The Liberty School

The effects of uncertainty

Today the Wall Street Journal has a great piece highlighting the absurdity of short-term fiscal policies:

Now Congress, taking up a deal worked out between the Obama administration and Republican leaders, is poised to turn the whole personal income-tax system into something of a temporary structure. The plan embraces a broad range of provisions—an extension of Bush-era rates, a new estate-tax formula—but for only two years. A payroll-tax cut in the bill is for a single year.

This means that if the compromise passes largely intact, the U.S. will have no permanent regime governing levies on salaries, capital gains and dividends, the Social Security tax, as well as a slew of targeted breaks for families, students and other groups. This on top of dozens of corporate-tax provisions that already were subject to annual renewal.

The level of uncertainty, unusual for developed nations, complicates planning and discourages hiring and investment, many economists and corporate executives say.

Couple that with the Washington Post reporting that businesses are squatting on $1.8 trillion in cash and you get a perfect example of the effects of economic uncertainty. Asinine government policies, both fiscal and monetary (and then some), are leaving companies extremely unsure of the economic climate to come. With portions of ObamaCare not set to take effect until as late as 2018 and bipartisan control of Congress coming in 2011, I wouldn’t expect any degree of assurance any time soon.

Filed under: Economics, Politics,

South Korea caves to US protectionism

Recently there has much much ado about the trade agreement between the US and South Korea. Unfortunately an egregious error is being made by many people who have called the deal a “free-trade” agreement. It is anything but.

Merriam-Webster dictionary defines ‘free’ as “having no trade restrictions” and “not obstructed, restricted, or impeded.”

Instead of standing up for true free trade, one that eliminates all impediments to an open flow of goods and services, the South Koreans gave in to President Obama and his union cronies’ demand for protectionism. This deal has nothing to do with free trade and everything to do with protecting American auto makers from foreign competition. The deal lowers export tariffs on American-made vehicles from 8% to 4% while the 2.5% tax on imported Korean-made cars, originally set to expire immediately in the Bush-era version of the agreement, is allowed to remain. Itl also cuts the entire 10% South Korean tariff on American trucks while maintaining the whopping 25% tariff on imports of South Korean trucks.

Speaking about the deal, President Obama said that “this agreement shows the U.S. is willing to lead and compete in the global economy.” If American automakers were willing to “compete in a global economy” they would not support barriers that prevent their competitors from selling their goods at a cheaper price in their backyard. It is precisely because they are unwilling to compete that they seek to stifle the competition by installing impediments to competition.

Filed under: Economics, Politics, ,

2010 Endorsements

I see no better place to begin my series of endorsements than my home congressional district – Virginia’s 3rd district.

Incumbent Democrat Bobby Scott is one of the most liberal members of Congress. In a recent interview with NBC12’s Ryan Nobles, Scott was unwavering in his support for letting the Bush tax cuts expire thereby raising taxes on all Americans.

In his 17 years in Congress, Bobby Scott has not met a spending bill he did not like. He has consistently voting for more wasteful government spending and programs while raising taxes and the debt ceiling. Scott favors, in his own words, a “government run” healthcare system. But what is far more damning is Bobby Scott’s view on the Constitution. He believes that he, as a congressman, has unlimited power via the General Welfare clause (despite the rest of the Constitution) and the only check on the power of congress is voters:

I think it’s fair to say that there is a check, we have elections every two years…You elect members of Congress, they use judgement, if people don’t like the direction that we’re going in they’ll change. That’s why we have elections.

Indeed, we have elections. And while Bobby Scott is virtually assured re-election thanks to a 1992 Department of Justice mandate that the Virginia General Assembly draw a black-majority district, voters still have alternative choices: Republican Chuck Smith, Libertarian James Quigley, and Independent Green John Kelly.

Scott’s biggest opposition comes from former 2nd district candidate turned 3rd district anointee Republican Chuck Smith. But Smith is certainly not the incumbent’s most substantial opponent largely because he has very little substance.

