Coyote Blog

From our American point of view, we usually think of the attack by the Japanese at Pearl Harbor fifty-five 65 years ago as the main Japanese objective at the time.  In fact, the attack on Pearl Harbor was merely a screening move, an attempt by the Japanese to limit the US's ability to respond to its main objective -- seizure of resource-rich targets in Indonesia and Southeast Asia. 

The Japanese in 1941 shared many of the beliefs that are disturbingly common today.   They believed that their country had to be "self-sufficient" in key industries and resources.  And, they had a huge distrust of foreigners and international trade.  Lou Dobbs would have been very comfortable with them.  The end result of believing in self-sufficiency was that Japan eschewed peaceful trade as a way to gain resources in favor of colonialism and military intervention.  To some extent, the European colonialism of the 19th and early 20th centuries stemmed from the same beliefs.

As an island nation, Japan had developed a rich and complex social
structure. It resisted westernization by sealing itself off from
contact with the outside world, particularly Europe and the United
States. By the early twentieth century, though, Japan's efforts to
achieve self-sufficiency were failing, for the nation lacked its own
raw materials and other resources. Some members of the ruling class
argued that Japan could grow and prosper only by modernizing and
adopting Western technology. Japanese nationalists, though, advocated a
different path: the establishment of an empire that would not only
elevate Japan's stature in the eyes of the world but also guarantee
access to the resources the nation needed. Moreover, many members of
the nation's traditional warrior class"”the Samurai"”were embittered by
the aftermath of World War I. Japan had backed the victorious Allies,
but the Samurai believed that in the peace negotiations following the
war the United States and Great Britain had treated Japan as a
second-class nation. They, too, longed to assert Japan's place in world
affairs.   [answers.com]

After WWII, the Japanese gave up colonialism and military intervention in favor of arms-length trade.  And, as a result, grew through peaceful exchange into being the wealthy world power that militarism and "self-sufficiency" could never achieve.

Postscript: Some might argue that the Japanese were forced to give up on trade in favor of militarism by the US embargoes.  This is a particularly popular explanation among the "America-is-the-source-of-all-evil" academics, that the Japanese would have peacefully traded for all their needs if only we had let them.  This viewpoint is silly, and completely ignorant of the goals and philosophies of those running Japan.

The Japanese desire to be resource self-sufficient is always there, and the embargoes were a result of previous military adventures by the Japanese to gain colonies by force in Korea and China, as well as Japanese threats to invade southeast Asia.  Japanese militarism to achieve "imperial self-sufficiency" predated western embargoes by many, many years.  The western embargoes may have forced the Japanese hand to move quicker than they might have, but their moves into resource-rich Indonesia were probably coming soon anyway, just as similar moves in Korea and China had been going on for a decade.

To be fair, today's self-sufficiency advocates are passive and xenophobic rather than aggressive and xenophobic, as the Japanese were.  This is at least a small improvement, and means that they prefer to quietly sink into squalor rather than going out with a bang (two bangs?) as the Japanese did.

Update:  Memories of the Pearl Harbor attack.  And the Arizona Republic comes through with a good series on the death of the USS Arizona.

I still get a lot of email and
commentary on my posts explaining why a trade deficit does not
necessarily result in a build up of debt.  Its a mistake that
protectionists like Lou Dobbs make, either accidentally or on
purpose, to confuse the trade deficit with a debt (Dobbs, in the linked article, claimed that we had $5 Trillion in accumulated trade debt).  In another
attempt to explain this, I want to present a thought experiment.

In our hypothetical, a regular old
American guy named Joe walks into a Wal-Mart to buy new Plasma TV.
Lets assume that Joe is presented with two choices, a Chinese-made TV
and an American-made TV.  The American TV is $2000 and carries a
brand Joe recognizes;  the Chinese TV is $1800 and is a brand Joe
does not recognize.  As far as he can tell, both are featured
similarly.

Joe may choose to take a chance with an
unknown brand to save $200, or he may not.  Let's see what happens
either way.  If Joe picks the Chinese TV over the American TV, the US
trade deficit will likely be worse, by whatever Wal-Mart has to pay
to restock the shelves.  But, while the trade deficit may be worse if
Joe buys Chinese, is there any additional debt created by buying
Chinese rather than American?

Well, Joe doesn't have more or less
personal debt either way.  Whether he is paying with cash or
financing the TV, this decision is unaffected by whether he buys
Chinese or American.  He may happen to buy Chinese and take on debt
to purchase the TV, but the decision to take on debt has nothing to
do with the fact that it is an import.  If he had bought the American
TV, he presumably would have taken on debt for that purchase as well.
In fact, if anything, since the Chinese TV is cheaper, Joe's
personal debt is reduced by buying Chinese over American.

In fact, the only way in which Joe's
personal debt could be said to be increased by Chinese imports is if
the $200 price differential was enough to change his mind from
not-buying a TV to buying one, and he then financed the purchase.
But this is only going to occur in a small percentage of
transactions, and besides, it would be unfair to call something so
empowering "“ ie giving Joe the power to get something he really
wants that he would otherwise been unable to "“ as a negative.
(Update: I do think this is sortof the logic trade opponents
use.  They argue that "rampant consumerism"is causing an increase
in consumer debt which is kindof sortof tied up in some way with this
whole cheap Chinese goods at Wal-Mart thing, so therefore trade
causes debt.  This may sound good rhetorically at an
anti-globalization rally but makes no sense scientifically).

Now let's take Wal-mart.  Assuming they
know how to price items, they will make a gross margin on either the
Chinese or the American TV.  How, then, can having to restock the TV
Joe bought by buying one from an American factory for say $1400
affect Wal-Mart any differently than paying the same (or less) money
to a Chinese company?  The answer is that it has no effect.  Buying
Chinese vs. American has no effect on Wal-Mart's debt.

So let's say Joe bought the Chinese TV,
and the Chinese end up with $1400 (the factory price) in US currency
courtesy of Wal-Mart.  If they don't need anything in the US, they
will trade this currency for yuan to someone in China who does want
to buy something in the US.  Let's assume that these dollars are all
incremental, so none go to buying exports from the US or goods to be
consumed in the US.  Let's assume that it all gets invested as
profits, and further, let's assume that it gets invested 100% in US
debt securities.

Aha!  People want to say to me.  There
is the debt!  Chinese are buying up US bonds.  And so they are.  But
trade did not cause or create the debt.  Just because Chinese trade
dollars are reinvested in debt securities does not mean trade cause
the debt.  In fact, the US government debt would exist with or
without Chinese trade, courtesy of the tax and spend whores of both
parties in the US Congress.  If the Chinese had not bought the debt,
someone else would have, and the debt still would have existed.  In
fact, the US debt would likely have just been a bit larger and a bit
costlier without Chinese buyers to bring down interest rates.

So, to review, an average American
makes an incremental decision to buy Chinese rather than American,
the trade deficit gets worse, but no debt is created.  So I renew my
challenge to Lou Dobbs, who claims America has $5 trillion in trade
debt by asking a simple question:  Where?

Under both state and federal law, it is illegal for me to hire anyone without documenting that they are in fact a legal US resident and have the right to work in the US.  Those of you who read this blog know that this irritates me, given my support for open immigration, but I do it.  It is also illegal for me not to make all the relevant state and federal social security and income tax withholdings for each employee, as well as pay premiums into state and federal unemployment funds, all of which require that I have an accurate social security number from each employee.  No valid social security number, no job.

All this mess is hard enough to comply with, and it takes a lot of my managers time, a full-time HR person, and thousands of dollars sent to ADP to stay legal.

And then I see this:

A Mississippi Democrat in line to become chairman of the House Homeland
Security Committee has warned the nation's largest uniform supplier it
faces criminal charges if it follows a White House proposal to recheck
workers with mismatched Social Security numbers and fire those who
cannot resolve the discrepancy in 60 days.

Rep. Bennie Thompson said in a letter to Cintas Corp. it could be
charged with "illegal activities in violation of state and federal law"
if any of its 32,000 employees are terminated because they gave
incorrect Social Security numbers to be hired.

Great.  Now I can go to jail both for employing folks without a valid social security number and for not employing folks without a valid social security number.

Sorry posting has been light this week.  A reader was nice enough to point to the latest rant by Lou Dobbs here.  Apparently, he has decided to take the position that free traders are now elitists, while folks like him who want the government to pick and choose winners among American businesses and industries as "populist."  The obvious response of course is that beneficiaries of American protectionist legislation tend to read as the who's who of politically connected elitists.  It is also hilarious to equate free trade, whose benefits are backed by 100 out of 100 economists, with some irrational faith-based belief system.  But I will leave that aside to point to this line:

He and others completely disregard the $5 trillion in trade debt that
the United States has built up through 30 consecutive years of trade
deficits. That trade debt is rising faster than our national debt and
is simply economically unsustainable, no matter what any faith-based
economist would argue. Our political, business and media elites
continue to disregard reality.

