NY Times recently went off on an anti-choice screed.  Not just anti-school-choice, but anti-all-choice, and readers were writing in in droves to agree!  Jeez, do people really want less choice? And just because you are too lazy to handle responsible decision-making, do you really want to limit my choice as well?  And by the way, who is going to be the official cull-er of choice, and what guarantees do you have that those officials will make the same decisions as you in culling choice?  Virginia Postrel has more thoughts on choice.

The bottom line of choice is that many of those in power do not trust you to make your own choices.  I wrote on distrust of individual decision-making here.  In my article on school choice, I ended with this caution:

Of course, there is one caveat that trips up both the Left and the
Right:  To accept school choice, you have to be willing to accept that
some parents will choose to educate their kids in a way you do not
agree with, with science you do not necessarily accept, and with values
that you do not hold.  If your response is, fine, as long as my kids
can get the kind of education I want them to, then consider school
choice.  However, if your response is that this is not just about your
kids, this is about other people choosing to teach their
kids in ways you don't agree with, then you are in truth seeking a
collectivist (or fascist I guess, depending on your side of the aisle)
indoctrination system.  Often I find that phrases like "shared public
school experience" in the choice debate really are code words for
retaining such indoctrination.

Update: I feel compelled to include this quote from Radley Balko:

Critics of capitalism once predicted that free markets would wreak mass
starvation, depletion of resources, pollution, and death.

They're now reduced to bitching about too many flavors of mustard.

We've won the debate.

The Public Be Damned

You still hear William Henry Vanderbilt's quote all the time today.  Generally, it is used to comment on situations where public companies dishonor themselves by fraudulently providing poor products and services.  Interestingly, doing a Google search on the term, I also see a lot of usage for it as applied to government as opposed to industry.

Anyway, it is ironic that the origins of the quote are very different than the current usage.  Vanderbilt's New York Central had just canceled an experimental high-speed high-service train from New York to Chicago.  A reporter asked him "Don't you run it (the train) for the public benefit?" and Vanderbilt very reasonably replied:

The public be damned.  I am working for my stockholders. If the public want the
train, why don't they pay for it?

In reality, Mr. Vanderbilt was eliminating a product that had proven unpopular in the marketplace.  His notion of fiduciary responsibility is not only appropriate, but in certain contexts can be argued to be legally required, at least today.  If some reporter today was stupid enough to ask the CEO of a failed dot-com this question (ie, why are you going out of business, why don't you just keep losing money for the public good) would we really criticize the CEO for giving the moron a smartass answer?  Accepting that Mr. Vanderbilt's answer was wrong is to accept that Mr. Vanderbilt should be a slave to public opinion, not as expressed by individuals in their purchasing decisions, but as expressed by an ill-defined elite who seemed to support the service for its aesthetic value.  And by the way, how had a service that didn't even exist a decade earlier, and only existed through the creativity of the NY Central, suddenly become an essential public service and expectation?

By the 20th Century, the high speed Chicago to New York express train  was bread and butter to the NY Central and its arch-rival the Pennsylvania.  In the end, cutting this service turned out to be just a temporary suspension of a product ahead of its time.

Why Income Distribution Doesn't Matter in This Country

The NY Times has somehow decided that one of America's real problems is widening income distribution, or more specifically, the exponentially increasing wealth of the top tenth of one percent of US earners.  The series seems to be running to about 47 episodes (actually 10), but a key article is here, entitled "Richest Are Leaving Even the Rich Far Behind,"  There are a number of ways to attack this article.  One is to fisk their really abused and misused numbers, which George Reisman does here on the Mises Economics Blog

Lets accept that the very very rich are getting richer.  So lets move from there to the question of...

"so what?"

The Times is a little weak on the "so what".  I presume that in their intellectual-statist readership,  it is an axiom that rich people suck and rich people getting richer sucks more.  However, it is possible to pull out four things the Times extended editorial-masquerading-as-a-news-story finds bad about increasing income inequality:

  • As the rich get richer, there is less money left for the rest of us
  • The process of the rich getting richer reduces opportunities for the rest of us
  • Having very rich people around make the rest of us feel bad
  • The rich are only getting richer because the rest of us are subsidizing them through tax policy

It has been a while since I have really gotten carried away writing about a topic (at least three or four days) so I will now proceed to address each of these in turn and in some detail.

As the rich get richer, there is less money left for the rest of us.  At the end of the day - this is what is in most people's minds when they decry aggregations of wealth.  There are many, many people in the world, even in this country, who think of wealth as a fixed pie, as a zero sum game where one person's victory requires another persons loss.

If we were living in 17th century France, where the rich nobility got that way by taxing the crap out of the working peasantry, this would probably be an adequate view of reality.  Wealth came from the land and its products, whose supply, given no technology improvements for decades, were both relatively fixed.  This zero sum view of commerce led to a mercantilist view of the world economy, where it was thought that wealth was fixed, and that the only thing that could be done to it was to move it around, or tax it, or steal it, or loot it.

But we don't live in 17th century France.  We live in a modern, dynamic capitalist society where wealth is created.  One proof of this is so obvious that it amazes me anyone clings to the implicit zero sum economy assumption:  Compare the US in 2000 to the US in 1900.  We are so much wealthier top to bottom in our society than in 1900 its not even worth spending much time on the proof.  This is not just in real dollar terms, but in things that affect ones life, from average life span to leisure time to entertainment to technology.  People who live in the poorest 20 percentile today have things -- such as a lifespan over 70, access to cancer cures, cars, computers, VCRs -- that not even the richest one half of one percent had in 1900.  The poorest 20 percentile in this country would be the upper middle class or even the rich in many countries of the world today.

