Follow the money

I can't understand some people's logic, or lack thereof. Here's a simple test to determine what country has the best healthcare, economic system, education system, etc: See where people choose to go and where they don't.

People come from all over the world to this country and yet I continually hear how we suck. Bullshit! Regardless of your political affiliation, how can you see refugees beating down the door to this country and not see the obvious statement being made: here is better than where they came from. That's not partisan, it's simple and right before your eyes. How can you look at countries which erect barriers to keep people from leaving and not state how much better we are?

NO ONE in America goes to other countries for medical care, and there are so many numerous examples of people with means coming here for medical care and yet there is this absurd argument that we aren't the best?

Health Care as a Right

I am pleased to post an entry for a guest contributor - Michael Perrone. Enjoy!

If watching the health care summit taught me anything today, it is that the label "bleeding-heart liberals" still has relevance. Ted Kennedy called health care a right. No doubt many at the summit would agree with him. One congressman from California was aghast that people with pre-existing conditions might have higher premiums. A Senator proclaimed that having different people pay different rates based on their medical history is akin to racial discrimination; so called "discrimination based on health". Terrible sob stories were seemingly offered up as undeniable proof for whatever policies were advocated.

You see, to the bleeding-heart liberal, health care is a right! As undeniable as the right to vote, and as defensible as the right to free speech, every American, every human for that matter, deserves the best health care, regardless of cost, regardless of responsibility and without regards to who might be paying for it.

If we look at the bill of rights, we might notice an interesting pattern. Every right outlined therein restricts federal power. Every right mentioned protects Americans from things that only the government could realistically do to you. The pattern suggests that our rights as citizens aren't secured because of, or by our government, but in spite of it. Our rights are listed as the end of government power and not the beginning of its influence.

The only way that health care can be a right is through force. If you follow this line of thinking out you must force doctors to treat any patient for any ailment, no matter how trivial, even if they can't be paid, otherwise you violate a patients right. You'll also have to force insurance companies to cover anyone at any time or tell them to close their doors. In the end it is unsustainable and the government, through our taxes, will have to pay the bill. It would become the only "right" that extends and enlarges federal power rather than extending and enlarging our power against potential tyranny.

Why government unions?

My last post got me thinking about unions. The basic reason for unionization is to increase the bargaining power of employees. The implicit assumption is that without this increased leverage, a single employee will be taken advantage of by an employer. Setting aside the merits of that argument, it ought to seem odd that government employees unionize at all. If government is our benefactor, then why do their employees need protection?

Leave it to the experts?

During my MBA I applied for Education Pioneers - a non-profit educational thingy - and we had a very interesting interview process. Six of us sat around and did a case study about a charter school where the issue was unionization. The applicants were all extremely talented individuals and also very liberal, yet every single group came to the conclusion that unionization was not the way to go. Why? Because despite being liberals, these folks were passionate about education and actually had principles. Unions, our case study in particular, added little value to the educational experience and had the unfortunate effect of detracting from it.

Unions have their place in society and I bear no ill will towards them. But the stark reality is that teacher unions are destroying our nation's youth and I do take offense to that. In this Wall Street Journal editorial, there are many examples of the ways teacher unions put themselves first at the expense of your children.

This means that large numbers of ineffective teachers wind up with ironclad job protection. When low-performing teachers can't be fired, it's the students who suffer. A New Teacher Project study last year looked at tenure evaluations in multiple states and found that "less than 1% of teachers receive unsatisfactory ratings, even in schools where students fail to meet basic academic standards, year after year." Less than 2% of teachers are denied tenure in LA, where the high school dropout rate is 35% and growing.

Basic Economics - Value

Beauty is in the eye of the beholder. This phrase meant to mitigate ugliness is the most fundamental economic truth. All value judgments are intrinsic. There is no such thing as absolute value. No set standard of what something is worth to all people at all times. Each one of us determines how much everything is worth to us at a given time. How do we do it? No one really knows, it's what makes us human, unique. What differentiates us from each other. Some people determine value in a painstakingly complex process, others decide on a whim. It's not exact, nor scientific, and never absolute.

Today, when you are well fed and fat, food is worth less than a Porsche. Tomorrow when you are starving and dangerously thin, you'd give 10 Porsches for a single morsel of food. When you were ten, a GI Joe action figure is what you wanted, valued, more than anything in the world; today you wouldn't pay 10 cents for it. You spend your money on a trip to Paris, I would never spend money on the same trip. Clearly we value the same trip differently, so can one say what the value of a trip to Paris is? Look around and you will see hundreds of different cars that all cost the same. Why so many? Why does not everyone pick the same car, the most valuable one? Maybe to each, the one he has is the most valuable to him?

Think about every single thing you own, can you come to any conclusion to what the value is? I mean a specific price at that point in time? You can't. What you can probably do is give an estimation, this item is worth more to you than that item, and perhaps you can arrange them in order. Perhaps your neighbor can do the same, I bet his order differs from yours.