Here is my very, very simple challenge for Lou Dobbs to help those of us who obviously don't get it:  Point to where this $5 Trillion of Debt is.   What private individuals or corporations owe it to whom?  That should be simple.  With the national debt, we can just go out and count all those government bonds.  But where is this trade "debt"?

Answer:  IT DOESN'T EXIST.  What he means is that over some time span of several decades, American has a cumulative trade deficit of $5 trillion.  But trade deficit does not mean debt.  I showed this in great detail here.  Calling it a "trade debt" is not a sloppy mistake on Dobbs part but an outright lie, meant to make the point that running deficits every year is unsustainable.  But America has become the wealthiest country in the world running trade deficits for the majority of the last 100 years.   In fact, one can argue that the trade deficit itself only exists as a phantom of the awkward and limited way in which we measure trade. 

Postscript: I constantly get people who write me that the fact the Chinese are buying up a lot of US government bonds or corporate bonds with their trade profits is proof of a "trade debt."  No such thing.  The US Government bonds are evidence of a fiscal deficit of the federal government, also called the national debt, and exists not because of trade but because Congress has no fiscal discipline.  Corporate debt is growing to buy back stock, make corporate acquisitions, and to buy new plants and facilities.  The fact the Chinese help to fund these debts does not mean that trade caused this debt.  In fact, foreigners buying US debt securities depresses interest rates and actually keeps the national debt lower.

Here is a thought experiment:  Wal-Mart runs a multi-billion dollar trade deficit every year with China.  Why isn't it building up lot's of debt to the Chinese?

I have been thinking about this previous post on trade and wanted to improve my answer to Jon Talton, our free-markets-hating business columnist in the Arizona Republic.  In his recent column advocating that we finally give up on all this free trade stuff, he said:

Americans were assured that new trade accords and China's membership in
the World Trade Organization would mean better living standards for
American workers. That's because China and other countries supposedly
would buy American exports.

I thought my answer was OK, but I want to take another shot at it, because I hear the argument all the time that "trade only benefits the US if other countries buy our exports."  This is wrong, but this misconception drives many people's thinking on trade.

If we are importing more from other countries but they are not "buying more of our exports," such that we have a large trade deficit, there are two possibilities to explain this:

• The definition of exports is too narrow
• Someone is throwing away value by building up a big pile of US dollars

The first is the most likely explanation.  A dollar is valueless in China, and the UK, and France except to the extent someone thinks they can eventually use it to buy something in the US.  Dollars that aren't or can't be used to buy dollar-denominated assets of some sort have no value.  The money a Chinese exporter accepts from Wal-mart is only valuable if they can recycle it and buy something in the US with it (or trade the dollars to someone else in China who wants to buy something in the US). 

So the dollars we send overseas for imports are going to come back.  But the  reason our trade accounts are out of balance is that the trade deficit numbers they quote on TV define our exports narrowly.  In short, "exports" as commonly measured don't include all the things we sell to foreigners for dollars.

One example of this is if a Chinese company takes the $10 million dollars it earns from exporting to the US and then invests $10 million in US materials to build a factory in the US.  That sounds OK, right?  That seems to be in balance.  But in the way we calculate the trade deficit, that would show as a $10 million trade deficit, because goods (and services) that foreigners buy in the US and consume in the US (rather than back in their home countries) are not considered an "export."  In fact, I would consider this "better" than an export, since both the dollars and the goods stay in the US.  But to trade deficit hawks, this is worse, mainly because their measurement is flawed.

A second example is if a Chinese company take the $10 million dollars it earns from exporting to the US and invests the money in US mortgage bonds.  Again, this would show as a trade deficit, but the US economy benefits from lower interest rates.  In this case, we are again selling foreigners a product, in this case wealth protection, which the US is very good at since we have a more stable economy and stronger rule of law than any other country in the world.  And again, the way we measure "export" does not encompass this product, since our trade measurement has a strong manufacturing bias that does not match the more diverse nature of our economy today.  (For those that lament forefingers helping to fund the enormous government debt, I share your pain, but that is a government spending problem and not a trade problem).

But what if the foreigners are totally perverse.  What if they ignore their own best interests and refuse to buy our exports and just sit on the dollars they get from trade without recycling them in any way to the US?  What if they do this even if by doing so, they would be throwing away billions, even trillions of dollars in value?  As absurd as this sounds, this is exactly the concern Talton and other trade-skeptics raise.

Well, the US in this case would STILL be better off.  First, the US would be getting whatever goods we are buying overseas cheaper or better (or else people would not be buying them).  This would reduce the costs of inputs to other products, and increase money consumers have to spend on other things.  The labor that would have gone into making these products domestically would be redeployed to making other things, increasing our net wealth. 

By the way, it is this last sentence I think Talton and his peers would not accept.  They tend to view employment as zero-sum, ie there are a fixed number of jobs in the world, and if we import, that creates jobs overseas which must reduce jobs in the US.  But labor markets have never worked that way.  As I wrote before:

I have taken on this zero-sum mentality before,
but it is particularly wrong-headed in this case.  Historically, the
argument makes no sense.  For example, the automation of the farm
sector wiped out 80 or 90% of the farm jobs in the US over the last
century.  By the zero-summers logic, we should be impoverished.
Instead, these people were redeployed to manufacturing and service jobs
that create far more wealth than the old 19th century farm employment.
But while people can sort of accept this historically, they can never
accept this in real-time.  But the fact is that when we lose, say, a
textile job to foreign competition, we not only gain because everyone
pays less for textiles and thus has more money to spend on other
things, but that worker gets redeployed over time to higher-value
functions.  Look at the old textile belt in North Carolina - what's
there now?  Electronics and Bio-tech.

By the way, the other thing that would occur if foreigners just buried dollars in the sand without recycling them is that the value of the dollar would rise to levels higher than it would be at if these countries recycled their dollars, thus further lowering the price of inputs for the US.  Talton laments this very effect:

Now, the populists will get a chance to make their arguments,
especially over what the American response should be to Chinese
currency manipulation, tariffs and subsidized exports.

The currency manipulation and subsidized exports have one thing in common:  They are both ways that the Chinese destroy value for their own citizens in order to lower prices for American consumers.  And Talton claims that the populist argument should be to end these practices?  Why?  I think its great that the Chinese want to hold billions in dollars just to keep the dollar high and prices low in the US.  I think its great that their taxpayers want to subsidize lower prices in the US.   I can understand why a Chinese citizen might want this to stop, but why should we, who are the beneficiaries?

Update: By the way, another common misconception is that a trade deficit implies someone is building up a debt.  This is not (not not not) at all true.  We can run a trade deficit indefinitely without building up a debt.  Yes, foreigners are currently investing some of their trade profits in US government bonds necessitated by the federal government's deficit spending, but the two are only weakly related - a trade deficit does not cause government debt.  A great way to see if a columnist has any idea what they are talking about is to see if they confuse the federal budget deficit with the trade deficit.  It is almost funny how often I see this confusion appears in print.  Anyway, this confusion is why people like Talton call the trade deficit "unsustainable".  See my posts on why the trade deficit is not a debt (and here).

Apparently, USAirways (the recently merged product of America West and US Air) has made a bid for buying Delta out of bankruptcy.  The bid is around $4 billion in cash and $4 billion in USAirways stock.  Which got me thinking about airline mergers in general.

Companies can be thought of as having tangible assets (trucks, airplanes, factories) and intangible assets (reputation, employees, brand names, contracts).  Most companies are worth far more than the book value of their tangible assets.  Most of Microsoft's value, for example, is in it's products, its brand, its franchise, its contracts, its people, etc., not in hardware or buildings.  As a result, most acquisitions are completed at prices far above the book value of the assets of the purchased company.  The difference is called "goodwill" by accountants and "enterprise value" by economists.

But enterprise value is a problem in airline mergers.  Most investors expect to pay and get paid a premium over asset values in a merger.  But I am not sure there should be any such premium nowadays for airlines, because I fear that the typical airline's "goodwill", or the value of their intangible assets, may be negative.