Michael Dell and Bill Gates are both in that evil 1/10 of 1% of richest people.  But how did they get that way?  They made their fortunes by providing me with this incredible tool on my desk that was unimaginable when I was born 40+ years ago, but now is pedestrian.  Right now I am typing on a Dell computer using Microsoft Windows, which I bought from the suppliers for a mutually agreeable price in a totally uncoerced manner.  My computer provides me with thousands of dollars of value - in productivity, in entertainment, in the ability to do new things that could never be done before (e.g. blog).  Most of this value I keep for myself; some, about $1200 in this case, went to the suppliers of labor and materials to build and program this thing.  And a small portion, less than $100, went towards the fortunes of Mr. Dell and Mr. Gates who had the vision to build the businesses they did.  The PC I have creates new value all around:  Thousands of dollars of new value for me the user and  hundreds of dollars in the form of jobs and new markets for suppliers.  Mr. Dell and Mr. Gates keep just a small portion of all that value created.  At some level, they are working cheap. And any one of us, had we had the vision, could have piggy-backed on Mr Gate's or Mr. Dell's wealth creation by buying stock in their firms.

The process of the rich getting richer reduces opportunities for the rest of us.  Since the "zero sum" argument is so easy to disprove, proponents of rich=bad have morphed their argument to this one.  This accusation comes up several times in the NY Times series, but is hard to refute mainly because the authors never explain the mechanism that they think is at work here or show any shred of proof.  The articles cite folks such as Warren Buffett, George Soros, and Ted Turner.  But how has their fortune-making reduced my personal opportunities one iota? 

Do I have less opportunity because Warren Buffet has made good investing decisions?  Heck, one can argue that any American has always had the opportunity to gain wealth in direct proportion to Buffet at any time, merely by buying Berkshire Hathaway stock.

How about Ted Turner.  Do I have less opportunities to improve myself because Ted Turner got rich creating CNN?  I guess I could facetiosly argue that by his creating CNN, others can no longer create a 24-hour cable news service because he has locked up the market, but Fox has disproved even this narrow argument.

What about George Soros?  I guess you could argue that from time to time my Sony Walkman was a buck or two more or less expensive because of some currency game he was playing in the markets, but I don't see how my opportunity has been reduced.  A better argument is that Soros's being wealthy might really threaten my opportunity if only because he funds so many statist-socialist causes with his billions.

In fact, this is one of those black-is-white arguments.  The reality is exactly the opposite.  When most rich people get rich (with the exception maybe of Peter Angelos and other tort lawyers) they do so by creating new value and thereby opportunity.  While all these folks may be really wealthy, in reality the wealth they have amassed is but a small percentage of the wealth and value that they created.  Where did the rest go?  To all of us, of course, in the form of jobs, and tools, and longer lifespans, and better entertainment.

Having very rich people around make the rest of us feel bad.  OK, this sounds like a problem for group therapy, but you see it in print all the time.  The disparity of incomes is "troubling" and could lead to "resentment".  If one were living in Venezuela or Nigeria or some country where, like 17th century France, wealth came from looting rather than the free exchange of goods, then I would agree that the income disparity would be troubling.  Shoot, if people were much wealthier than I because they were using the legal system to loot the rest of us, I would be pissed off (ironically, this is the case with the billionaire tort lawyers, but this is the last group that the Times will ever challenge). 

However, in this country, where most of the very rich got that way through hard work and better ideas, the result of free and uncoerced commerce, why be resentful?  Sure, I would love to have a G-V aircraft and hot Swedish wife [ed note:  oops, my wife might read this] like Tiger Woods, but lacking these, I have zero desire to deny them to Tiger.  I don't even begrudge super-tramp Paris Hilton her millions (but she did inspire me to change my will so my kids don't inherit from me until they are well past their majority).  Heck, I have spent whole vacations touring the discarded toys of the super-rich (e.g. mansions in Newport, RI).  What fun would there be without a moving target to aspire to?

So why do the Times and some many intellectualls legitimize this envy?  This type of envy has driven anti-semitism and in fact all sorts of racism through the ages.

The rich are only getting richer because the rest of us are subsidizing them through tax policy.  Around my house, I joke that everything, at least in my family's opinion, turns out to be my fault.  The equivilent at the NY Times is that everything is Bush's fault, and in particular, the fault of Bush's tax cuts.  The Mises article cited above does a pretty good job of fisking the argument that the tax system post-cuts favors the rich.  I took on took this notion here and here.  The Times "analysis" makes two major mistakes:

  • Social Security Tax hide and seek:  The NY Times article shows the very wealthy paying lower marginal rates than lower level earners.  As I pointed out here, this is entirely because they are including social security taxes in their analysis and that the taxes are capped at $90,000.  If you look at only income taxes, then marginal rates do not drop at higher incomes.

The left's argument here is highly contradictory.  When wanting to make the "rich are not paying enough" argument, they include Social Security taxes, knowing that since those taxes are regressive, they make it look like the rich are somehow getting off easy.  However, when discussing Social Security, the don't want to think of them as taxes - because they want Social Security to be insurance with premiums rather than a transfer program with taxes

  • Bracket Creep: The TImes points out that the income tax rate for the super rich is no higher than the rate for the merely rich or even $100,000 earners.  The implication is that the super rich are somehow getting a better deal.  But in fact, the problem is that the definition of rich, vis a vis taxes, has been lowered through the years.  The whole history of the income tax is to sell a tax as applying only to the very very rich, and then broadening the applicability over time.  The federal income tax followed this path, as has the AMT.  More recently, the top rate on California income taxes is seeing the same creep.  The statist trick is to apply a rate to the super rich, then creep it down so eventually it applies to everyone.  Then, they cry that - hey, the super rich aren't paying more than the middle class, so they institute a new higher super rich rate.  Rinse and repeat.

Conclusion.  I will leave you with the lyrics from Rush's The Trees:

There is unrest in the forest
There is trouble with the trees
For the maples want more sunlight
And the oaks ignore their pleas

The trouble with the maples
(and they're quite convinced they're right)
They say the oaks are just too lofty
And they grab up all the light
But the oaks can't help their feelings
If they like the way they're made
And they wonder why the maples
Can't be happy in their shade?

There is trouble in the forest
And the creatures all have fled
As the maples scream `oppression!`
And the oaks, just shake their heads

So the maples formed a union
And demanded equal rights
'the oaks are just too greedy
We will make them give us light'
Now there's no more oak oppression
For they passed a noble law
And the trees are all kept equal
By hatchet,
Axe,
And saw ...