I have followed the Chuck Smith campaign since day one – I was a delegate to the 3rd District Republican convention that “nominated” him. During the entire campaign I have yet to hear one specific proposal from the man. He has run an entire campaign on the phrase “principles before politics” – a phrase more ambiguous than a Picasso painting. As I understand it, the only things that even qualify Chuck Smith for membership in the Republican Party are his general opposition to taxes and and equal rights for gays. In his radio town hall with WRVA’s Doc Thompson, Smith struggled to mold his answers in such a way as to not commit to any specific position – a sign of complete cowardice.

The fact remains that Chuck Smith is not only a terrible Republican, he is a terrible candidate. This is why the voters of the 2nd district overwhelmingly opposed his nomination as their candidate. Not to be refused what he wants, to be sent to Washington with the rest of the tactless politicians, Chuck stepped into the race for the 3rd district nomination where he managed, with the help of several unit chairs and the 3rd district leadership, to clear the field of the other three candidates therefore giving voters no choice and capturing the nomination unopposed.

Bobby Scott’s most principled and substantial opposition comes from Libertarian James Quigley. James understands the details of a vastly expanding government and the dangers it poses to individual rights. He is unafraid to answer a question with unadulterated honesty and does not hesitate to consider the ramifications of taking a position. James has worked hard to grow his campaign from the ground up and has surprised nearly everyone in the 3rd district and surrounding areas by his success, so much so that Virginia’s top conservative blog Bearing Drift has predicted that Quigley will attain 10% of the vote – a resounding success for a third party candidate with very little money and no help from a leviathan national party.

For his undiluted support for liberty, I hereby endorse James Quigley for Congress in Virginia’s 3rd district.

Filed under: Politics, ,

Blaming money where money isn’t to blame

As the election draws nearer and the Democrats fall farther and farther behind in the polls, they’re trying a last-ditch effort to convince voters that the GOP is being funded by rich, evil, multi-national corporations. They’re trying to harness the anger over the Citizens United ruling that overturned limits on corporate spending in elections. As the New York Times puts it:

We can’t turn on the television these days without being assaulted by ads anonymously savaging candidates. Welcome to politics in post-Citizens United America. The Supreme Court allowed unlimited campaign spending by corporations and unions but didn’t require the folks picking up the tab to stand behind their words.

It is too late for this campaign. The House approved a measure requiring phantom check writers to identify themselves on their ads and barring money from overseas corporations. Senate Republicans blocked it. Voters who say they’re fed up with negative politics — and sleazy back-room deals — need to demand better.

I couldn’t agree more that voters should demand better – from themselves.

On November 2nd I will be voting for a candidate who has no chance of winning at this point and is last amongst the three candidates in terms of funds. He has no commercials on television and I have yet to even see one yard sign in my area of the district. Yet I know who he is. I know what he stands for. I have heard him speak, as I have heard all of the balloted candidates speak. I know these things because I take my vote seriously. I am a rare breed – an educated voter.

The myth that money buys votes is precariously pervasive amongst the electorate and is entirely counterintuitive. To affirm such a belief, one must admit that they sell their vote to the highest bidder. Surely you will have a difficult task finding a person who would confess to such bribery, yet those who blame wealthy corporations and candidates for buying an election are ubiquitous. Thus is the myth dispelled.

The truth is that money is often a scapegoat for the loser. Instead of accepting the much more likely culprits – that voters are angry with their performance or oppose their agenda – they purport that filthy rich corporations and/or unions are stealing the election. The fail, however, to make the logical connection between said money and the electorate’s supposed inability to choose for themselves. Does money influence elections? Certainly, but only because people are irresponsible with their vote. In this case it’s far more reasonable to blame the people instead of the entities pouring cash into TV ads and mailers. This phenomenon lends great credence to the belief, professed by the likes of John Stossel, Bryan Caplan, and myself, that, while it is everyone’s right to vote, it is most often best if they do not.