Take the example of Delta.  Unlike scrappy competitors like Southwest and JetBlue, Delta has a lot of baggage (so to speak).  First and foremost, they have terrible legacy union contracts that mean that pay all of their employees much more money than do startup airlines and they are much more constrained by work rules in improving productivity.  They have huge and building under-funded retirement and medical accounts.  They have legacy contracts that may suck, and they often have hodge-podge mixed fleets that are hard to maintain.  All of this tends to add up to a negative effect on value.

The one positive intangible companies like Delta have is their brand value, and I would argue that most of that is tied up in their frequent flier programs[** Update Below].  Without these programs, most frequent fliers have demonstrated that they would switch airlines for trivial improvements in fares.  This value in the frequent flier programs was demonstrated in the America West merger (among others), when Juniper Bank contributed $455 million (!) to the merger for the right to issue the visa card attached to the program.  Wow.

Given this problem of negative enterprise value, it is not surprising that savvy upstarts like JetBlue and Southwest before it have not grown by acquiring other companies.  Both are willing to take advantage of bankrupt competitors to grow, but they only have bought assets (like planes and gates) rather than whole enterprises, so they don't inherit legacy contract or union issues.  When the companies who are making money do things one way, and the companies who find themselves in bankruptcy court every five years do it another way, the difference probably matters.

Which brings me to the title of the post and agency costs.  It is really, really uncertain whether buying Delta is good for the USAirways shareholders.  Since buying airline equities has always been a losing proposition over the long haul, the deal only makes sense if 1)  They are getting a screaming deal, either because of Delta's bankruptcy or because they are doing the deal in just the right part of the business cycle; or 2) They can really harvest synergies, which in this case would have to include shutting down entire hubs, such as Charlotte in favor of Atlanta or Cincinnati in favor of Pittsburgh.   While I can't speak to the latter with any facts, you have a better chance betting Arizona will win the Superbowl than betting any acquisition hits its promised synergy values.

But if the value of the acquisition is unclear for shareholders, there is one group that almost certainly benefits:  USAirways management.  Management, even if shareholders don't get a great deal, will benefit in both monetary and non-monetary (e.g. status) ways from running an airline three or four times as large as the current enterprise.  This mis-match in incentives between hired management and shareholders is called agency costs, and is something every board should be more cognizant of when approving acquisitions.

**Update:  A rant on the ethics of frequent flier programs

I was wondering this morning if I could turn public opinion against penicillin.   After all, hundreds of people die every year from taking penicillin.  If I ran a newspaper, every day I could feature another heart-rending story about a small child or a single mother with four kids dieing from a penicillin allergy.  Sure, some heartless fools who don't understand these poor people's suffering will say that penicillin is a net benefit.  But that will be easy to counter - I'd ask them to show me who was saved.  Sure, lots of people take it, but how can you prove they would have been worse off without it?  How can you prove how many people would have died without it?  I would have an easy time, because the victims of penicillin are specific and very visible, and the beneficiaries are dispersed.

I thought of this analogy while I was reading Jon Talton's column on the front page of the Arizona Republic business section celebrating the Democratic victory in Congress because we may finally be able to get rid of this awful free trade stuff.  As an aside, Talton has always been an interesting choice as the primary business columnist int he Republic, given that he doesn't really feel bound by the teachings of economics and he really does not like business.   His socialist-progressive formulations may be appropriate somewhere in the paper, but seem an odd choice for lead business columnist, sort of like finding a fundamentalist evolution denier, who still accepts Archbishop Usher's age of the earth, as lead science columnist.

I would fisk Talton's column in depth, but he doesn't really say anything except throwing together a hodge-podge of progressive rants against globalization (CEO pay, China, decimation of manufacturing -- he's got everything in there).   Like most progressives, he extrapolates flatness (not even declines, but flatness!) from 2001-2004 and declares that the world economy has changed and he has seen a major macro-economic trend (no mention of how the business cycle and recession we had in the same period might have affected things).

I will just take on one piece, where he says:

Americans were assured that new trade accords and China's membership in
the World Trade Organization would mean better living standards for
American workers. That's because China and other countries supposedly
would buy American exports.

Economists, what grade does Mr. Talton get?  F!  Because he demonstrates that he does not understand the economic argument for trade.  Because the argument does not actually require that foreign countries buy our exports for us to be better off with trade.   Comparative advantage says that even imports alone help our economy, allowing us to purchase inputs more inexpensively and refocus our domestic labor on tasks which we do comparatively better. 

The second fallacy with his statement is that export numbers grossly understate the amount of goods and services that foreigners buy from us.  Exports are only the goods they buy from us and take back to their country.  But foreigners buy many goods from us and use them in the US (say to build a factory or as an investment or financial instrument) and these foreign purchases of American goods don't show up as exports.  As long as the US is the safest and most stable country in the world, we will probably always run a trade deficit, as foreigners will continue to want to keep the goods and financial instruments they buy from us in the US where these assets are safer.  I wrote a lot more about this topic, and the recycling of dollars from China, here.

Finally, implicit in this anti-globalization view of trade is an assumption that the economy is zero-sum -- ie, there is sort of a global fixed pool of jobs, and if China gains steel market share and employment, the US net loses employment.  I have taken on this zero-sum mentality before, but it is particularly wrong-headed in this case.  Historically, the argument makes no sense.  For example, the automation of the farm sector wiped out 80 or 90% of the farm jobs in the US over the last century.  By the zero-summers logic, we should be impoverished.  Instead, these people were redeployed to manufacturing and service jobs that create far more wealth than the old 19th century farm employment.  But while people can sort of accept this historically, they can never accept this in real-time.  But the fact is that when we lose, say, a textile job to foreign competition, we not only gain because everyone pays less for textiles and thus has more money to spend on other things, but that worker gets redeployed over time to higher-value functions.  Look at the old textile belt in North Carolina - what's there now?  Electronics and Bio-tech.

The problem with trade is very like the one in the penicillin analogy -- it is all-to-easy to identify the few short term losers, who lost their job in American industries that can't compete with foreigners, but all-too-hard to find the huge dispersed benefits from lower prices and the continuing creative destruction that comes with strong competition.  This doesn't mean that individuals lives aren't disrupted, but it does mean that it's short-sighted to the point of being a Neanderthal to use these disruptions as an excuse to throttle free trade, just as it would be short-sided to ban penicillin because some people have allergic reactions.

It will be interesting to see if the Lou Dobbs populists rule the day on this issue.  If so, they it will be ironic that it is the Democrats, not the Republicans, who take the first major steps to dismantling the work of Bill Clinton  (because it sure as heck hasn't been GWB supporting free trade).

My prior posts on why you should stop worrying and learn to love the trade deficit are here and here and here and here.  I also looked at trade with China from the other side, and found it is China that should be mad about their government's trade policies and currency manipulation, not us:

It is important to note that each and every one of these
government interventions subsidizes US citizens and consumers at the
expense of Chinese citizens and consumers.  A low yuan makes Chinese
products cheap for Americans but makes imports relatively dear for
Chinese.  So-called "dumping" represents an even clearer direct subsidy
of American consumers over their Chinese counterparts.  And limiting
foreign exchange re-investments to low-yield government bonds has acted
as a direct subsidy of American taxpayers and the American government,
saddling China with extraordinarily low yields on our nearly $1
trillion in foreign exchange.   Every single step China takes to
promote exports is in effect a subsidy of American consumers by Chinese
citizens.

This policy of raping the domestic market in pursuit of exports
and trade surpluses was one that Japan followed in the seventies and
eighties.  It sacrificed its own consumers, protecting local producers
in the domestic market while subsidizing exports.  Japanese consumers
had to live with some of the highest prices in the world, so that
Americans could get some of the lowest prices on those same goods.
Japanese customers endured limited product choices and a horrendously
outdated retail sector that were all protected by government
regulation, all in the name of creating trade surpluses.  And surpluses
they did create.  Japan achieved massive trade surpluses with the US,
and built the largest accumulation of foreign exchange (mostly dollars)
in the world.  And what did this get them?  Fifteen years of recession,
from which the country is only now emerging, while the US economy
happily continued to grow and create wealth in astonishing proportions,
seemingly unaware that is was supposed to have been "defeated" by Japan.

Tonight, it appears that AZ voters will pass Prop 202 to raise recreation use fees in Arizona.  Oh, you say that's not what Prop 202 was for?  It was minimum wage?  That's right.  Prop 202 raises the minimum wage in AZ by 31%. 

I have written about the minimum wage many times.  For a variety of reasons, many seasonal recreation workers in AZ, and in fact in the US, are retired folks who work for minimum wage and a camp site to take care of a facility.  They love the job, and do great work, while filling seasonal jobs that younger folks trying to raise a family can't really take on.  When you take all wage related costs -- wages, payroll taxes, unemployment insurances, workers comp, liability insurance, etc. -- wages drive about 2/3 of recreation costs.  That means that a 31% increase in wages equates to a 20% increase in recreation use fees for camping, boating, day use, etc.

