The wages of government

June 19, 2009

For those not familiar with the Golden State’s problems, here they are in a nutshell:  we are dealing with a budget deficit over 20 billion dollars.  A series of ballot initiatives, basically to raise taxes, all failed, and the state is slashing expenditures across the board.

As Mises so accurately described it many years ago, a dollar of public spending necessarily offsets a dollar of private spending.  In fact, the problem is much worse as the Austrian school is precise to detail.  For the government dollar doesn’t simply replace a private dollar, it is actually destructive.  The dollar of government spending not only crowds out an equal amount of private spending, but the dollar spent by the government necessarily is consumptive.  Thus, whatever is spent is gone once consumed.

Since the dollar spent by the government must come from somewhere, it comes from taxation or from borrowing.  Both dollars are taken directly from what would otherwise be the pool of loanable funds, which would then be invested into wealth creation.  Thus public expenditures necessarily destroy what would otherwise have been created.

Now, California has been on a public spending binge.  Lest anyone think that California Forward is some “right wing” think tank, note that its leadership council includes labor leaders and a former director of OMB for the Clinton administration.  It is a “bipartisan” group, which of course means they equally favor leviathan.

One way to measure change in state spending, is to track spending per person.  Over the past ten years, controlling for inflation, California’s per capita spending has risen by 41 percent, increasing from $3,244 in 1997‐98 to $4,565 in 2007‐08.

41 percent increase in per capita spending.  And we wonder why California is in such dire straits.

Here’s an extremely interesting piece of information.  California’s spending on health and human services has increased in the past ten years by 127%.

Sometimes, even the most benign of observations is the most damning.

Under California’s tax rules, high‐income earners pay a larger percentage of their income in income taxes than do middle‐income and low‐income earners.  One result is that during good fiscal years, a large number of very wealthy Californians pay high taxes.  But during downturns in the economy, the amount of tax payments from the very wealthy drops dramatically.  As a  result, the state must content with significant fluctuations in personal income tax.

Not only has the public spending skyrocketed, destroying wealth in the process, but the wealth generating class has been the victim of an ever increasing amount of theft.

The good news in all of this is that what has happened to California is soon spread to the rest of the nation once Obamanomics takes effect.  Debt fueled consumption, ballooning public expenditures, wealth confiscation, and massive crowding out of private investment lead a state, and a nation, to poverty.  But hey, the best part of all is the misery will be shared equally.

The only thing California, or any state for that matter, cannot do is print money.  Well, Uncle Ben has that one taken care of quite nicely.  So, on top of everything else, we’re going to get massive inflation.

base

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Grand larceny by any other name

June 17, 2009

This is an act of theft, grand larceny sanctioned and supported fully by the state.

California is imposing a 90-day moratorium on housing foreclosures under a new law that takes effect Monday.

The law is expected to make lenders try harder to keep borrowers in their homes. Loan companies must prove they tried to modify the delinquent loans before they can begin foreclosing.

Notice of course the word “impose”.  Does anything better describe the leviathan state than this word?

Of course

But supporters acknowledge the California Foreclosure Prevention Act won’t stop thousands of foreclosures from eventually happening.

It’s already next to impossible to do business in California, given the high taxation, onerous regulation, and generally unfriendly attitude of government at all levels towards businesses.  All this will do is increase banks reluctance to lend to California residents.  And why should they, when they know at any time the state will intervene and steal their property.

Banks lent money (although I do confess, they were lending fake money that the Fed created out of thin air) with the intentions of being repaid.  Borrowers took out loans ostensibly with the promise to repay.  If the banks made bad loans, they lose.  If the borrowers cannot repay their loans, many of which were far larger than they should have taken, then they lose.  Someone will come along and purchase the house for what is the real market value, whatever it might be.

Those who would and could buy the home at a real price lose.  Those Californians that desire to buy a home in the future will have a much harder time finding lenders.  New capital is being diverted to “save” older, poorer investment.  The state is literally stealing the wealth of others.


Man does not live by

June 17, 2009

PICT0108

PICT0098

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work alone.

One has to believe that those who are libertarian (and I guess I’ll add conservatives in some sort of manner) are too busy enjoying life, living it to the fullest in Aristotelian or Randian fashion to be consumed with destroying wealth, confiscating and redistributing the wealth of others, or other acts that arise from pure hatred and jealousy.

I’ve never understood the mindset of the left (and they are not liberal in any sense of the word), that seeks destruction of freedom and liberty (just see the MLPA in my state for instance), property rights, and desires control over peoples’ lives.