Update:  Several people said I missed the point about mobility, rather than just the rich getting richer.  I respond to this here.

Creating Two Classes of Citizens

Over the past couple of days, the comment period and the resulting debate about FEC rule-making for blogs and campaign finance reform really has me simmering.  As a review, McCain-Feingold for the second* time in modern US history created a dual class of citizenship when it comes to First Amendment speech rights:  The "media" (however defined) was given full speech rights without limitations during an election, while all other citizens had their first amendment rights limited. 

These past few weeks, we have been debating whether this media exemption from speech restrictions should be extended to bloggers.  At first, I was in favorThen I was torn.  Now, I am pissed.  The more I think of it, it is insane that we are creating a 2-tiered system of first amendment rights at all, and I really don't care any more who is in which tier.  Given the wording of the Constitution, how do I decide who gets speech and who doesn't - it sounds like everyone is supposed to:

Congress shall make no law respecting an establishment of religion, or
prohibiting the free exercise thereof; or abridging the freedom of
speech, or of the press; or the right of the people peaceably to
assemble, and to petition the government for a redress of grievances.

I have come to the conclusion that arguing over who gets the media exemption is like arguing about whether a Native American in 1960's Alabama should use the white or the colored-only bathroom:  It is an obscene discussion and is missing the whole point, that the facilities shouldn't be segregated in the first place.

I have read my handy pocket Constitution (courtesy of the Cato Institute) through a number of times, and I have yet to find any mention of special constitutional privileges or rights for employees of major media firms.  Unfortunately, we seem to act like its in there somewhere, as I wrote here as well, though in a different context.

*  Footnote:  This is not the first time we have created two classes of citizen when it comes to speech.  Over the last 30-40 years, we have differentiated "political" speech from "commercial" speech.  Until McCain-Feingold, political speech was pretty zealously protected by the courts, while we have gotten to the point that the government can pass nearly any law it wants restricting commercial speech.  Here is a simplistic example.  Unless I am over some spending limit, I can buy an ad in the NY Times and print in 70 point type "Bush Sucks" and no court would bat an eye.  If I am a pissed off Ford customer, I can print an ad in the Times saying "Ford Sucks" and probably be fine as well.  However, if I am a Honda dealer, and place an ad in the NY Times saying "Ford Sucks", I will likely get fined and slapped with an injunction.

When the Constitution says that "Congress shall make no law ... abridging the freedom of speech" it sure seems like there aren't any qualifying words like "political" or "commercial"

Revisiting Nuclear Power

The NY Times has an article on a growing but still small minority of environmentalists who are ready to revisit nuclear power:

Several of the nation's most prominent environmentalists have gone
public with the message that nuclear power, long taboo among
environmental advocates, should be reconsidered as a remedy for global
warming.         

Their numbers are still small, but they
represent growing cracks in what had been a virtually solid wall of
opposition to nuclear power among most mainstream environmental groups.
In the past few months, articles in publications like Technology
Review, published by the Massachusetts Institute of Technology, and
Wired magazine have openly espoused nuclear power, angering other
environmental advocates...

In his article, Mr. Brand argued, "Everything must be done to increase
energy efficiency and decarbonize energy production." He ran down a
list of alternative technologies, like solar and wind energy, that emit
no heat-trapping gases. "But add them all up," he wrote, "and it's just
a fraction of enough." His conclusion: "The only technology ready to
fill the gap and stop the carbon-dioxide loading is nuclear power."

While I am more of a warming-skeptic than most (see here, among others), I made this same plea for reconsidering nuclear power a while back.  However, a different regulatory approach (not laxer, just different) will be required:

If aircraft construction was regulated like nuclear power plants,
there would be no aviation industry.  In the aircraft industry,
aircraft makers go through an extensive approval and testing process to
get a basic design (e.g. the 737-300) approved by the government as
safe.  Then, as long as they keep producing to this design, they can
keep making copies with minimal additional design scrutiny.  Instead,
the manufacturing process is carefully checked to make sure that it is
reliably producing aircraft to the design already deemed safe.  If
aircraft makers want to make a change to the aircraft, that change must
be approved with a fairly in-depth process.

Beyond the reduction in design cost for the 2nd airplane of a series
(and 3rd, etc.), this approach also yields strong regulatory benefits.
For example, if the
in a particular aircraft, then the government can issue a bulletin to
require a new approved design be retrofitted in all other aircraft of
this series.  This happens all the time in commercial aviation.

One can see how this might make nuclear power plant construction
viable again.  Urging major construction companies to come up with a
design that could be reused would greatly reduce the cost of design and
construction of plants.  There might still be several designs, since
competing companies would likely have  their own designs, but this same is true in aerospace with Boeing, Airbus and smaller jet manufacturers Embraer and Bombardier.

We Won't Respect You in the Morning

Again, small government libertarians like myself, who held their nose and voted Republican in the last election, have been used.  From the NY Post today:

THE Republican promise of smaller,
less-intrusive government is getting harder and harder to believe.
Especially when a more plausible plot line is unfolding every day: that
the GOP has put aside the ideals of Reagan and Goldwater in order to
pursue a political strategy based on big spending.

For the latest, check out a report just released by the
libertarian Cato Institute that tells a striking story about just how
out-of-control spending has gotten under President Bush.

Cato finds that:

* Bush has presided over the largest increase in federal spending since Lyndon Johnson.

* Even excluding defense and homeland security spending, Bush is the biggest-spending president in 30 years.

* The federal budget grew from 18.5 percent of the Gross
Domestic Product on President Bill Clinton's last day in office to 20.3
percent at the end of Bush's first term.

Add to that Bush's massive Medicare prescription-drug
benefit, expected to cost $720 billion-plus over the next 10 years.
(The money for that new entitlement, the first created by a president
in a generation, will start flowing this year.)

It is not in the least bit comforting to have my suspicions confirmed by Cato, whose whole report is here.  Bring back divided government!  I will take Reagan-Democrat Congress or Clinton-Republican Congress over this any day.