What, you say?  That's not what we meant!  We consumers aren't supposed to pay this extra, you business guys are!  Well, my profit margin is about 5% of revenues, which is a pathetically low number for a service business.  Basically, I do this for fun -- I could probably make a better return investing in government bonds.  So, to avoid bankruptcy, wage increases get passed right through to use fees.  And since the law requires that the minimum wage be increased every year, it means that use fees will have to go up every year (for comparison, we have been able to hold many use fees flat for 3-4 years at a time, despite fuel and other costs).

Sorry.  My employees were happy to work for $5.15 an hour.  They did not ask for a raise.  In fact, I have a waiting list of people who want jobs at $5.15.  It was the voters of Arizona who decided that my employees could no longer legally accept this amount for their labor.  And, unfortunately, it is the voters of Arizona who will have to pay for this raise my employees did not even ask for.

I had been lulled into thinking maybe the US Postal Service was modernizing, but I was wrong.  I have a PO Box in Colorado where I have my mail for our business forwarded to our Phoenix office for the winter months.  However, there is apparently absolutely no way to have all the mail coming to that box forwarded.  It can only be forwarded by name.  So, if I have 7 business names and 12 employees with mail in that box, I have to submit 19 change of address cards.  And, if anyone makes a typo in mailing to one of these 19 names, it won't get forwarded - only if the letter is addressed to the name exactly as it is written in the change of address card will it get to me.  Anyone want to guess how often that happens?

Hit and Run, trying to make a different point, quoted this statement from Harold Meyerson (my emphasis added):

But the new growth of selective libertarianism in the Democratic ranks
is hardly going to be the main source of controversy in coming party
debates. More likely, that debate will pit those who think retraining
is the answer to our more layoff-prone society (that's the Bob Rubin
solution) against those who think that retraining needs to be
supplemented by, for instance, publicly funded alternative energy
programs that would generate millions of jobs (that's the solution of a
number of union leaders, and one that I favor as well). The latter
position is clearly more in the New Deal liberal mode, but Rubin's is
hardly libertarian.

Do serious people actually favor publicly funded alternative energy programs of the scale that would employ millions of people?  Note that since the total civilian labor force is approximately 150 million people, he is talking about a program encompassing several percent of the US workforce.  I am supposed to be on vacation this week, but here are a couple of random thoughts:

• A huge government make-work program seems to be an odd response to an increase in employment volatility, which is how the problem is framed, even by Meyerson.  He calls it our "layoff-prone society."  I don't accept that this is necessarily a bad thing, but even if it is, a jobs program does not solve it.  Our unemployment today is at a low level (less than 5%) so that the problem, if it exists at all, has to be volatility, not the absolute size of employment.  So a jobs program helps, how?
• I will confess a big government-funded jobs program would reduce employment risk in one way:  once someone is hired by the government, whether it be a teacher or bureaucrat,  it is impossible short of a felony conviction to fire them, no matter how horribly destructively incompetent they are.  So anyone hired by this new job program would have a job for life, I guess, though at an enormous dead-weight-loss of the overall economy.
• The current economy hovers near full employment.  That means that millions of people sucked by the government into an alternative energy program would be pulled out of areas the market currently says is the most productive place for them.  Unless the government has identified a massive market inefficiency, such a program will net reduce the productivity and output of the economy.  Remember -- these millions of people are likely employed somewhere else today, so those places they are employed either have to scale back or pay more for labor.
• Does anyone really think the government is going to make the right technology and investment choices in such a program?  It will take about 47 seconds before the investment process is politicized and spending is handed out as pork to valued supporters in key Congressional districts. (just look at ethanol and the Midwest Archer Daniels Midland lobby). Remember, the government has been pouring all its investment and subsidies and regulations (e.g. zero emissions requirements) into plug-in electric cars, which still are not there technologically.  In the mean time, the market has latched onto hybrids, a technology actually opposed at first by government energy czars in places like California (because they were not zero emissions).  Hybrids have done more to reduce automotive fuel consumption than any of the technologies, from plug-ins to fuel cells, that the US government has supported in any big way.

Postscript:  Yes, I know plug-in hybrids may be here soon, but batteries are apparently still not where they should be.  I would love to have a plug-in hybrid.  Note, of course, a plug-in hybrid is very very different from a straight electric car, which was the choice of the bureaucrats.  Also, I know that some areas have started to subsidize hybrids, for example by allowing their use by one passenger in the car-pool lane.  These are late-to-the-party efforts to claim some government credit for a private market trend already in progress.

Update:  In fact, today's SJ($) brings us a relevent example:

[Former Airbus CEO] Mr. Streiff talked of moving production jobs between
partner countries, running Airbus like a business. For the first time,
there was talk of apportioning work on the basis of competitiveness,
not national entitlement. There were hints that Airbus should emulate
Boeing with major risk-sharing partnerships, looking beyond Europe for
new product development resources and production sites. He even
committed the ultimate sin"”publicly admitting that Airbus had fallen
over a decade behind Boeing in new product development.

In his exit statement, Mr. Streiff said, "I
progressively came to the conviction that the mode of corporate
governance at Airbus didn't allow for the success of my plan." In other
words, the now former CEO implies, he was blocked by people who like
the status quo. So who would be happy with the status quo when the
situation is degenerating with each day? Well, any government official
who wants governments to stay in charge of the economy. The last thing
they want to see is private sector cash reinventing the fruit of their
state-directed industrial policy.

For the best clue to this dysfunction, consider
France's finance minister, Thierry Breton. He recently told reporters
that Airbus is a "European success," but vowed to "defend this model."
Now why would a model need defending if it were successful?

Airbus was created when European governments
orchestrated their economies, creating new national and continental
champions according to politicians' whims. As far as industrial policy
goes, Airbus was a no-brainer: The jetliner industry offers guaranteed
growth rates and extremely high barriers to entry. Take some legacy
industrial assets, insert government cash, find some talented sales
people, and watch it go. Every other European industrial
scheme"”shipbuilding, cars, Concorde"”obliterated value. Airbus was the
only state-supported success. Unfortunately, Europe's politicians
forgot a crucial fact: Airbus succeeded despite government industrial
policy, not because of it. In fact, this government interference has
created some serious trouble.

Look at the Airbus record: a series of moderate
successes (A300/310, 330), one huge home run (A319/320/321), and some
lamentable but forgivable near misses (A340, A340-500/600). But with
the full support and connivance of parent governments, they launched a
spine-breaking disaster, the superjumbo. Without the A380, Airbus would
still be a tremendous success. Instead, they've got a serious
industrial crisis, right in the middle of the best jetliner market in
years. Mr. Breton's "model" of state-guided industries is alchemy in
reverse: spinning gold into straw.

Leading "progressive" blogger Markos Moulitsas is trying to tempt libertarians to the progressive cause.  He tries to convince libertarians that growing corporate power should scare them more than government power.  Uh, no.  Hammer of Truth has a good rejoinder:

Moulitsas still cites corporate power over people as a problem, and
still fails to recognize that corporations gain their undue power from
government. Government is the enabler, empowering corporations to step
on individuals and small businesses through both regulations and
subsidies. It's only by restraining government that corporations can be
held in check, and it's unfortuate that Moulitsas hasn't figured this
out yet.

Nearly every government law, from anti-trust to trade law to licensing, generally is written to benefit incumbents who make campaign contributions against upstart competition.  Also, by the way, corporations can't send people with guns to your house if you don't cooperate with their will. 

I have in the past been at the executive level of several Fortune 50 companies, and this notion of corporate power is hilarious.  In each case, our situation seemed like that of a wounded, lumbering elephant, trying to stay just ahead of a back of small but swift predators.  Sure, our very size meant that sometimes we did damage from our thrashing around, but to somehow call this power is absurd.  We were constantly fighting against our own size to try to hold on to what market we had.

Finally, with corporations, including the current great Satan Wal-Mart, I can always choose not to shop or work there.  The IRS and the US Congress offer me no similar protection from their control.

More good stuff along the same lines from Catallarchy.

In this older post, I went into more depth on why progressives never will like capitalism, because they are too conservative (little-c).  At the end of the day, progressives like Kos want to reduce risk, variability, unpredictability and general "messiness".  These goals carry too high a price in terms of lost freedom and lost upside for humanity.