My guess is that they’ve never experienced this:

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pure joy.  I gather they are so consumed by hate and vile they haven’t the capacity to experience happiness.  Since they’re miserable, I gather their goal is the misery of others.

The real reason I’m a libertarian?  I haven’t the desire or inclination to tell anyone anything.  I’m too busy fishing, or planning my next trip.


Agents of the state

June 8, 2009

This is what happens when you ignore those most basic of economic truisms.

“Neighbor tells on neighbor in LA”

Van Beveren has assumed the role of a Drought Buster who reports violators, going so far as to get the DWP to write a strongly worded letter to Caltrans when the agency violated water restrictions.

The Department of Water and Power wishes more residents were like Van Beveren – whose own water use is already below the mandated 15 percent reduction – as the first week of tougher water restrictions went into effect.

We want neighbors to alert each other that they might be in violation so they don’t have to pay a monetary fine,” DWP spokesman Joe Ramallo said. “That’s why we sent out door-hangers that people can give to a neighbor to inform them about the new program.”

The utility also is taking calls, at 800-DIALDWP, where people can call in anonymously to report violations.

The first offense draws a warning and a second violation carries a penalty of $100, with subsequent violations increasing by $100. After the fifth violation, water restrictive devices can be installed.

“Most people comply immediately,” Ramallo said. “We gave out 3,500 warning citations under Phase Two and only a handful of people ended up paying fines. Most people want to cooperate.”

Since the new phase went into effect, Ramallo said there has been an increase in calls and hits on the agency’s Web site, http://www.ladwp.com, for information about what people are allowed to do.

The program remains under constant review and the DWP is prepared to make changes as necessary, Ramallo said.

One group that says it has been hurt by the restrictions is landscapers.

Syrus Rasekhi, who owns ZM Green Yard Maintenance in Tarzana, said the designation of Mondays and Thursdays creates problems for landscapers.

Isn’t this lovely.  The government is encouraging people to report their neighbors to the authorities in order that the state can extract fines.  I thought this sort of action only took place in the Soviet Union.

Of course, there is a much better way to handle this situation.  The answer comes from of all places Harvard.

Managing Water Demand

In an extremely insightful report on water usage, the authors, Shiela Olmstead of Yale and Robert Stavins of Harvard, discovered that, sacre bleu

 

Price-based approaches to water conservation are more cost-effective than non-price approaches
The gains from using prices as an incentive for conservation come from allowing households to respond to increased water prices in the manner of their choice, rather than by installing a particular technology or reducing particular uses, as prescribed by non-price approaches
A recent study of 12 cities in the United States and Canada suggests that replacing two-day-per-week outdoor watering restrictions with drought pricing could achieve the same level of aggregate water savings, along with welfare gains of approximately $81 per household per summer drought. 

Price-based approaches to water conservation are more cost-effective than non-price approaches

The gains from using prices as an incentive for conservation come from allowing households to respond to increased water prices in the manner of their choice, rather than by installing a particular technology or reducing particular uses, as prescribed by non-price approaches

A recent study of 12 cities in the United States and Canada suggests that replacing two-day-per-week outdoor watering restrictions with drought pricing could achieve the same level of aggregate water savings, along with welfare gains of approximately $81 per household per summer drought. 

You don’t say.  How come nobody ever thought of this before, using prices to ration usage of scarce resources?  Perhaps somebody did.
Nevertheless within these limits, which in economic life it never oversteps, monetary calculation fulfils all the requirements of economic calculation. It affords us a guide through the oppressive plenitude of economic potentialities. It enables us to extend to all goods of a higher order the judgment of value, which is bound up with and clearly evident in, the case of goods ready for consumption, or at best of production goods of the lowest order. It renders their value capable of computation and thereby gives us the primary basis for all economic operations with goods of a higher order. Without it, all production involving processes stretching well back in time and all the longer roundabout processes of capitalistic production would be gropings in the dark.
Thankfully we have Ludvig von Mises’ work to assist our benevolent dictators.  Without prices, economic calculation is impossible.  Without prices, we are forced into belligerent relationships with out neighbors by the state.  The state alone decides who gets water, and how they get, without concern for valuation.  Those who comply with state mandates feel somewhat better than their peers, and feel entitled to turn them over to the state when they don’t comply.
“Most people comply immediately”.  Yes, I bet they do.  And they have ways of making us speak.  
You really have to appreciate the increase in calls.  What better way to increase the power of the state than to turn otherwise peaceful citizens into agents of the state.  And of course, let’s not forget the glazers, those landscapers whose business will suffer.
Markets work, always, everywhere, and without fail.  