 

My Proposal on Filibuster Rules

I am about at the end of my rope on listening to the current filibuster debate, all the more so because whatever side some Senator is on today, you can bet a pile of money that they were on exactly the opposite side 10 years ago, when the majority-minority positions of the two major parties was reversed.  Senators from both sides can argue all day that their current stand is "on principle", but this is crap.  If all these people's stands were "on principle", then about 100 Senators have completely changed their principles in the last 10 years. 

Before I take my shot at truly coming up with a solution "on principle", here is but one example of this switch of sides.  I will use the NY Times as an example, mainly because they are so much fun to criticize.  Thanks to Powerline for pointers to some of these editorials.

In their editorial titled "Senate on the Brink", dated March 6, 2005 the Times stated:

To block the nominees, the Democrats' weapon of choice has been the
filibuster, a time-honored Senate procedure that prevents a bare
majority of senators from running roughshod.

and further:

Now [the White House] threatens to do grave harm to the Senate. If Republicans fulfill
their threat to overturn the historic role of the filibuster in order
to ram the Bush administration's nominees through, they will be
inviting all-out warfare and perhaps an effective shutdown of Congress.

Wow! Its sure good that we have this filibuster thingie to protect our way of life.  And its great to have champions like the NY Times who are stalwart defenders of this procedure. 

Except when they are not.  Back when the majorities were reversed almost exactly a decade ago, on January 1, 1995 the NY times editorialized:

The U.S. Senate likes to call itself the world's greatest deliberative body. The
greatest obstructive body is more like it. In the last season of Congress, the
Republican minority invoked an endless string of filibusters to frustrate the
will of the majority. This relentless abuse of a time-honored Senate tradition
so disgusted Senator Tom Harkin, a Democrat from Iowa, that he is now willing to
forgo easy retribution and drastically limit the filibuster. Hooray for him.

For years Senate filibusters--when they weren't conjuring up romantic images
of Jimmy Stewart as Mr. Smith, passing out from exhaustion on the Senate
floor--consisted mainly of negative feats of endurance. Senator Sam Ervin once
spoke for 22 hours straight. Outrage over these tactics and their ability to
bring Senate business to a halt led to the current so-called two-track system,
whereby a senator can hold up one piece of legislation while other business goes
on as usual.

and further (note the Senators who are players in this quote 10 years ago):

Mr. Harkin, along with Senator Joseph Lieberman, a Connecticut Democrat, now
proposes to make such obstruction harder. Mr. Harkin says reasonably that there
must come a point in the process where the majority rules. This may not sit well
with some of his Democratic colleagues. They are now perfectly positioned to
exact revenge by frustrating the Republican agenda as efficiently as Republicans
frustrated Democrats in 1994.

Admirably, Mr. Harkin says he does not want to do that. He proposes to change
the rules so that if a vote for cloture fails to attract the necessary 60 votes,
the number of votes needed to close off debate would be reduced by three in each
subsequent vote. By the time the measure came to a fourth vote--with votes
occurring no more frequently than every second day--cloture could be invoked
with only a simple majority. Under the Harkin plan, minority members who feel
passionately about a given measure could still hold it up, but not indefinitely....

The Harkin plan, along with some of Mr. Mitchell's proposals, would go a long
way toward making the Senate a more productive place to conduct the nation's
business. Republicans surely dread the kind of obstructionism they themselves
practiced during the last Congress. Now is the perfect moment for them to unite
with like-minded Democrats to get rid of an archaic rule that frustrates
democracy and serves no useful purpose
.

Gee, now I'm starting to think this filibuster thingie might not be so good.  I kindof get confused as to which principled stand by the NY Times I should get behind.

My Plan

First, recognize that I am not a lawyer, nor a constitutional scholar, nor do I play one on TV.  But seeing as the "experts" are tripping over themselves in their hypocrisy, there is not reason I can't jump in the fray too.

My idea for this started when I found out something about filibuster rules -- there are already certain votes that by Senate rules have been made immune to filibuster.  Thank God for blogs, because you won't find this anywhere in the MSM, though its apparently common knowledge.  Everyone treats a change in filibuster rules for judge confirmations as "a break in the dam" or a "slippery slope" which will wipe out the entire filibuster rule.   However, such exceptions have already been made.  The most used one is for budget votes - neither party may filibuster certain budget votes.  The logic for this is obvious - no one want to let 41 people shut down the government.  The majority party should be able to pass their budget.  This exemption is why Senate leaders often bury controversial provisions (recent example:  ANWR drilling) in the budget -- so they can't get filibustered.  Other votes exempt from filibuster include votes under the War Power Act and a number of really trivial things that I can't remember right now - I am looking for a link and would appreciate help.

This leads me to what seems like a fairly obvious, moderately principled position on filibuster:  Change the Senate rules to allow filibuster on new legislation, but exempt votes from filibuster that are required to keep the basic functions of government running.  This latter exempt category would include things like approving budgets, raising the debt ceiling, and voting on nominees of all types.

Postscript:  By the way, as a libertarian, I am generally all for seeing the government shut down, and don't shed many tears when the Senate does nothing.  However, I think my proposal is pretty true to the intentions of the Constitution.  In particular, of all the functions that are currently being shut down by the filibuster, it is galling that it is the court system that is being ground to a halt, since the courts are one of the few institutions where even a hard core libertarian like myself accepts a strong role for government.  Which is not to say that I am happy with the power courts and judges have been taking on themselves of late.

Update:  Here is a further good proposal that I am not sure why no one is talking about - if they are going to filibuster, lets make them actually filibuster, i.e. keep talking and talking:

  However, I think that these Princeton students have the right idea:  If you are going to filibuster, then you should have to filibuster.
Filibusters should come at some personal and political cost. We should
abolish the candy-ass filibusters of modern times, and require that if
debate is not closed it must therefore happen

The
prospect of John Kerry, Hillary Clinton or Ted Kennedy bloviating for
hours on C-SPAN would deter filibusters except when the stakes are
dire, if for no other reason than the risk that long debate would
create a huge amount of fodder for negative advertising. If Frist were
to enact the "reform" of the filibuster instead of its repeal, he would
sieze the high ground. He could take the position that the Republicans
are merely rolling back the "worst excesses" of the long period of
Democratic majority in the Congress, and that filibusters will still be
possible if Senators are willing to lay it all on the line. Indeed,
even the students at Princeton would be hard-pressed to argue against
such a reform of the filibuster, since extended speechifying is
precisely the means they have used to make their point.