Recently, the so-called "reality-based community" on the left has developed the theory that US oil companies have purposefully dropped gasoline prices from over $3.00 to $2.00 a gallon solely to help Republican re-election prospects in November.  This notion is so insane as to be, well, insane, and I am not even going to bother fisking it any more than I would bother refuting a flat-earth hypothesis.  OK, I can't resist, here are two quick arguments, by no means comprehensive.

• US oil companies control a minority of world oil supplies, and those folks who do dominate the market (Hugo Chavez, Iran, the Saudis, the Russians) are highly unlikely to be cutting Bush much slack.
• The implication is that either the old, high price or the current low price is somehow an unnatural contrivance.  If the higher price was a contrivance, ie above the normal market clearing price due to some collusion, then we would have been swimming in oil as supplies outstripped demand, and inventories would be overflowing.  If the current lower prices are a contrivance, then demand should outstrip supply and we should have lines at every gas station.  Of course, neither situation has been observed.

So here is this week's message for the Left:  Economics is a science.  Willful ignorance or emotional rejection of the well-known precepts of this science is at least as bad as a fundamentalist Christian's willful ignorance of evolution science (for which the Left so often criticizes their opposition).  In fact, economic ignorance is much worse, since most people can come to perfectly valid conclusions about most public policy issues with a flawed knowledge of the origin of the species but no one can with a flawed understanding of economics.

Postscript: In fact, the more I think about it, the more economics and evolution are very similar.  Both are sciences that are trying to describe the operation of very complex, bottom-up, self-organizing systems.  And, in both cases, there exist many people who refuse to believe such complex and beautiful systems can really operate without top-down control.

For example, certain people refuse to accept that homo sapiens could have been created through unguided evolutionary systems, and insist that some controlling authority must guide the process;  we call these folks advocates of Intelligent Design.  Similarly, there are folks who refuse to believe that unguided bottom-up processes can create something so complex as our industrial economy or even a clearing price for gasoline, and insist that a top-down authority is needed to run the process;  we call these folks socialists.

It is interesting, then, given their similarity, that socialists and intelligent design advocates tend to be on opposite sides of the political spectrum.  Their rejection of bottom-up order in favor of top-down control is nearly identical.

Update:  From Cafe Hayek, letter to the Washington Post

Dear Editor:

Alleging
that today's falling gasoline prices result from a fiendish plot to
keep the GOP in power, Kenneth Jones is certain that "gasoline prices
will go right back up to $2.75-plus after the [November] election"
(Letters, October 2).

If Mr. Jones is correct, he can make a
financial killing.  All he need do is to invest all of his assets going
long in gasoline futures (which are today about 30 percent lower than
they were in late July).  Indeed, he ought even to cash out all the
equity in his house, max out on his credit cards, and borrow heavily
from his brother-in-law so that he can invest as much as possible in
these futures.

He can then contribute his post-election financial bounty to the Democratic National Committee.

Sincerely,
Donald J. Boudreaux

I love it when I get proven right, especially just days after my post, where I said:

I just don't know why conservatives are so afraid to let folks like Khatami speak in the US.
Sure, he is a lying dictatorial human-rights-suppressing scumbag, but
so what?  Its good to let people like this speak as much as they want.
They always give themselves away. 

And, shazam!  Both Khatami and Hugo Chavez bury themselves in a deep hole with their verbal idiocy.  Both did more for to rally support against themselves in the last few days than a hundred speeches by their detractors.

PS- My company is cutting up all its Citgo cards on Monday.

I guess it's inevitable come election time, but a cottage industry has arisen of late to spread the word that the US economy is broken and that conditions for all but the rich are actually eroding.  This historically has been a winning strategy -- Remember, in late 1992 Bill Clinton campaigned with the absurd (but generally unchallenged in the media) contention that it was the worst economy since the Great Depression.  Most of the lamentations about the current condition of the poor and middle class are presented with the standard populist baggage that the economy is zero-sum, and these groups ills are somehow related to and the result of the income growth of the very rich.

Jacob Hacker of Yale now adds to the chorus, arguing that in addition to worse material fortunes, the middle class faces more risk.  As someone who gave up a good, high-paying job in corporate America for the risk roller coaster of running by own business, I have little sympathy -- after all, I am part of his trend and I happily chose my path.  And its astonishing to me in this day and age anyone can argue that we have too much of a culture of personal responsibility.  Please.

However, rather than fisking this in depth, I will leave the task to my much more capable ex-roommate from Princeton, who also happens to be a senior something-or-other at Cato, Brink Lindsey:

But if we're talking about
security from material deprivation, that's a different story. Let's
start with the biggest risk of all: that of premature death. Back in
1970, during Mr. Hacker's golden age of economic stability and
risk-sharing, the age-adjusted death rate stood at 12.2 deaths per
1,000 people. By 2002, it had fallen more than 30%, to 8.5 per 1,000.
In particular, infant mortality plummeted to 7.0 from 20.0, while the
number of Americans killed on the job dropped to three per 100,000
workers from 18.

Next, look at the two main
indicators of middle-class status: a home of one's own and a college
degree. Between 1970 and 2004, the homeownership rate climbed to 69%
from 63%, even as the physical size of the median new home grew by
nearly 60%. Back in 1970, 11% of Americans 25 years of age or older had
a college or higher degree. By 2004, the figure had risen to 28%.

As to consumer possessions, the
following comparison should suffice to make the point. In 1971, 45% of
American households had clothes dryers, 19% had dishwashers, 83% had
refrigerators, 32% had air conditioning, and 43% had color televisions.
By the mid-1990s all of these ownership rates were exceeded even by
Americans below the poverty line.

No matter how the
doom-and-gloomers torture the data, the fact is that Americans have
made huge strides in material welfare over the past generation. And
with greater wealth, as well as improved access to consumer credit and
home equity loans, they are much better prepared to deal with the
downside of increased economic dynamism.

Mr. Hacker leans heavily on his
findings that fluctuations in family income are much greater now than
in the 1970s. But research by economists Dirk Krueger and Fabrizio
Perri has shown that big increases in the dispersion of income have not
translated into equivalent increases in consumption inequality. In
other words, most Americans are able to use savings and borrowing to
maintain stable living standards even in the face of economic ups and
downs. And those standards are much higher than those of the
all-in-the-same-boat era.

Mr. Hacker, however, shows little
interest in providing such context or balance. Fully committed to what
could be called a "free market bad, big government good" narrative, he
simply ignores data that point in the other direction. Thus he
lambastes reforms such as Health Savings Accounts and Social Security
privatization for shifting risks onto individuals while failing to
mention that the policy status quo imposes massive risks of its own.

I know Brink has been finishing up his new book.  I would love to see him start blogging again.

More Thoughts:  I have a couple of thoughts of my own on the risk issue:

• Risk, I guess defined as income volatility, may be higher for the average person today that it was in 1970.  However, in a broader context, it is still drastically lower than any time in history or than in most places in the world.  Certainly pre-WWII people had substantially more risk in their income, particularly in the agricultural sector, which dominated the economy of this and other countries through most of history.  In subsistence agricultural economies, every year even the most productive and competent people face not just the risk of income loss but starvation and extinction through factors wholly beyond their control.
• The vast majority of the risk reduction people experienced in this country after WWII came from the operation of the private market economy, and not from government programs.  It was the incredible productivity growth, export growth, and technology growth of American industry that provided whatever security people might be nostalgic for.
• Further, the author worries about a risk-shift.  But in the 50's and 60's, there was very little risk in the system.  Corporations faces little risk in world markets, executives at corporations faced little risk to their jobs, and most workers faced little risk.  There has not been a risk shift -- this implies there was once some Atlas that bore the burden of all this risk and has now shrugged.  One might argue that there is more risk in the whole system - corporations are not guaranteed their market share so workers are not guaranteed their jobs.  The author tries to make it a populist argument, as if rich folks are shrugging off risk onto the poor.  The fact is that everyone faces more income volatility today, from largest corporation to lowest paid worker.  The good news, as Mr. Lindsey points out, is that this volatility is around a much higher mean.
• The costs of income security programs were always funded by workers
  themselves.  There was never a time when this security was provided by a mythical "someone else".  General revenue programs like welfare and defense over
  the last 30 years have been effectively funded by "the rich", since by
  any definition, that is who pays the income taxes.  However, programs
  like social security, Medicare, and unemployment are all based on
  payroll taxes with caps that mean that most of the tax is paid for by
  the poor and middle class themselves  (some of these are technically
  paid as a percentage of wages by the employer, but trust me that they
  have the same effect on take-home pay as if they had been deducted
  directly from the employee's check).  To the extent workers have
  security, it is only because they have been forced to buy and pay for
  an insurance policy.  So again, there can be no shift, because the workers bore the cost of the insurance themseleves.  Are they getting good value for this insurance?  I don't know --
  nobody knows.  Many reform proposals the author worries will further
  increase risk in fact are structured to put this insurance premium back
  in the hands of the worker, to let him or her decide if and how they
  want to spend it to insure themselves.
• The current obsession with this topic of risk strikes me as a case of white collar bias.  I am not sure anyone but the highest seniority workers ever had this mythological income security in the blue collar sector.  Layoffs and technology-based job obsolescence that created turmoil for blue-collar workers never seemed to touch white collar workers in the same way.  My sense is that what's new today is that middle class white collar workers are now facing these same forces of change, in many industries for the first time.  In fact, a skilled machinist is probably more secure in his job today than an account paybables clerk.  For years, the left has joined unions in criticizing companies like GM for continually cutting blue collar jobs without touching bloated white collar payrolls.  It's odd to see them jump suddenly to the other side of the issue.
• I hate to point out the obvious, but what government income-risk-management program has gone away since 1970, other than welfare reform?  Social Security, unemployment insurance, food stamps -- they all exist, most at levels higher than 1970.  Government-funded health care programs cover far more people for far more stuff.
• Certainly some private practices have changed that may affect employee risk.  It is interesting that the author mentioned 401K's.  To Hacker, shifting from defined benefits pensions to 401K's is an increased risk.  I am sure he would point in part to plans like Enron's where 401K holders took a bath because they were encouraged to funnel a lot of their savings into Enron stock.  But most 401K plans don't work that way, and it does not matter since defined benefit plans are even worse.  Defined benefit plans presuppose that the company you work for will remain financially solvent for decades, and they assume workers will never switch jobs, since they are not very portable.  Defined benefit plans are horrible for workers  -- it reduces their flexibility and increases their risk.  401K's are a fabulous, worker-empowering invention and are bad only for a few union leaders and large pension fund managers (e.g. Calpers) who gain political power by virtue of the money they control.
• Yes, many jobs are less stable, but there is no evidence that there are long-term unemployed people out there.  The nature of the people losing work and the job market today has changed, such that there are much better tools to find new work, and there is more work out there for their skills.  White collar workers today probably find new work easier than blue collar workers in West Virginia ever did in the 1950's and 1960's when the mines closed.  My guess is that most everyone from Enron has found a new job (or jail cell).  There are people in Appalachia who still haven't found a job 40 years after the mine closed.

This has been an incredible week in the ongoing culture clash between the western democracies and radical Islam.  In a series of events right out of the Onion or Monty Python, radical Muslims around the world protested the Pope calling them violent with ... waves of violence.  Once his remarks were proven right in such an obvious and public way the Pope reacted by ... apologizing for his remarks.**   

I am tired of apologizing to radical Islam (for some silly, bland cartoons, for god sakes!)  I am tired of bending over backwards into pretzels to give them the benefit of the doubt.  I am extremely tired of being told these folks are just aggrieved and in reality they share my values, because it is very very clear that they don't share my values.  I am tired of being told most Muslims are peaceful --  when these peaceful folks give their sanction and support to the violent ones and accept the most radical as their leaders. 

Radical Islam is, with the downfall of soviet communism and the painfully gradual opening up of China, the most illiberal force in the modern world. By a long shot.  It treats individual life with contempt, has no concept of rights, and in particular treats women far worse than apartheid South Africa ever treated blacks.  The theocracy we fear from certain Republican 700 Club folks is like 3.2 beer compared to full 200 proof Islamic theocratic fascism. 

I don't know why the left in this country has been hesitant to call out illiberal practices in the Middle East as vociferously as they have in other circumstances.  A part of this hesitation is probably opposition to the Iraq war, and fear that denouncing radical Islam for its faults might somehow give the administration a stronger mandate for more military adventures.  A less charitable explanation is that the hesitation is an extension of political correctness and cultural relativism run wild).

Well, I opposed the Iraq war:  The Augean stables are just too dirty to clean up by sending the military from dictator to dictator. I will go further and say I actually think the terrorist threat is exaggerated (and yes I do remember 9/11) in order to keep giving the FBI more powers and help politicians get elected.  Get tough on terrorism is sort of the new get tough on crime election speak.

But I don't think the threat to liberal values posed by Islamic fundamentalism is exaggerated.  And the first step in fighting it is to not give it, as Ayn Rand would say, the sanction of the victim.  People sometimes email me and say "who are we to talk -- America is not clean."  I will agree we have our warts - and much of this blog is taken up with pointing some of them out.  But what I always tell people, and still believe, is the following:

The US does harm when we fail to live up to our values.  Radical Islam does harm when they successfully pursue what they value.

**Postscript:   I don't pretend to understand all the 13th century quotations in the Pope's speech.  I don't think it matters.  If he had simply said "radical Islam preaches too much violence and it has to stop" he would have gotten the same reaction.  By the way, every person in the world seems to say bad things about the US, many of these comments are untrue or apply only to a minority of our leaders and not to myself. I can't remember anyone ever apologizing to me.   This story  that Muslims will do more violence unless the Pope apologizes some more reminds me of Sir Robin in the Monty Python and the Holy Grail.  "Perhaps if we run away more..."

And here is my message to the right -- I acknowledge that radical Islamic leaders treat apologies, backing-down, etc. as weakness to be exploited rather than preludes to reasonable compromise.   For this reason, I thought the invasion of Afghanistan was a necessity.  However, this general fact does NOT automatically justify the Iraq war.  If it did, it would also justify invading any Islamic country we want.  I still don't understand the strategic sense of Iraq and now we are stuck there, because I agree that once in, backing off will only embolden the radicals in the area to further hi-jinx.

A while back, I pointed out that immigration opponents seemed to be depending on American's having poor match skills and a pathetic knowledge of history.  Today in this post from Captain's Quarters we find more statistical funny business.  Captain Ed, like many conservatives, have been stumping for the US to build a big honking fence at the border, nominally as part of the war on terrorism.

Of course according to supporters it is only about security, not xenophobia, which explains why the fence proposal in Congress covers both our northern and southern borders since both are equally porous to terrorists.  Oh, wait, the law only covers the southern border?  Oh.  Well, I hope terrorists can't read a map and don't notice that the northern border is three times as long and in many cases more unpopulated and unguarded than the southern border.

Anyway, another "security" argument by immigration foes is that hordes of criminals are apparently pouring across the border, and walls are proposed as a way to stop them.  The Captain quotes Bill Frist:

One of the most important and most effective ways that we can stop
illegal immigration is through the construction and proper maintenance
of physical fences along the highest trafficked, most commonly violated
sections of our border with Mexico.

Take the case of San Diego. According to the FBI Crime Index, crime
in San Diego County dropped 56.3% between 1989 and 2000, after a fence
stretching from the Ocean to the mountains near San Diego was
substantially completed. And, according to numbers provided by the San
Diego Sector Border Patrol in February 2004, apprehensions decreased
from 531,689 in 1993 to 111,515 in 2003.

Whoa. That sounds impressive.  But, remember what I often say on this site -- correlation is not causation.  Indeed, it is not just random chance that he picked the years 1989 - 2000.  Those were the years that nearly every part of the US saw a huge drop in its crime rate.  Using this data for these years, and presuming Frist is using the crime rate index per 100,000 people, which is the stat that makes the most sense, here are some figures for 1989 - 2000:

Crime Rate Change, 1989-2000:
US :  - 28%
Arizona:  -28%
California: - 45%
New York: -51%

Wow!  The border fence in San Diego even had a similarly large effect on crime in New York State!  That thing is amazing.  Oh, and note these are state figures.  My understanding is that the figures for large metropolitan areas is even more dramatic.  So what happened in 1989 to 2000 is every state and in particular every large metropolitan area in the country saw huge double digit drops in crime, and San Diego was no exception.   But Frist tries to give credit to the border fence.

In case you want to believe that Frist does not know what he is doing with these stats (ie that he wasn't intentionally trying to give credit for a national demographic trend to a border fence in San Diego) notice that 1989 was the US crime rate peak and 2000 was the US crime rate low point.  So with data for the years up to 2005 available, he just happens to end his period at 2000.  Oh, and the new style fences he wants to emulate were actually only started in 1996 (and here, search for "triple fence"), AFTER most of these crime gains had been made.  Correlation definitely does not equal causation when the proposed cause occurred after the effect.