The money myth draws its lifeblood from fears that politicians, once in office, will be beholden to their campaign’s funders. Therefore, as the fable goes, people must know precisely who those funders are. I have a better suggestion: If you have a reasonable suspicion that a candidate is likely to be faithful to anyone or anything other than the Constitution of the United States, don’t vote for them.

Filed under: Politics, ,

The NYT wants another housing bubble

Because the housing market isn’t recovering from the folly of government intrusion at break-neck speed, the New York Times is calling for…more government intrusion:

Mortgage rates are averaging 4.3 percent for a 30-year fixed-rate loan, and the Federal Reserve is considering pushing them even lower. In theory, those low rates should unleash a wave of refinancings, giving homeowners and the economy a boost.

Here is the catch: Millions of people who are current in their payments cannot qualify for low-rate refinancing because their home values or credit scores have declined during the recession.

That is bad news for everyone. But there is a way out. Many of the disqualified mortgages are owned or backed by Fannie Mae and Freddie Mac, the government-controlled mortgage companies. The Obama administration could direct the companies to refinance the loans of anyone who is current. That could pave the way for up to eight million refinancings, for a savings to borrowers of roughly $24 billion a year.

Essentially, the NYT wants to add an unnatural amount of risk to the market (again) to counter the natural correction of home prices instead of allowing home equity to return to market levels over time. As the Times itself points out, this is part of the cause of the original housing bubble:

Loosening loan standards may seem like a replay of what caused the mortgage mess, including the costly failure of Fannie and Freddie. But both companies and taxpayers are on the hook if borrowers default.

Taxpayers are only on the hook if the government does precisely what it has already done: subsidize risky lending thus ballooning the default rate and promising to pay for the negative effects of their folly with taxpayer money.

Filed under: Economics, Politics,

Basic economics: 9/11 edition

On the 9th anniversary of the September 11th attacks, Bob Crandall, the former president and CEO of American Airlines, appeared on FOX News with Neil Cavuto to discuss airline safety since 9/11 as well as the little known “airline bailout.”

Understandably overshadowed by the worst terrorist attack in our nation’s history (and because Republicans only criticize bailouts and massive spending when done by Democrats) the airline bailout got little attention at the time it was passed. Now, with the distress of 9/11 mitigated by father time, it serves as a great exemplifier of the very core laws of economics – supply and demand – in an ‘era of bailouts.’

In his interview with Neil Cavuto, Crandall claims that the airline industry “might very well have simply run out of cash” sans the government bailout. He goes on to say that without taxpayer cash the industry would not be able to operate, that planes would not be able to fly although, only seconds prior, Cavuto had pointed out one very simple yet paramount fact – “people were very afraid to fly.

This is where it gets very simple: If fewer people want to fly, fewer planes are required to fly them. Fewer flight attendants are then needed to serve passengers, and fewer employees to operate the terminals. The industry will adjust and, if done properly, losses can be attenuated.

These are all economic axioms. Surely Mr. Crandall, a graduate of the University of Pennsylvania’s Wharton School, knows how the profit-and-loss mechanisms of a free market works. What he also knows is that the airline industry was heavily troubled prior to September 11th.

In the early 90’s the entire industry suffered a near $10 billion loss. Many airlines were filing for bankruptcy or collapsing altogether. After Crandall’s departure, American bought Trans World Airlines, which filed for its third bankruptcy as part of the purchasing agreement, in April 2001. Four months later that year, still prior to 9/11, Midway Airlines filed Chapter 11 bankruptcy due largely to competition (imagine that!) from low-cost Southwest Airlines opening shop at Raleigh-Durham. After Christmas came early for the industry via government bailout, Midway resumed operations until filing bankruptcy once more in 2003 and finally ceasing operations for good.

What the airline bailout teaches us is that Keynsianism fails every time it is tried. Markets will adjust to fluctuations in the economy just as the airline industry was in the process of doing before the natural flow of the business cycle was interrupted by government intervention.