Economics of NFL Draft

Forget the UN and judge nominations and other trivial matters.  This weekend is the NFL draft.  Via Marginal Revolution comes this cool article about the economics of the NFL Draft.

The article is pretty long, so let me summarize the couple of things I thought were pretty interesting.  The first was the relative value of draft picks.  They did a lot of work quantifying the performance of players selected at different positions in the draft (i.e first pick, second pick, etc).  You'll have to see the detailed study as to their methodology, but it struck me as pretty reasonable.  They also looked at the cost or salary by draft pick.  Combining the two got this curve:

Curve1
The "surplus" line is the difference of the curves, ie performance value minus compensation cost.  Since compensation costs fall faster in the late first round (the first round is 30 picks) and into the second round than does performance, the surplus value peaks in the second round.  This does not mean the best players can be found in picks 25-75, but it does mean that the best values can be found there.  Since the NFL works under a salary cap that equalizes total compensation, the best team should be the one that consistently picks these value players (this is different than the baseball / NY Yankees model, where there is no cap, and maximum performance presumably comes from getting the top players, irregardless of salary).

If this is correct, teams should be willing to straight-up trade a pick in the top 15 for a pick around 35.  However, in reality, they can usually trade a pick in the top 15 for two or more picks in the 25-75 ranges, which should make the trade a no-brainer.  Interestingly, the market for picks is actually going the other way:

Curve2
The researches studied hundreds of past draft day trades of picks to generate these curves.  It basically says that early picks are valued exponentially higher than even late first round picks, and this preference for very early picks has actually increased in the past few years.  This curve says that a #5 pick might be worth at least 3 and possibly many more picks in the 25-75 band.

Given these two curves, if they are correct, why don't more teams trade their top picks into the 25-75 band.  There are at least 3 answers to this:

  1. Read Moneyball.  Once you read it, you will understand that sports GM's do not understand these concepts of value.
  2. There may be other values, other than player performance, that teams get from top picks.  For example, most fans will have heard of the top ten people drafted, but will know few from the 25-75 band.  The top, well-known picks generate a disproportionate amount of fan excitement and "hope" which can translate into more paying butts in seats, which this study does not take into account
  3. Some teams are getting it.  In listening to several mock drafts lately, it is clear many teams want to trade down from the top picks this year - no one wants to pay the signing bonuses commanded at these levels.  By the way team that has traded for the most picks in this band is ... Philadelphia.  Who has been in the NFC championship game 4 years in a row, so maybe someone out there does get it.

 

Economics of Tipping

I've written a couple of times about how I find the whole process of tipping in this country to be irritating.  There is absolutely no logical framework you can come up with to say why we are expected to tip restaurant workers but not, say, retail workers.  Tipping has long, long ago passed the point where it was a practice to reward good service and has instead become a way for employers to shift the burden of paying wages to their employees onto their customers.  For example, I wrote (or more accurately, ranted) here:

Unfortunately, restaurants and other service establishments have
twisted this act of reward and generosity into having customers pay the
wages of their staff.  Restaurants are simultaneously increasing
tipping expectations (from 15% to 20%+) while requiring tips on more
and more occasions by building them automatically into the bill.

The event that brought my irritation to a boil the other day
actually happened valet parking my car at a restaurant.  As background,
the establishment charged $4 to valet park your car.  Now, I am not a
socialist, so I accept that value is not driven by cost but rather by
what I am willing to pay for it, and I was willing to pay $4 to avoid
having to walk a few blocks from the free lot  (those of you from
Boston or NY are wondering what the fuss is about -- a valet parking
charge of any amount is virtually unprecedented in Phoenix, at least
until recently).

So I paid my $4, and then I saw the sign:

"Our employees work for tips"

What?
You mean I just paid your company $4 for what amounts to about 5
minutes of labor, and now you are telling me that in addition, I need
to pay your employees' wages for you too?  This is pretty nervy - I
mean, other than a percentage concession payment they are probably
making to be the parking company at that location, what other costs do
they have?  I didn't want to hurt the young guy actually doing the
parking, but for the first time in years I didn't tip the valet.  That
little sign turned, for me, an act of goodwill into a grim obligation,
extorted from me by guilt.

I bring all this up because I saw an interesting piece the other day on Marginal Revolution:

1. Two studies show little relationship between quality of waiter service and
size of tip.

2. Hotel bellboys can double the size of their tips, on average, by showing
guests how the TV and air conditioning work.

3. Tipping is less prevalent in countries where unease about inequality is
especially strong.

4. The more a culture values status and prestige, the more likely that
culture will use tipping to reward service.

5. Tips are higher in sunny weather.

6. Servers can increase their tips by giving their names to customers,
squatting next to tables, touching their customers, and giving their customers
after-dinner mints. (query: how do lap dances fit into this
equation?)

7. Drawing a smiley face on the check increases a waitress's tips by 18
percent but decreases a waiter's tips by 9 percent.

8. In one study, waitresses increased their tips by 17 percent by wearing
flowers in their hair.  In general it pays to look distinctive albeit not freaky

 

Enron and the UN

I was wondering if anyone else noticed this.  Greg Scoblete (hat tip: Instapundit)  points out the very different treatment that the Enron and the UN Scandals have gotten in the NY Times:

Notice the care this New York Times editorial takes
when treating Kofi Annan today, all hedged bets and mild condemnation.
It's only Kojo, after all. Confined to those shifty Swiss. Not a big
deal, besides the only people who care are the warmongers angry that
Kofi wouldn't sign on to the Iraq war. Just do better next time.