For all of you who always wanted to live in Soviet East Berlin, you may soon get a good taste of that experience:

The first fence, 10 feet high, is made of welded metal panels. The
second fence, 15 feet high, consists of steel mesh, and the top is
angled inward to make it harder to climb over. Finally, in high-traffic
areas, there's also a smaller chain-link fence. In between the two main
fences is 150 feet of "no man's land," an area that the Border Patrol
sweeps with flood lights and trucks, and soon, surveillance cameras.

Below are views of Nogales, AZ and Berlin.  Nothing alike.  Nope.  Totally different.

Finally, I will give the last word to Frist, bold added.

That's why I strongly support the Secure Fence Act of 2006 "¦ and that's
why I'm bringing this crucial legislation to the floor of the Senate
this week for an up-or-down vote. By authorizing the construction of
over 700 miles of two-layered reinforced fencing along our southwest
border and by mandating the use of cameras, ground sensors, UAVs and
other forms of hi-tech surveillance, this legislation would help us
gain control over every inch of our borders "“ once and for all.

"gain control over every inch of our borders," except, or course, for those 3000 5525 miles (350 million inches) to the north where the people on the other side have the courtesy not to speak a foreign language.  But its hard to demagogue well about a threat from Canadians, since they are mostly WASPs like we mostly are, or at least it has been for the last 100 years or so.  54-40 or fight!

Update: Here is that terrifying Canadian border barrier (from this site).  This demonstrates why our terrorist security dollars need to all be invested on the southern border, since this one is already locked down tight.  Heck, there is one of these babies (below) every mile!  Beware terrorists!

And don't forget these terrorist-proof border checkpoints along our northern frontier:

But it's not about race.

Update 2:  Yes, my emailers are correct.  I did not actually give Frist the last word like I said I would.  Gosh, I feel so bad about that.

Update 3:  Welcome to readers of my favorite site, Reason's Hit and Run.  It looks like Texas may soon consider a border fence, though with Louisiana instead of Mexico.

I just don't know why conservatives are so afraid to let folks like Khatami speak in the US.  Sure, he is a lying dictatorial human-rights-suppressing scumbag, but so what?  Its good to let people like this speak as much as they want.  They always give themselves away.  There were counter-protests and lots of debate about Iran in the news and on the nets, and that is as it should be.

I suppose conservatives real fear is that the press will, as they sometimes do, throw away their usual skepticism and cynicism and report his remarks as if they were those of a statesman rather than a thug on a PR mission.  But that's a different problem, and not a good enough excuse to suspend free speech, even for a man who granted it to no one else in his own country.  (I have never bought into the "media bias" critique, either conservative or liberal, in the press, because this seems to imply some active conspiracy exists to manage the news to some end.  Rather, I think it is more fair to say that reporters tend to apply too little skepticism to stories with which they are sympathetic.  For example, many reporters think homelessness is a big problem, so they were willing to uncritically accept inflated and baseless numbers for the size of the homeless population, numbers they would have fact-checked the hell out of if they had come from, say, an oil company to whom they are unsympathetic or skeptical of.)

On the same topic, I don't know why conservatives are so worried about this story of an increase in students from Saudi Arabia.   It used to be that we had confidence that people from oppressive countries would have their eyes opened by living in the US.  We have always believed that intellectually, freedom was more compelling than dictatorial control, and would win over hearts and minds of immigrants.  Our foreign policy with China, for example, is counting on engagement to change China.  Have we given up on this?

Apparently, conservative Republicans are gearing up for a big Congressional push on "border security", hoping to decouple it from any discussion of immigration liberalization.

I know from my email and comments that many of my readers disagree with my stand for open immigration.  Reasonable people can disagree, but the hypocrisy of the "border security" and its linking to the war on terror really set me on edge.

If you are a "border security" supporter, then say what you mean -- that you want to string a lot of razor wire and enlist the US Army to secure the border from ... poor people looking for a job.  I get email every other day from the "minutemen" who triumph their brave defense of the border.  I will virtually guarantee that they have not found a single terrorist and probably have not found a single person coming over the border solely for criminal intent, and that 100% of their impact has been to set the authorities on people who are looking for work.  Yes I know that foreign born people looking for work in the US without the proper paperwork is currently illegal, but so is speeding and making a rolling stop at a stop sign  (which are, by the way, a lot more dangerous).  The question is, who is being harmed?  To be precise, the government's job is not to "secure the borders" but to "secure its citizens".  Doing so presupposes we can clearly state, "against what?"

Yeah, but what about the terrorists?  Don't make me laugh.  There are so many other, easier ways for a terrorist to get into the US that every terrorist act to date has been committed by people who came through normal border checkpoints and not across the Sonoran desert.  And I have written several times about open immigration would actually make it harder on known terrorists entering illegally, by eliminating the camouflage of other people crossing the desert for them to hide in.  And besides, every plan I have ever seen of late involves a wall along the Mexican border, but nothing along the Canadian border.  A terrorist can sneak over either just as easily, so a plan that was really aimed at terrorism would be putting walls on both borders.

I am sympathetic to the argument that you can't provide full government handouts, err, benefits to everyone who shows up at the border.  So fix the eligibility rules on government benefits, as I suggested in my plan here.

So lets be honest.  If you want border security, lets not pretend that a wall along the Mexican border  is about terrorism or security.  Its about stopping people who were not born in this country from working here.  Though I am opposed to the efforts, it is actually kind of refreshing to see nativist groups going after day labor centers.  This at least represents an honest and open statement of their intentions, that they want to prevent a certain class of people from getting work.

Update: Kerry Howley at Reason has some similar thoughts

This makes perfect sense to me.  The fact that I am 6'-4" tall has nothing to do with it:

Economists have long been irritated by the weird fact that tall people
have better jobs and earn more money. Many explanations have been
offered, various forms of social and individual discrimination first
among them. But two Princeton economists disagree: "In this paper, we offer a simpler explanation: On average, taller people earn more because they are smarter."

Update: I am amazed that I even have to say this, but of course I am having fun with this and don't take it seriously (I can't believe all the emails this has generated).  Besides, just think about the math for a minute.  There is a broad normal distribution of intelligence for both short and tall people.  The study says the averages of these two distributions diverge a bit.  But even if they do, the distributions themselves are much, much wider than this divergence.  This means in practice, even if true, this study has no predictive power for individuals you meet.  Short and tall people will be both smart and dumb.  It only means that if you somehow met all 300 million people in the US, you might notice you met a few more smart-tall people than smart-short people, but that is all it would mean.  Now, I do believe tall people might make more money.  There is good evidence that tall people get disproportionately favored in hiring and promotions than equally qualified folks who are altitude challenged.

Now, if you said short people were touchier and more over-sensitive than tall people, I would have a hard time disproving it from my email.

For most city dwellers, the temperature increase in the summer time from the urban heat island effect (UHIE) dwarfs any temperature increase from global warming.  UHIE is the result of high population density, with lots of cars and equipment that generate heat and buildings and roads that seem to hold it in.  Many cities are several degrees warmer than the surrounding countryside.  The effect is so dramatic that correcting for this effect is a big part of the uncertainty in answering seemingly simple questions like "how much has the earth warmed in the last 100 years?"

Apparently, UHIE is a big problem in one of the world's densest cities, Tokyo.

The gleaming high rise buildings that crowd the
cityscape may symbolize Japan's economic recovery but they have also
converted this priciest of human habitats into vast heat-trapping
canyons in what is known as the urban heat island (UHI) effect.

Heat churned out by air-conditioners, automobiles and human activity
finds no escape, causing ambient temperatures, especially in the summer
months, to rise by several degrees and forcing authorities to
constantly look for newer ways to cool down a city on the boil....

A report released by the Tokyo Metropolitan government this
year shows that average temperature rise in the capital over the course
of the 20th century has been 3 degrees C....

Yamaguchi also told IPS that the number of days recording temperatures
of over 35 degrees C has gone up to more than 35 days a year,
concentrated around the three summer months between July and September.
That contrasts with the 14 days recorded in 1975....

Tellingly, most of the deaths from the European heat wave several years
ago where in cities, which tells me that UHIE had a contributing role
more than global warming.  This is actually something we argue about
from time to time in Phoenix.  Ocasionally the city considers
steps to lower our albedo, such as requiring white (rather than black)
roofs and looking at alternatives to dark asphalt for roads.

This has never been a big environmentalist issue.  My guess is that
this is because environmentalists, at least in the US, have adopted a
goal of increasing urban concentration and population densities.  I
suppose it might be embarassing for them to admit the warming they are
trying to get city dwellers to blame on CO2 may in fact be largely due
to the environmentalists own urban planning approaches.

