Big things

December 20, 2010

Interesting article here asking why can’t we do big things anymore.  First, lets look at the list:

The recent quick fade of the Deficit Commission was the latest reminder that America no longer seems to have the stomach for big challenges.  There was a time – was it just a generation ago? – when Americans were legendary for doing vast, seemingly superhuman, projects:  the Interstate Highway System, the Apollo Missions, Hoover Dam, the Manhattan Project, the Normandy invasion, the Empire State Building, Social Security.

All of the above, with the exception of the Empire State building, are all creations of massive government.  If he’s going to praise war and socialism then, why does he not champion it now?

I have an answer as to why we cannot accomplish even simple things anymore.  There’s simply no room left given the size and scope of the federal government, its wealth confiscation, its overbearing regulations, its economic plannings.

I do love how he includes the Manhattan Project: government financing of the means of total annihilation.

Part of the reason he surmises is how technology has made everything smaller.  Ah yes, the beauty of the free market, capitalism, entrepreneurs taking risks, and we all are winners.

He only finally gets around to the real problem in passing:

Everybody’s a winner: The recruiting ad for the Pony Express said:  “Orphans Preferred.”  The ugly fact is that the building of America cost a lot of lives by putting men (and sometimes women) in dangerous, high-risk situations.  We don’t seem to have the intestinal fortitude for that kind of sacrifice anymore – and even if we did, our robust system of torts laws would make it too expensive to pursue anyway.  You probably can’t conquer outer space with a society that doesn’t keep score in youth soccer games, hands out participation trophies, and sues for every cut and bruise.  After all, the virtual bullets in a Halo gunfight don’t hurt.

Well of course.  Make government big enough, have ti do big enough things, and pretty soon it gets around to running, and ruining, everyone’s lives.  Sad, he doesn’t see the connection between the first paragraph and this one. In fact, he misses the picture entirely.  We do big things extremely well.  The big thing IS government.


“Peace” on the march

December 17, 2010

In further news on the warfare state,

The Obama administration plans to further step up attacks on Al Qaeda and Taliban insurgents in the tribal areas of Pakistan, to address one of the fundamental weaknesses uncovered in its year-end review of its Afghanistan war strategy.

Administration officials said the increased attacks across the Afghan border would help offset the Pakistani government’s continued refusal to move against the Qaeda leadership and their extremist allies, especially the Haqqani network. From havens in Pakistan’s North Waziristan region, those groups have carried out deadly assaults against American troops and have plotted attacks against the West, officials say.

In announcing on Thursday that the 97,000 American troops now in Afghanistan have made some fragile gains in the past year, President Obama said Pakistan was “increasingly coming to realize that the Al Qaeda and Taliban leaders who have been given safe havens pose a threat to Pakistan as well as the United States.”

We’re extending the war into Pakistan.

But the real strategy appears to be for the United States to do most of the work itself — at least until the Pakistanis step up. That means even more strikes using Predator and Reaper drones in Pakistan’s tribal areas, and possibly carrying out Special Forces operations along the border.

These are the same strategies and tactics employed by the previous administration, so criticized by then candidate Obama.  In fact, Obama has been far more aggressive than even Bush was regarding Pakistan and missile strikes.

Warfare is the life of the state.  I guess when the welfare state fails, one can always turn to war.  That’s what the nobel peace prize is about.


Government kills women

December 16, 2010

In another example of how government kills…

On Dec. 17 the Food and Drug Administration is expected to take the radical step of revoking approval for an advanced drug in the treatment of one of the country’s most deadly diseases.

Avastin, an advanced treatment for late-stage breast cancer, made it through the FDA approval process back in 2008. But over the summer, an advisory commission at the agency determined that the drug wasn’t providing sufficient benefits to patients and recommended that the full FDA board retroactively rescind that stamp of approval.

The FDA has until Dec. 17 to make that recommendation official. If it does, the effects on breast cancer patients will be devastating. Some 17,500 American women are prescribed Avastin every year. Many will face shorter, more painful lives because of the FDA’s decisions.

And this is how the government protects us?  I’m sorry, but the state’s apologists love to say how worse off we’d be without such wonderful agencies as the FDA.  They love to claim how unsafe food and drugs are kept off the market, how evil drug companies would otherwise kill us for the sake of profit.