In other words, par for the Kofi course.*

Now, Enron.  Hang 'em high! Trust no one. Spare no one. Cast the net wide! Wider! The root of all evil. Crush all Imperial CEOs. Ken Lay - why wait for the trial? Even named a disease after it.

They are different:  The UN scandals are much worse:

  • The UN is a far more important institution -- at the end of the day, Enron is just a pipeline company, and no one, except their hosed employees, really has missed it
  • The UN has overseen a far larger amount of corruption in $ terms.
  • Enron enriched some twits in Houston.  UN enriched a brutal dictator who used the money to cement his totalitarian power over his country
  • At least as far as I know, Enron employees were not guilty of mass rape.

Disclosure: When I was a first year associate at McKinsey & Co.,
I worked on a study team led by Jeff Skilling (it was at McKinsey that
Skilling developped many of his ideas for the gas-trading business that
catapulted him into a senior position at Enron).  I had great respect
for Skilling's off-the-chart intelligence and ability to synthesize
tons of detail.  If that causes the reader to be suspicious of Skilling's Congressional testimony
, well, I will leave that to the reader's opinion and future court
decisions.  Remember, though, that the
I-was-too-dumb-to-know-what-was-going-on defense did not even work for Bernard Ebbers, and Skilling is a lot brighter than Ebbers.

How to Convince Congress to Limit Free Speech

Ryan Sager has interesting revelations in the NY Post about who supported Campaign Finance "Reform".  There is not a lot of confirmation yet on his story, though he has transcripts from some interesting insider speeches linked. 

I bet every one of the groups who financed this effort and that Mr. Sager lists would piously swear that they are supporters of civil rights and the first amendment.  It is interesting to see the hypocrisy in their assault on political speech.

Why Judge Nominations Are Suddenly So High Stakes

Over the last 10 years, it certainly appears that the stakes have been raised substantially in judicial nominations, to the point that the approval of federal judges seems to be the number one issue in front of the Senate, even ahead of matters like Social Security reform or tax policy.  Sure, in the 80's we had some high-profile confirmation battles (e.g. Bork, Thomas), but those were for the Supreme Court and might be narrowly interpreted as revolving around issues of abortion and perhaps affirmative action.  Certainly both sides of the abortion debate are gearing up to duke it out over Supreme Court nominations, but most of the current brouhaha in the Senate is over lower level appointments that can't reasonably be interpreted as having much influence on abortion.  So something else must be going on.

To understand what this "something else" is, I want to digress a bit into the analogy of campaign finance (yes, its analogous).  I won't conceal the fact that I think that the most recent round of campaign finance "reform" has been a disastrous infringement on first amendment rights, the implications of which are only just coming to the surface.  However, my opinion of it is irrelevant to the analogy.  While proponents of campaign spending restrictions point to the "corrupting influence" of large sums of money in the election process, what no one ever mentions, though, is why such large sums of money are being spent in the first place.  It is this latter issue on which I want to focus.

The reason that politics have become so high-stakes, at least in dollar terms, is because the government controls so much more of the economy and our lives.  A century ago, the federal government had the power to raise and lower tariffs, and some limited control of the money supply, and occasionally gave out land grants to new railroads, and that was about it.  Today the government can tax an individual or corporation six or seven different ways, determines how much you must pay your employees, controls much of the health care system, holds product design or pricing approval authority for many industries, controls access to critical raw materials, etc etc.  If the government decides it does not like a particular person or industry, it can charge it with billions in extra costs in taxes -- or if it finds an industry politically expedient, it can pump it up with billions in subsidies.    Every year, the government takes literally trillions of dollars from one unfavored class of citizen and gives it to a more politically favored class. 

With stakes this high, it is no wonder that more and more people are willing to pay more and more money to let their voice be heard in the political process.  Greater amounts of money flowing into politics is not a sign of a broken democracy, but just its opposite.  More political spending means more money spent on speech, which in turn results from more people trying to add their voice to the political process more intensely.   Rather than deal with the root cause, the growing power of government to arbitrarily transfer wealth, the country instead lurches from one half-assed attempt at political speech control to another.

So here is where I am going with this analogy.  Today, it increasingly appears to people that the process for approving Presidential judge nominations in the Senate is broken.  The opposition party, first with some tentative steps by Republicans under Clinton and then with wholesale defiance by Democrats under Bush, are increasingly making the appointment of judges tremendously contentious.  I would argue though, as with campaign finance, that the problem is not with the process, but with the changing power of judges.  Over the last 30 years, judges have increasingly gone beyond interpreting and applying law to creating new law on their own, a power that is as constitutionally unjustified as it is unchecked.

To understand this, lets first start with an example of what I would consider appropriately constitutional behavior by judges.  This is an example from a case brought against the Bush Administration, demanding the release of terrorist suspects the administration has held indefinitely.  The Bush administration argued that the war on terrorism was different from other crimes, and that it required an enhanced ability to indefinitely intern suspects.  The US District judge in the case disagreed, and note particularly the language he uses (emphasis added):

U.S. District Judge Henry F. Floyd ruled Monday that the president of the United States does not have the authority to order Jose Padilla to be held indefinitely without being charged.

"If the law in its current state is found by the president to be insufficient to protect this country from terrorist plots, such as the one alleged here, then the president should prevail upon Congress to remedy the problem," he wrote.

I can find no more perfect example of a judge appropriately fulfilling his constitutional role.  For him, the necessity or merit of being able to hold terrorist suspects without charges is IRRELEVANT to him.  Judge Sweet might well consider holding suspects without charges in these cases to be the most necessary thing in the world, or alternately the most reprehensible.  But his job is not to decide if such a power SHOULD exist, his job is to decide if such a power DOES exist.  And he says it does not -- and to call the legislature if you want one, because it is their job to create new law. 

Unfortunately, there is a growing theory of jurisprudence that creates an expanded role for judges.  In this theory, judges are empowered to act sort-of as the institutional Dali lama, the wise person who descends from the mountain from time to time to correct moral lapses made by legislatures.  If you are a Star Trek fan, think of this theory placing judges in the role of the Organians, parachuting into human affairs from time to time to correct moral problems.  As Justice Scalia put it in a recent decision:

The Court thus proclaims itself sole arbiter of our Nation's moral standards, and in the course of discharging that awesome responsibility purports to take guidance from the views of foreign courts and legislatures.