I sense I am in the minority on this (what's new) but I just don't understand the outrage directed at the decision to let Muhammad Khatemi into the US for some speaking engagements.  I guess I am enjoying the spectacle, though, of conservatives attacking McCain-Feingold for limiting free speech and then attacking the state department for letting a former head of state (albeit a fairly crazy one) into the country to, uh, speak.

The letter says that allowing
Mr. Khatemi to visit America "undermines U.S. national security
interests with respect to Iran and the broader Middle East." It also
says permitting Mr. Khatemi's "unrestricted travel through the United
States runs contrary to U.S. priorities regarding homeland security."

Taking the first part of this objection, I suppose they are arguing that granting this person a visa is somehow a reward, and we don't want to reward Iran.  Now, I will confess that Iran sucks, but I don't get how this rewards them or sets back our cause.  Yes, if he was received in the White House or by a prominent government official, I can understand it, and I would oppose doing so.  Besides, when our former head of state Jimmy Carter goes to other countries, the trips always seem to have the opposite effect that people fear here, as he tends to hurt rather than somehow advance his home country's interests every time.

As to the second part, I could understand it if someone had a legitimate concern that this was a terrorist leader and he would be spending his time visiting and organizing terrorist cells, but I have not seen anyone make that claim.  Besides, if I was in the FBI, I would love it if he was here to do that, and would follow him all over the place.  The CIA and FBI often leave known agents in place, because it is much easier to stay on top of the person you know about than the person you don't.  A high profile visit by Khatemi should be the least of our security concerns.

This just strikes me as one of those silly political loyalty tests that Democrats seem to like to conduct on domestic policy and Republicans conduct on foreign policy.  If you let this guy in, you are branded as a supporter of terrorism and fascism and whatever else. 

As I said just two days ago:

I am constantly irritated by efforts to ban a certain speaker from
speaking or to drown out their message with taunts and chanting.  If
you think someone is advocating something so terrible - let him talk.
If you are right in your judgment, their speech will likely rally
people to your side in opposition.  As I like to tell students who want
to ban speakers from campus -- Hitler told everyone exactly what he was
going to do if people had bothered to pay attention.

By the way, in explanation of the title of this post, I was reacting to something quoted from Rick Santorum.  Now, I often hesitate to react to comments by Santorum, because, like Howard Dean and a few others, he is sort of a human walking straw man.  But here goes:

On it, Mr. Santorum, who
has cut his deficit against his Senate challenger in Pennsylvania to
single digits, wrote that he should be granted a visa only if Iran
allows their people to hear "free American voices."

Mr. Santorum wrote: "We should insist, at a minimum, that the
Iranian people can hear free American voices. Iran is frightened of
freedom. They are jamming our radio and television broadcasts and
tearing down television satellite dishes in all the major cities of the
country. It seems only fair that we be able to speak to the Iranians
suffering under a regime of which Muhammad Khatemi is an integral part."

So now are we going to allow people free speech only if their country does so in a bilateral manner?  All you Americans of North Korean, Chinese, Iranian, Saudi Arabian, Venezuelan, etc. decent, Beware!   This logic betrays a theory of government that rights don't extend from the fact of our existence, but are concessions granted by the government.  By this logic, people have free speech only as long as the government allows it, and the government has the right to trade away an individual's free speech as a part of a negotiation.    

Eight days from now, all of our first amendment rights will be put away in a box for 60 days, hopefully to be retrieved after the election is over.  During those 60 days, and in an astronomical violation of the intent of our Constitution and Bill of Rights, none of us, unless we are operating under the banner of certain organizations like official political parties, will be able to pay to publicly criticize the *cough* fine *cough* men and women who serve as elected officials in this country.  Once the election is over and their jobs are safe and the criticism is moot, then you will get your speech back.

Thank you very much John McCain, Russ Feingold, all the Congressmen who voted for this, GWB who signed it, and the Supreme Court who astoundingly declared it constitutionally A-OK.

Update: Here is an example.  I use it because the people involved are try to fund ads to support a law I absolutely oppose (I have no desire to give the Feds more power over the free movement of US citizens across state lines).  But I totally support their right to advocate their position on TV.  In this case, their public speech is great even for folks like me who oppose what they support, because I didn't even know this proposed legislation existed until they started talking about.  Their ad informs me, even if it is sending me the message that I need to counter their message.  And that is what political dialog should be in a free society.

I am constantly irritated by efforts to ban a certain speaker from speaking or to drown out their message with taunts and chanting.  If you think someone is advocating something so terrible - let him talk.  If you are right in your judgment, their speech will likely rally people to your side in opposition.  As I like to tell students who want to ban speakers from campus -- Hitler told everyone exactly what he was going to do if people had bothered to pay attention.

My vote for the world's ugliest bank note is the new US $10 bill (click for larger pictures)

Really these images don't do justice to just how butt-ugly this bill is.  I understand the need to introduce color and anti-counterfeiting technologies.  I also understand that they are trying to maintain elements of the historic greenback.  But this bill marks the point where it is now impossible to sustain both these goals.  If we need color, then its time to go color -- maybe Peter Maxx could design a new bill.

Really, who designed this thing?  The combination of colors is god-awful. And what's that blank oval on the back that looks like a misprint?  This thing is a mess.

(Note to my wife:  Yes, I am actually blogging about this.  She thinks that some of the things I get worked up about are kind of trivial.)

Update:  One of the commenters reminded me that there were for a while calls to replace Hamilton with Reagan.  I guess Hamilton was singled out because like Franklin, he is a non-president.  Which is kind of ironic, since Hamilton probably knew more about money and banking than all the presidents on the other bills combined.  I'd be a lot happier if they instituted some kind of waiting period, like for the Hall of Fame, of say 50 years before you can get your face on currency.  Besides, everyone know that the Gipper is supposed to be on the quadrillion dollar note.

I have been spammed several times with messages breathlessly telling me I have to watch this video about why the free flow of people from poorer nations into the US looking for opportunity is so disastrous.  I had nothing else to do in my hotel room, so I watched a bit.

The video clearly relies on the fact that American students have had crappy education into US history.  He uses the period of 1925-1965 as his base period, to show how much higher immigration rates are today than in these years.  To try to make current immigration seem out of line, he gives us the first real whopper of the video - he actually calls 1925-1965 the "golden age of American immigration", implying it was an era of free and open immigration and representative of a high rate of immigration.  Anyone with any sort of history education should be able to smell a rat - after all, wasn't the late 19th and early 20th century the real period of immigration into this country? 

In fact, 1925-1965 was, on the metric of immigration as a percentage of US population (the correct way to index the number) the LOWEST and most restrictionist period of immigration in our entire history.  In fact, 1925-1965 was the golden age of xenophobic restriction laws (aimed mainly at that time at southern and eastern Europeans).

So, after the lecturer began his talk by saying that white is black, I was obviously not really interested in the rest  (not to mention the fact that he for some reason reminded me of across between Rutger Hauer and Crispin Glover playing a creepy takeover-the-world villain).  He tries to take an environmental approach, I guess to try to lure the Left into the nativist camp.  I will say his upward sloping population charts are pretty funny, given that they have absolutely no relationship to any credible forecast.  He seems to take the global warming modeler's approach to shifting assumptions to get that big hockey stick.  His argument is ridiculous, though.  If you believe that a unit of population brings with it a measure of environmental harm, then immigration doesn't really change the net harm to the globe, it only moves its effects around.  And I would argue that the US with its wealth and attention to environmental matters is in a far better position to mitigate these effects than say Mexico.  I addressed this conservative retread of Paul Ehrlich population bomb panic here.

I was thinking on the airplane today about how to categorize our current situation in Iraq.  Its hard to draw exact conclusions about where we are there, because I don't think anyone is giving the whole story.  I am willing to believe that we have done a better job than the media has portrayed of rebuilding infrastructure and schools and wells and all that stuff, though at a horrendous cost.  I am also willing to believe that the Bush administration is downplaying crucial problems of factionalism and tribalism that they grossly underestimated before getting involved there.

My fear is that we have turned Iraq into a big dead man's switch, with the US army's finger on the button to keep things from blowing.  My fear, and I think a lot of people share it, is that as soon as we leave, and take our finger off that figurative switch, the whole place is going to blow up.  And, to overextend the metaphor, I can't see what the US is doing or can do to disarm the thing.  Its a lose-lose, as far as I can see, with a costly long-term occupation leaving us open to the "imperialism" meme on one hand, and reduced long-term credibility on the other, with a pull-out letting future allies and enemies alike know that there is a point at which we give up.  Its back to the old Wargames conclusion:  "Strange game -- the only winning move is not to play."