A man’s gotta know his limitations

June 8, 2009

A line made famous by Clint Eastwood in his famous role as movie cop Dirty Harry.

Tension in Obamaland as the Keynesian nightmare unfolds.

 

“You can’t assemble a group of really brilliant people, and deal with some of the most complex problems in our lifetimes and not have disagreements,” said David Axelrod, Mr. Obama’s senior political strategist 
Even colleagues who have tussled with Mr. Summers say the president was right to bring him in to the White House inner circle amid the global crisis.
“Larry Summers is one of the world’s most brilliant economists,” said Mr. Orszag

“You can’t assemble a group of really brilliant people, and deal with some of the most complex problems in our lifetimes and not have disagreements,” said David Axelrod, Mr. Obama’s senior political strategist …

Even colleagues who have tussled with Mr. Summers say the president was right to bring him in to the White House inner circle amid the global crisis.

“Larry Summers is one of the world’s most brilliant economists,” said Mr. Orszag…

You can assemble all the brilliant people in the world, you can have the greatest of all living economists at it’s head, and they will not be able to “run” the economy.  When they realize that, than they can earn the title brilliant.


What creates what?

June 7, 2009

I noticed an article from some months back over at heritage.org.  

Economic Stimulus Pushed by Flawed Jobs Analysis

This part shows exactly, not only why the entire “stimulus” is nonsense, but why the Obama team is leading us on a very dangerous course:

 

To estimate the number of jobs created by increased government spending, Romer and Bernstein multiply the amount of government spending in the stimulus plan by the multiplier discussed above. The outcome is the increase in GDP resulting from the increased spending. They then apply a “rule of thumb” that a 1 percent increase in GDP results in the creation of 1 million jobs. They do not justify this rule by citing any empirical or theoretical research.
The “rule of thumb” is misused because it assumes that increases in GDP create jobs. In fact, the relationship is actually the other way around. Production and work create GDP, so it is more accurate to say that 1 million more jobs produce 1 percent more GDP.

To estimate the number of jobs created by increased government spending, Romer and Bernstein multiply the amount of government spending in the stimulus plan by the multiplier discussed above. The outcome is the increase in GDP resulting from the increased spending. They then apply a “rule of thumb” that a 1 percent increase in GDP results in the creation of 1 million jobs. They do not justify this rule by citing any empirical or theoretical research.

The “rule of thumb” is misused because it assumes that increases in GDP create jobs. In fact, the relationship is actually the other way around. Production and work create GDP, so it is more accurate to say that 1 million more jobs produce 1 percent more GDP. [emphasis mine]

 

This is Keynesian fallacy in a nutshell.  It is completely backwards analysis to economics, that if we simply spend and “increase GDP” – through artificial means (government expenditures) – jobs will be created.  Employment is the result of production, and production creates GDP.  It’s going to be a very long and painful road.  Sadly, they are choosing this path.


How’s that stimulus going?

June 7, 2009

jobsgraph

This graph might look familiar.  It is in the “secret” (well, the title at the top says “embargoed until Jan. 10, 2009.  So you now it has to be important.) The Job Impact of the American Recovery and Reinvestment Act.  

So, if I can make out exactly what is suppose to happen, without the stimulus, unemployment should have been 9%, but not until 2010.  Hmmm…what is it now???

According the BLS, it’s already 9.4%.  Oh, and that would be WITH the stimulus.  Of course, the “good news” is that the job losses were not as bad.  See, were already “saving” jobs.

But in reality, the destruction is only beginning.  Rather than letting the malinvestment work its way out and letting the economy recover, then generate real wealth and real growth, all we’re getting is government fueled destruction.  

The fed has been printing madly, the government has been borrowing and spending wildly, and the economy has been collapsing.  The freefall will only continue.  But of course, the enlightened will only see this as a call to do more.  The problems, we will be told, were that were that the fed didn’t print enough, the government didn’t spend enough, and the public didn’t spend enough.

What got us into this calamity will never be addressed.  What will never be accepted is the truth, that the boom was artificially driven by monetary expansion, that tremendous wealth and resources were diverted away from productive ventures.  Those with full responsibility will never accept their roles, and will only clamor for more control, more power, and a correspondingly greater loss of freedom, liberty, and prosperity.

The only thing a stimulus package does is stimulate the growth of government.

Maybe that was the plan all along?


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