The only evil I see is the government, the only killing I see is the government’s.  These “evil” drug companies are actually saving lives.

Is the drug really unsafe?  Who’s to say?  But here’s the real problem:

Despite all evidence to the contrary, the advisory committee claims its recommendation had nothing to do with Avastin’s cost. The FDA’s top brass will doubtlessly take the same line and claim that its decision to ratify that recommendation was based solely on the drug’s medical efficiency.

The truth is that Avastin is expensive. A year-long supply for breast cancer treatment costs upwards of $80,000.

However, if the FDA revokes Avastin’s approval, public insurance programs like Medicaid and Medicare could decide to refuse coverage of the treatment. Many private insurers would likely do the same.

Both the Susan G. Komen Foundation and the Ovarian Cancer National Alliance have sent letters to the FDA urging it not to revoke approval. They rightly believe that treatment decisions should remain exclusively in the hands of individual patients and their doctors.

And this much is certain as well:

Government drug rationing isn’t going to stop at Avastin.

Neither will government killing.


Con-law time

December 15, 2010

I’m not a professor of constitutional law, and thankfully so.  I think it goes without say that as we have one in the white  house currently, the last thing we’d need is any more.  But, that does raise for me at least, a very interesting question: If he’s a professor of constitutional law, I’d love to know which constitution.

The recent case regarding the obamacare mandate has sparked tremendous debate about its constitutionality.  In a case brought by Virginia (ah yes, Virginia, home to Jefferson, the Virginia resolutions nullifying the Alien and Sedition acts) a court threw out the mandate as beyond the powers of Congress.  This is but the first of many battles, one I’m going to wager here, will end up in a decision in the affirmative for the forces of the state.  The only victory over this monstrosity will be willful refusal by individuals and states.  Right now, we are voluntarily servile.

If one needs a JD from an Ivy League school to discuss the constitution, then we truly are doomed.  In fact, the writing down of laws and posting publicly thereof, is sort of, kind of, an old tradition.  The whole point is that anyone should be able to read, know, understand, and discuss the laws.  Obfuscation and arbitrary laws are, how we say it, tyranny.

The crux of the argument is the “necessary and proper” clause in the constitution.  So, to begin with, let’s examine the actual text:

To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.

I don’t claim to be a legal expert, nor can I cite from the vast number of decisions on this excerpt.  Perhaps the most famous case of the N and P clause was McCulloch.  I’m sure there are many others, including Wickard v. Filburn, the most heinous of decisions that allowed the government to prohibit farmers from growing wheat for their own use.  I guess property rights are the first things to vanish in dictatorships!!

So, this isn’t intended to be a full blown discourse on the N and P clause history.  In fact, it shouldn’t need to be.  What is “necessary and proper” is for citizens to be able to read and understand the words as written.  If we need specially trained lawyers to do that for us, then we’re no longer a republic.

First, let’s look at the relevant parts: “carrying into Execution the foregoing powers” and “all other powers vested by this Constitution”.  That alone ought to end the debate.  Clearly, the only things that the government can do must be entirely related to those powers specifically spelled out in the constitution.  Nothing more.  (It’s also why I have no faith in the courts.  95% of what the federal government does in unconstitutional and they’ve upheld all of it.  Why stop at the remaining 5%.)

Now, it also states that this applies to the government, or any “department or officer thereof”.  This surely means that the government, or any departments or officers must only execute those constitutionally authorized powers.  Nothing more.

Anything else the government does, anything that is beyond the scope of its constitutionally authorized powers, is null and void.  And in a sane world, that would be the end of it.

For instance, the principle of implied powers assumes that since only the federal government can make treaties and establish relationships with foreign governments, it ought to be able to provide the ambassadors travel and living expenses.

Another power is the admittance of new states into the union.  Oddly enough, the issue of leaving the union was never addressed.  I guess it required a bloodthirsty dictator to make union a one-way ticket.

The income tax, the life’s blood of statism, required a constitutional amendment.  Ought that fact alone prove the point.  If it was “necessary and proper” to tax the incomes of people, then an amendment wouldn’t have been “necessary”.