The problem with this theory is two-fold.  First, it calls for making judges the rulers in a benevolent dictatorship, for there really are no checks on judges elected for life who suddenly have the power to create new law.  Sure, the notion of a benevolent dictatorship of people with strong moral compasses has been a compelling notion to some through the centuries, but it never works and always ends up getting abused.  Which leads us to the second problem with the theory, which is that there is no constitutional basis for judges creating new law, nor would the power-paranoid writers of our Constitution ever have allowed it. 

Now, you may be thinking me paranoid to think of judges as taking on the power to write law.  I offer proof in two parts.  First, doesn't the exponentially higher stakes and greater attention today in approving judge appointments point to the fact that judges somehow have more power than they had a few decades ago?  Second, lets look at an example.

I covered this one in this post on media privilege, and quoted from the NY Time editorial:

[Judge Robert Sweet] explained that the United States Court of Appeals for the Second Circuit in New York recognized a qualified First Amendment privilege that protects reporters from being compelled to disclose their confidential sources

Judge Sweet defended the existence of this privilege by saying:

he took note of the important role of confidential sources in news investigations of the Watergate, Iran-contra, Monica Lewinsky and Abu Ghraib scandals

Do you see the difference from Judge Floyd's opinion above.  In this case, the Judge does express his opinion, that confidential sourcing has played an "important role" in unwinding a number of political scandals.  He uses this as a justification to create a privilege for reporters to conceal evidence and ignore subpoenas from a federal investigation.  Recognize, as background, that whatever shield law for reporters that may exist in your state, there is NO press shield law allowing concealment of sources at the Federal level.  And, the First Amendment itself only says:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

I don't see anything in that text that implies that the press can legally get away with obstructing justice while other citizens not in the press, like Martha Stewart, go to jail for obstructing justice.  Now, you might think that the press should have such a privilege.  Heck, I might in fact support some type of privilege.  But the fact is that right now, it does not exist under the law and judge Sweet should have given judge Floyd's answer, which I can't resist paraphrasing:

If the law in its current state is found to be insufficient to protect the media in doing valuable work, then the press should prevail upon Congress to remedy the problem

Now I am sure that I am vulnerable here to Constitutional scholars saying that I am a neophyte to Constitutional Law and I don't understand the chain of court decisions that lead to, in the case above, the press privilege precedent.  I have two responses to this.  First, I am tired of Constitutional Law being made into this arcane specialty where only a few experts can participate in the discussion, like Jesuits arguing about some arcana of a papal encyclical.  The Constitution is a very short and straight-forward document.  Anyone can understand it, and should.  I don't need 10 years of legal training and a piece of paper from the state bar to tell me that I see nothing about hiding information from police investigations in the First Amendment (heck, there are only 50 words there - where can it be hiding?)

My second response is specifically aimed at the chain-of-precedent reasoning for so many of the new rights and privileges that seem to be created nowadays.  Of course, precedent is critical in making law work - Common Law is all precedent and even in our constitutional system, relying on precedent saves a lot of rework (e.g. the Supreme court already decided this case X way so until they revisit it, we will follow that precedent). 

However, something else seems to happen in this chain.  Have you ever taken an original document, and Xeroxed it, and then made a copy of the copy, and then a copy of the copy of the copy, etc. through 10-20 generations?  What happens?  Typically somewhere along the way, some small flaw or spot on the machine causes a spot to appear on the copy.  As the copy is copied through successive generations, the spot grows and begins to stand out, until it is just as much a part of the document as the original text.  The spot, however, is an artifact that is reinforced through generations, like kids repeating a mistake in the game telephone.  That is what some of these court decisions feel like to me.  How did the NY circuit court find a press privilege - well, someone found a very very limited privilege out of thin air years ago, and then another judge used that as a precedent for expanding the privilege, until it is set in concrete today.  Just like the document experts in the CBS memo fraud want to get hold of originals of the documents to remove all the artifacts of copying to make the best decision on authenticity, so I in turn wish that courts would sometimes set aside all those intervening layers of other judges' decisions and just go back to the original damn document and work straight from the Constitution.

Liberals and some libertarians support have supported this theory of jurisprudence to date because to a large extent many of their causes have been net beneficiaries.  And, if history teaches anything, trashing constitutional controls to achieve near-term policy goals nearly always comes back to haunt those who do it. I understand the temptation -- for example, I oppose the death penalty for minors, and left the recent Supreme Court decision on the death penalty out of this post because I thought it a reasonable role for the Court to reinterpret "cruel and unusual".  But others, including Professor Bainbridge whose work I like a lot, and Justice Scalia whom he quotes, would argue that I am letting a favorable outcome blind me to the same problem of courts writing law. 

Postscript:  You may have noticed I did not mention Roe v. Wade.  In fact, I tend to avoid abortion issues like the plague.  In part this is because I have friends that are strongly, perhaps even radically pro-choice and friends who are strongly, perhaps even radically ant-abortion.  Like a lot of Americans, I believe that a fetus is not a human life at conception plus one day and it is very definitely a human life to be protected at birth minus one day, and I worry a lot where the dividing line is in the middle between life and non-life.  However, I will make two comments in the context of this post about Roe v. Wade that I think are fairly belief-neutral:

  1. I have never understood how "privacy" drives legality of abortion.  The clear question is "is the fetus a human life".  If it is not, then since it must instead just be tissue in a woman's body, then I accept her right to do with it as she pleases.  However, if the fetus is a human life, then it has rights of its own and the woman may not violate these except in special circumstances, no matter how much privacy she has.  So the decision is really one of "is the fetus a life"?  The Constitution does not give us much guidance on this question, but typically these types of uncertain decisions have been left to the states.  It is only with Roe v. Wade that the Court began taking on a new role of exercising a moral override over legislatures in certain areas (see Organian / Benevolent Dictatorship example above)
  2. I can't find a privacy right in the Constitution, though I will say I wish it was there, and would support a well-worded amendment in that area.  However, if the Court in its greater wisdom feels like there is a privacy right buried in there somewhere that restricts government intervention into what we do of our own free will with our own bodies, then there are a HELL of a lot of laws out there that need to be declared unconstitutional beyond just anti-abortion law, including:  narcotics laws, prostitution laws, the FDA, the tobacco settlement, alcohol prohibitions, helmet laws, seat belt laws, etc.