In other words, basic economics.

Filed under: Economics, Politics,

Maintaining failure in education

Over at Cato @ Liberty, Andrew Coulson argues that we should return to the student-to-teacher ratio of the 1970’s. As Andrew notes, achievement has not budged despite a steady increase in education spending a doubling in employment. His assumption is that such increases have not had any effect and that “there’s no reason to expect it would fall if we pared back the government school rolls.”

Perhaps he is wrong.

Any good economist knows that there are seen and unseen effects of every action. It is seen that the level of achievement has remained relatively the same over the past few decades despite an avalanche of spending. What may be unseen, however, is the movement of the level of achievement. If you are confused, imagine someone on a treadmill – they may be moving but they are not changing position. This is caused by the runner’s forward propulsion being offset by the equal and opposite movement of the treadmill’s conveyor belt. To continue the analogy let’s pretend that the level of student achievement is the runner and the treadmill’s conveyor belt is the infusion of taxpayer money. It is quite possible that the level of achievement could have fallen sans the increase in spending, just as the runner would be changing his position without the treadmill nullifying the force of his legs.

To many libertarians and opponents of public education this may not be a friendly argument because it requires one to admit that, to some degree, spending does affect achievement. However, accepting this argument as correct would also lead one to conclude that the increase in the level of achievement as a percentage of each dollar spent is very low – a compelling example of poor government efficacy. As I see it, that the government must steadily increase spending merely to maintain a failing system is a much more damning argument against government control of education than any other.

Filed under: Politics,

The voting compromise

I’m sick of the “that candidate just doesn’t have a chance” meme. So I’m going to discredit it.

Often times people tell me that my preferred candidate can’t win, that people have to unite on someone they agree with 70%-80% of the time for the sake of beating someone they agree with only 10% of the time. Well, let’s play a numbers game.

Let’s say there are 50 voters who generally agree with each other. Five decide to vote for the underdog candidate. Of the other 45, 20 of them – less than half – say that they are going to support the establishment candidate because the other guy just can’t win, even though they agree with that candidate far more. Winning, they say, is more important than the ideal candidate (many would argue about what the precise definition of winning is, and that you can never win if you compromise). Remember now, this is less than half of the remaining voters.

At this point, the establishment candidate wins 45-5. Anyone see where I’m going with this? If you do, you’re either an uncompromising voter, or you’ve been cured already. If not, keep reading.

A second scenario has the aforementioned 20 voters having a bit more faith and following the first five in voting for the person they support the most, avoiding a compromise. Suddenly we are at a 25-25 tie. And there goes that argument, one-fell-swoop.

Now many people will claim that it’s not that simple; that the dynamics brought on by such things as closed primaries make it easier for the base of a party to select a candidate that is too far outside the mainstream. This, of course, is said only by people who are not part of said base, and disagree with you anyway.

Filed under: Politics

Haley Barbour and free labor

It is highly unfortunate that it took a natural disaster for a prominent member of the Republican Party to understand the benefits of free labor. Indeed, it was in the aftermath of Hurrican Katrina that Mississippi Governor Haley Barbour came to appreciate the influx of labor, both legal and illegal, to help the ailing state. With hundreds dead and billions of dollars in damage, Mississippi was on its knees. In an interview with Peter Robinson from the Hoover Institution, Governor Barbour attributed much of the success of the recovery effort to immigrant workers.

I don’t know where we would have been in Mississippi after Katrina if it hadn’t been for the Spanish speakers that came in to help rebuild, and there’s no doubt in my mind some of them weren’t here legally. Some of them were, some of them weren’t. But they came in, they looked for the work. If they hadn’t been there, if they hadn’t come and stayed for a few months or a couple of years, we would be way, way, way behind where we are now.