If one looks honestly at the constitution and still argues that the federal government can force someone to buy something, that they believe that somehow this fits into “necessary and proper”, then that person is either a liar or a fool.  In fact, if anyone with such lofty credentials hold such a view, that speaks volumes on the credentialing institutions.

I don’t want to hear recitation of the litany of court cases supporting this, opposing that, of particular of arcane legal proceedings.  It simply doesn’t matter.  This is just using flawed statist logic to support even more flawed statist logic.  Am I to believe that I am unable to read the document and understand it in its entirety, both its meaning and intent.  The words are actually quite clear.

There is no power granted to regulate the individual health of any citizen.  There is no power in the entirety of the  constitution to force anyone to do anything.  As such, there is absolutely nothing necessary nor proper about doing such.

This is really a very simple and easy problem.  However, we live in a world where the most intelligent and enlightened can’t read.  Or at the least, they cannot understand the clear and simple written word.


Taxes and pro sports

December 11, 2010

Recently I was discussing our current budgetary fiasco disaster and the subject of increased taxes and revenue came up.  I tried to explain to the other parties that you simply cannot tax your way out of this.  there are many reasons for this, not the least of which is the problem is wholly one of spending.  Nobody ever goes into debt, either a person, a family, or a nation, by earning to little.  Debt is always a function of excessive spending.  But there’s another reason, and it’s Hauser’s Law.

Bottom line is that regardless the top marginal tax rates, the net revenues to the government theft will never exceed 19% of GDP.  The next question was obvious: why?

One need only consider basic economic principles (you know, those things that columnists at the NY Times so conveniently ignore!!) such as the law of diminishing marginal utility and the law of increasing opportunity cost.

Quite simply, the more someone works the greater the marginal cost.  In other words, each successive unit of work requires them to forgo more than the previous unit of work, be it an hour, a day, or whatever.  Also, the increased income suffers from diminishing marginal utility in that the increases in income are of less value than the previous amount of income.

Here’s how to look at it.  Someone earns $30,000 a year and has all his expenses covered with a little extra.  The first say, $25,000 is the most important, that which covers his bills.  A pay cut of say $1000 will not dramatically reduce his lifestyle, neither will another $1000 dramatically improve it (Keynesian charlatans take note).  So, earning $31,000 now, the increase of $1000 might be spent, perhaps even saved.  You save the money when the money has little use to you in the present.

Don’t confuse that with trade, as there the money holding has less utility than the item traded for.  In this case, there is nothing of greater utility than holding money.  This is a vital concept.

So, let’s say to earn the extra $1000, an individual would have to extend his working hours.  If that meant working on a weekend and missing some other activities, then the cost will have risen, while at the same time, the marginal utility of extra income will be less.  One might choose to work, but only would so as long as the cost was lower than the gain.

Should the individual simply receive a raise for being more productive or whatever, the same principle applies.  The extra $1000 in income would still have less utility than the previous $1000.  But this isn’t about a rudimentary example, it’s about sports.

Looking at the tax graph, I noticed that tax rates dropped dramatically beginning in the 1980′s.  Curious to note, that’s about the same time that pro sport athletes began to earn significantly higher salaries.  I recall, because I was a fan of his at the time, Pete Rose became baseball’s highest paid player

for the grand total of $800,000 a season.

Think about that for a moment.  Even as late as the 1970′s, there had never been a millionaire professional baseball player. Consider that today, the best players in the league earn $10-15 million a season, or more.  Hard to imagine today for sure.  But consider, the greatest the game has ever seen, Aaron, Mays, Mantle, Koufax, so many others, the greatest of the greatest, all hall of famers, and none ever was “rich”.  Sure, they were well off, and sure, they were famous.  But they were nowhere near the level of lifestyle that today’s mediocre ballplayers are.  After most left baseball, they ended up like the rest of us, working to put food on the table.  The only difference was that they had better stories.

But all that began to change, and I suspect it was due almost entirely to the decline in marginal tax rates.  Let’s go back to the concepts discussed earlier.  We noticed in the graph that as late as the 1960′s, the top marginal rate was 90%.  Who in their right mind would ever work for a 10% return on effort?  Consider it in terms of professional sports contracts.  If Pete Rose was paid $880,000 in 1968, he would have been taxed at the 90% bracket, and been able to “keep” all of $88,000.  As it was, he still was taxed at about 70% but $266,000 is remarkably better.