More on the Press and Revealing Sources

In a previous post, I wrote:

There were two interesting court decisions today that each can be summarized as "the press does not have rights or legal privileges beyond those granted to any ordinary citizens"

A number of readers were confused by this, as we have always seen the brave reporter on TV or in the movies protecting their information sources under a "shield law".  Many states, but not all, do in fact have shield laws that give reporters some protection against revealing their sources of information under subpoena.  However, there is no such law at the federal level, and any state laws that exist do not apply to federal courts or subpoenas.

However, despite this lack of an explicit federal shield law, most media organizations argue that the Constitution confers such privilege on them anyway.  Per the NY Times, some judges agree:

[Judge Robert Sweet] explained that the United States Court of Appeals for the Second Circuit in New York recognized a qualified First Amendment privilege that protects reporters from being compelled to disclose their confidential sources

This confuses me - I have read the first amendment many times.  I see the stuff about freedom of the press.  I always naively assumed this meant that they had the freedom to publish any old bonehead thing they wanted, including criticism of the government, without any limitations by the state.  I never realized that this meant that they also had the freedom to evade subpoenas and cover up evidence of crimes, things the rest of us would go to jail for (e.g. Martha Stewart).  Does the fact that the same amendment refers to freedom of religion mean that priests can legally cover up wrongdoing?  Do freedom of speech protections mean that bloggers can hide sources from subpoenas?

I find the judge's logic, as reported by the Times, to be scary:

The judge, Robert Sweet, reasoned, correctly, that the subpoenas for the phone records were the functional equivalent of demanding testimony from the reporters themselves, and he took note of the important role of confidential sources in news investigations of the Watergate, Iran-contra, Monica Lewinsky and Abu Ghraib scandals.

In other words, the Judge thought that allowing the press to hide their sources was useful in some cases historically, so he created a new first amendment privilege.  This is the kid of action that irritates the heck out of me.  What the judge just did in this case is legislate.  He saw a need in society and created a new privilege for a class of citizens based on that need.  You may even agree with his logic - in fact, I may even agree in part with his logic - but it is not his job!  He should be saying: "I'm sorry, as useful as such a protection may be, I see no basis for it in federal law or in the Constitution.  If you think you need one, write your Congressman but for now, there is no such privilege".  UPDATE:  If judge Sweet needs an example, here is one from an unrelated case:

U.S. District Judge Henry F. Floyd ruled Monday that the president of the United States does not have the authority to order Jose Padilla to be held indefinitely without being charged.

"If the law in its current state is found by the president to be insufficient to protect this country from terrorist plots, such as the one alleged here, then the president should prevail upon Congress to remedy the problem," he wrote. (hat tip LGF)

Sounds a lot like my suggestion above, huh?  This strikes me as a good judicial practice - rule on the law as it is, rather than what you think it should be.  We actually don't know whether Judge Floyd thinks that it is a good idea for the President to be able to order terrorist suspects held indefinitely, nor should his opinion matter.

Another Update:  Professor Bainbridge has a good post on yet another case of legislating from the bench.  I am lukewarm on the death penalty in general and am opposed the death penalty for minors, but I still think the Supreme Court is dangerously overstepping its bounds here.  The majority opinion talks about practices in other countries and public opinion - what does that have anything to do with Consitutionality? Those are arguments for legislation banning death penalty for minors in the legislature, not for the Court.

By the way, the Times wants to be able to keep secrets, but gets pretty huffy when other people have the same privilege:

Some judge may have looked at the issue, but we have no way of knowing, given the bizarre level of secrecy that still prevents the reporters being threatened with jail from seeing the nine-page blanked-out portion of last week's decision evaluating the evidence.

I found one other point in this same NY Times editorial to be hilarious.  I have not really commented on the Plame affair, because I found it to be pretty boring.  In fact, it is telling that most discussion of the affair ended the day after the elections.  Anyway, I found this note by the NY Times pretty funny:

Meanwhile, an even more basic issue has been raised in recent articles in The Washington Post and elsewhere: the real possibility that the disclosure of Ms. Plame's identity, while an abuse of power, may not have violated any law. Before any reporters are jailed, searching court review is needed to determine whether the facts indeed support a criminal prosecution under existing provisions of the law protecting the identities of covert operatives.

There is nothing wrong with this statement in and of itself - in fact, I agree.  Its funny only because the Times was the one reporting that it was in fact a crime committed:

Officials are barred by law from disclosing the identities of Americans who work undercover for the C.I.A. That provision is intended to protect the security of operatives whose lives might be jeopardized if their identities are known.

Among those who have cried foul are several Democratic senators, including Charles E. Schumer of New York, who have said that if the accusation is true and if senior administration officials were its source, law enforcement authorities should seek to identify the officials who appeared to have violated the law. Mr. Schumer has asked Robert S. Mueller III, director of the Federal Bureau of Investigation, to look into the case.

The Best of the Web pointed out this even more telling statement from a 12/31/04 NYT editorial.  Note the complete lack of uncertainty as to whether there was any crime committed (emphasis added)

The change was announced by the newly appointed Deputy Attorney General James Comey, who turned the case over to a respected career prosecutor, Patrick Fitzgerald, the United States attorney in Chicago. Mr. Fitzgerald is charged with finding out who violated federal law by giving the name of the undercover intelligence operative to Mr. Novak for publication in his column.

Interesting to see how their perspective changed when the subpoenas landed at their door.  "Law enforcement needs to get to the bottom of this as long as, err, they don't ask us to help".