The entire Katrina recovery effort owes much of its success to President Bush, who suspended the Davis-Bacon Act in response to the damage caused by Hurricane Katrina stating that it would “result in greater assistance to these devastated communities and will permit the employment of thousands of additional individuals.” The act, implemented in 1931 to intentionally stifle competition in the labor market and keep blacks out of work, was also suspended by George H. W. Bush in 1992 in response to Hurricane Andrew.

It strikes me as odd that Republicans support a free labor market in times of disaster but otherwise turn immediately into protectionists with an asinine immigration policy.  There are a few, however, who get it, such as Arizona Representative Jeff Flake.

Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!

Filed under: Economics, Politics, ,

Conservative bigotry on gay marriage

The past week has had me pulling my hair out reading the conservative backlash against Judge Vaughn Walker’s decision that California’s Proposition 8 banning gay marriage is unconstitutional. Conservatives often cite the Constitution, limited-government, personal responsibility, freedom, etc. But now they’ve been hooked in the mouth by their hypocrisy.

The truth is, conservatives believe in the freedom so long as they agree with what you are doing, and that’s not freedom at all. As many conservatives tend to be Christians, they seek to legislate their morality onto the masses; this is, quite clearly, the origin behind the anti-gay marriage movement. Now, while the lay conservative may cite the Bible (“If a man lies with a male as he lies with a woman, both of them have committed an abomination. They shall surely be put to death. Their blood shall be upon them.” Leviticus 20:13) more professional conservatives, the ones that know we do not operate under the Christian Republic of America, must attempt to circumvent their religious motives and argue from another avenue. In doing so, quite clumsily I might add, they further prove their ignorance on history, the Constitution, and law in general and inadvertently admit their hypocrisy and bigotry for all the world to see.

Take this, from a post on RedState:

Judge Vaughn Walker’s Perry v. Schwarzenegger decision is being hailed as a sweeping victory for same-sex marriage advocates and crushing blow to supporters of the traditional definition of marriage as it has been since the existence of the institution.

Notice the word “traditional.” Where in the Constitution does it denote that we must enshrine tradition into our laws? If I recall correctly, slavery was a tradition for quite some time. Traditionally, women weren’t allowed to vote. If we are to protect tradition we must immediately revoke women’s right to vote and enslave all people of African descent. Clearly, this is not what the author wants. What he really means is the Christian definition of marriage. He cannot admit to this, however, lest he be a theocrat.

Other rants just make me laugh, such as this post also at RedState in which the author, in a fury of anger, contradicts himself several times:

There is absolutely zero evidence that the people who drafted and ratified the 13th, 14th and 15th Amendments to the Constitution intended to prohibit the people of the United States from being able to recognize though the democratic process what marriage is – a union of a man and a woman.

I find poetic irony in a conservative – the breed of politico that never leaves home unarmed of the “America is a Republic, not a Democracy” meme – espousing “the democratic process” aka mob rule. Or is he:

For reasons of pro-creation and parenthood, to start with, but also for reasons of faith and morality, for some of us, any marriage other than such a union can never be, whatever society says, a “marriage” at all.

At this point I cannot contain my laughter, and confusion abounds. As the author points out, society is not fit to tell him the definition of marriage. But it is fit to define marriage through a constitutional amendment. Uhm…

Looking more locally on the radar, Steven Osbourne writes at Bearing Drift:

…theoretically the federal government could tell the Catholic church that the equal protection clause applies to married men who wish to join the ranks of the Catholic priests, despite the fact that the Catholic church restricts that office to celibate members.  Although this example may seem far fetched, what Judge Walker has done here has opened a door that could lead to much more government control over religious institutions, which would be a violation of the first amendment.

His ignorance here is astounding. The Walker decision stated that the government, as an issuer of marriages, cannot discriminate based on sexual orientation. Nowhere does it state, imply, or give way to the possibility that the government can intrude into private religious practices.

Conservatives are supposed to believe in freedom and liberty for all. Clearly, such is not the case.

Filed under: Law, Politics,