Now, that $880,000 in 1978 was such a high sum is mostly due to the high tax rates.  Look, if a pro athlete was to sign a contract for $500,000 in the 1960′s, they’d be bringing home $50,000. If the next lower tier was say 50% (I don’t know for sure, but let’s use it for the sake of argument) and they signed a contract for $100,000, they’d be bringing home the SAME amount, $50,000.  The sole difference would be how much the government stole.  The shock value sadly would have been at the nominal salary, not the theft.

Today, the top rate is 35% and I think it anything but a coincidence that as tax rates have fallen, professional salaries have skyrocketed.  Of course they would.

As salaries have risen in all pro sports, there has also been a corresponding increase in the level of competition and quality of all pro sports.  In fact, the influx of foreign players to the US has remarkably improved pro baseball.  And, oddly enough, so has it too in hockey.

It used to be that pro hockey in America was a thuggish sport, lacking grace, skill, and speed.  There were no European players.  However, hockey is huge in many European countries and the best players in the league today are mostly of foreign birth.  With the inclusion of these players into the league now, hockey is a much better game, faster, more athletic, and certainly more appealing to fans.  In fact, most of the league’s stars are foreign born, a fact of no importance or concern to hockey’s legions of fans.  They simply want the best product possible.  International trade works everywhere, all the time.  It’s a beautiful thing!!

So, why wouldn’t they have come to America before?  Yes, there was the Cold War thing, and many Eastern European players couldn’t escape.  But there was no such barrier to Latin American players.  The reason has to be, at least in part, the confiscatory marginal tax rates.  Why work so hard when most of it will be confiscated.  In economic terms, the marginal costs would have exceed the marginal revenues.

Yes, perhaps their lives would  have been better nonetheless, but it still begs the question.  Why didn’t they come earlier?  It must be that the tax rates before made it less profitable to come.  The athletes were thinking at the margin.

Basketball salaries have skyrocketed just the same.  In fact, basketball has imposed, as have all other sports, salary caps.  While price controls are destructive, at least within the sports themselves, there is no government intrusion.  Thus, though not the solution, at least the state was not involved, however I’ll wager the same economists were!!

Bastiat reminds us that we must look at the unseen as well.  Hazlitt reminds us that the good economist looks at the long term effects on all groups.  I don’t believe anyone cutting taxes three decades ago could have foreseen the dramatic rise in sports salaries and the commensurate increase in level of play.  But it did happen, and it happened because when athletes, just like anyone else, keep more of what they earn, they will do more, do better, and we all are the beneficiaries.

I’m hoping to see a special on ESPN about the effects of tax cuts and sports.  But that probably isn’t going to happen anytime soon.


These people call themselves economists?

December 10, 2010

This is economic thinking at it’s worst.

U.S. Home Values to Drop by $1.7 Trillion This Year, Zillow Says

U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.

This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement.

“It’s definitely going to continue into 2011,” Stan Humphries, Zillow’s chief economist, said in an interview on Bloomberg Television today. “The back half of 2010 looked horrible and 2011 should look like the mirror image of that.”

There are a few things certain, most notably, the Mr. Humphries is not an economist.  Oh, he might call himself one, he might even have pieces of paper from some prestigious university, but he’s not an economist.

The article is wrong from the first three words.  It isn’t “home values” at all.  it should be home prices.  They are as different as night and day.  And it is obvious as to why:

Housing demand has slumped since the start of the year as the government tax credit expired

Demand has decreased.  It creates surpluses.  Surpluses put downward pressure on prices.  It’s how markets clear, that is, unless government gets in the way.   Of course that burst of home buying was due to the tax credit artificially lowering prices.

Back to the beginning, let me be perfectly clear (well, if dear leader can use it!!), absolutely nothing has been lost.  Nothing at all.  Nobody has lost anything by their home prices falling.  If they are paying their mortgage, and are still in possession of their house, then they still have exactly what they started with.

I wish this was some novel and brilliant insight I came up with.  I wish I could lay claim to this.  But alas, I all can do is recognize the true wisdom and acknowledge that what was, always is, and always will be.  Try as the modern alchemists of fiscal and monetary policy try, some things remain absolute:

The value of a specific article is always vague and arbitrary, so long as it remains unacknowledged. Its owner is not a jot the richer, by setting a higher ratio upon it in his own estimation.

Now, this is perhaps the greatest and most egregious example of policy driven economy.  Government policy subsidized and promoted people sinking their fortunes and futures into their homes, and base it all upon a price.  This was somehow supposed to be wealth?

Although price is the measure of the value of things, and their value the measure of their utility, it would be absurd to draw the inference, that, by forcibly raising their price, their utility can be augmented.

In what other market would one expect prices to continually rise, and that simply rising prices could be equitable with true wealth?  And with what other market could there be so many “economists” of dubious analysis?  Prices cannot continually rise.  When they do, it is called a bubble.  And bubbles burst.

Houses are consumer goods, not capital goods in any manner, and as such, are totally unproductive.  Sure, it might be satisfying a consumer need, but that is consumer need, the final stage of production utilizing capital goods and scarce resources.  As such, ALL consumer goods ought to be worth less over time than from their purchase price.  The only things which wouldn’t be, for example, might be a collector item.  One would certainly not want to play baseball with a bat used by Henry Aaron, but would certainly value it immensely for its collector interest.

So, I guess in addition to broken windows, policy driven economics creates many bad economists.


Government kills #2

December 9, 2010

New category – “Government kills”.

Children’s Hospitals Lose Some Drug Discounts

In an unintended consequence of the new health care law, drug companies have begun notifying children’s hospitals around the country that they no longer qualify for large discounts on drugs used to treat rare medical conditions.

As a result, prices are going up for these specialized “orphan drugs,” some of which are also used to treat more common conditions.

Once again, we must ALWAYS remember Bastiat’s broken window.

Joshua D. Greenberg, vice president of Children’s Hospital Boston, said that loss of the discounts “jeopardizes our ability to care for some of the sickest children with the most complex health care needs.”

Government kills.  Now, this might not be the “best” example, as in reality, these were distorted market prices to begin with.  Why?

Over the last 18 years, Congress has required drug manufacturers to provide discounts to a variety of health care providers, including community health centers, AIDS clinics and hospitals that care for large numbers of low-income people.

Several years ago, Congress broadened the program to include children’s hospitals. But this year Congress, in revising the drug discount program as part of the new health care law, blocked these hospitals from continuing to receive price cuts on orphan drugs intended for treatment of diseases affecting fewer than 200,000 people in the United States.

In other words, as I already detailed, pooling is theft.  In this case, the companies were forced (isn’t all government simply force?) to provide the drugs at a discount.  And, this “discount” was in fact paid for by higher prices on all other drugs and on other consumers.  The problem is that they didn’t know it was figured into the price.

In all fairness however, one might very well assume that if, IF, drug consumers were asked to pick up some of the tab so that needy children might have access to these drugs, most would have wholeheartedly agreed.  I certainly would have.  But, that is not coercion nor force.  We would in fact be knowingly paying for, and receiving satisfaction (utility) from, the purchase.

Christina M. Barnes, the pharmacy director at Galion Community Hospital in rural Galion, Ohio, said she was excited when her hospital qualified for the discount program earlier his year. But, she said, she was dismayed to learn that many drugs would be excluded.

“We were given an advantage with one hand, and it was taken away with the other hand,” Ms. Barnes said.

William A. Sarraille, a lawyer at Sidley Austin in Washington who represents drug makers, said, “The discounts are huge and can have a very significant, very negative impact on the ability of manufacturers to develop new, better products that meet patients’ needs.”

The Food and Drug Administration classifies more than 350 medicines as orphan drug products. Manufacturers said they could not recover the costs of developing such drugs if they were required to sell them at deeply discounted prices.

Sorry to burst Ms. Barnes’ bubble, but nothing was “taken away”.  What was actually taken away was other people’s property without their consent.  And the long term effect?  Fewer new drugs will make it to market.  Another broken window.

I loved how this administration was going to “bend the cost curve down”.  As if they had the magical powers to do any such thing.  Apparently they never bothered (well, I’m restating the obvious here!!) to heed Hayek’s wisdom.  They simply haven’t the knowledge to do so.  They will simply harm many and help none.

Policy driven economics simply breaks windows.  And to that we can now confidently add, kills.


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