While all this may seem obvious, it is very important because many economic fallacies are predicated on the belief that someone else can determine what is most valuable. The reality is that there is only one person who can determine what is most valuable to you: you. And your determination is inexact at best. If we equate happiness with obtaining or doing that which is most valuable, then getting a trip to Paris that you don't want is completely worthless.

Constitution, what constitution?

Letters to the Editor are never random. Unless the letter is exceptionally insightful and good, most of them are merely reflections on the points the editors want to make in the first place. What they select to print is what they believe. So here is a startling letter (why am I surprised) in the New York Times:

To the Editor:

You write that Tea Party leaders want “strict adherence to the Constitution.” But since the Tea Party members distrust government, do they really understand and approve of what the Constitution actually states: Congress shall have power to provide for the “general welfare of the United States”? And further, “to make all laws which shall be necessary and proper for carrying into execution the foregoing powers” (Article 1, Section 8)?

The Tea Party seems confused — lauding the Constitution, which gives broad power to Congress, on the one hand, and fearing a properly activist government as a threat on the other hand.

The Tea Party leaders and followers may wish to emphasize personal freedom, but they have the “socialism” (government providing for its people) of the Constitution to contend with.

Robbins Winslow
Naples, Fla., Feb. 16, 2010

The architect of our constitution, James Madision, was kind enough to elaborate on just this topic:

With respect to the words "general welfare," I have always regarded them as qualified by the detail of powers connected with them. To take them in a literal and unlimited sense would be a metamorphosis of the Constitution into a character which there is a host of proofs was not contemplated by its creators

The New York Times editors are not stupid. They know that the author's claims are incorrect and they deliberately are trying to influence an interpretation of the constitution which goes against its plain meaning.

And lest you think that this is isolated. Gail Collins, in her editorial, derides those foolish people who actually believe in the tenth amendment:

The 10th Amendment to the Constitution, which gives the states all powers not delegated to the federal government, is all the rage. (The Second Amendment is so 2008.) Its passionate fans, who are inevitably starting to be referred to as “tenthers,” interpret the amendment as pretty much restricting the federal government to military matters. They feel the health care reform bill is unconstitutional. Perhaps also Social Security.

Actually, Ms. Collins, the health care reform bill and social security ARE unconstitutional. But let's not let the law get in the way of raw power.

Sadly, neither Ms. Collins nor the New York Times has any sense of irony or shame, or they might take the time to read some history and discover some interesting information about the tenth amendment and the rest of the Bill of Rights. It seems some folks way back when really did have some reservations. Alexander Hamilton writing in Federalist 84:

I go further, and affirm that bills of rights, in the sense and in the extent in which they are contended for, are not only unnecessary in the proposed constitution, but would even be dangerous. They would contain various exceptions to powers which are not granted; and on this very account, would afford a colorable pretext to claim more than were granted. For why declare that things shall not be done which there is no power to do? Why for instance, should it be said, that the liberty of the press shall not be restrained, when no power is given by which restrictions may be imposed? I will not contend that such a provision would confer a regulating power; but it is evident that it would furnish, to men disposed to usurp, a plausible pretense for claiming that power.

Ms. Collins and the New York Times are not very original and their criticisms were predicted over two hundred years ago by men who knew better. Either the New York Times is stupid or dangerous. I vote for the latter.

Do tax cuts starve the beast?

I was listening to Jason Lewis (a nationally syndicated conservative radio host) and he mentioned that if our deficit were used to fund tax cuts he would be OK with that. So it got me thinking, are tax cuts stimulative? Are they any better at stimulating the economy than spending?

The economy is an evolutionary economic machine. It grows naturally because brilliantly ordinary men and women are constantly finding ways to do more with less. Efficiency allows labor to find new work, to create new products and services, and to make us (presumably) happier. The free market facilitates this process through private enterprise and government, i.e. the anti-free market, hinders it. So for our economy to grow, i.e. the pie to get bigger, we need to embrace private enterprise at the expense of government. Otherwise, government gets larger while the pie gets smaller.

This leads to the relevant issue. The only thing that matters in terms of stimulating the economy (growing it) is what percentage of the pie is public versus private. Too much public crowds out the private, and the rate of growth slows down. Government spending is really the only relevant issue. Spending, regardless of how it is financed, determines what percentage of the economic pie the public sector is.

Government borrowing increases spending; it increases the share of government and this retards overall economic growth. What about tax cuts, do they stimulate? The reality is that tax cuts affect the financing side of the balance sheet, and we know from Modigliani and Miller that financing does not affect the real value of the economy. Therefore tax cuts are not stimulative and any correlation must be attributed to some other reason. My personal theory is that tax cuts shine a light on government spending. And even though this may not starve the beast as intended, it at least causes us to look at what we are feeding him.

The origin of government

Anarchy, according to Merriam Webster, is "a utopian society of individuals who enjoy complete freedom without government." My libertarian friends, who rightly call for a reduction of the federal leviathan, go to far when they advocate it's death.

Liberty unconstrained is no liberty at all. Why? Because if everyone does whatever they want, then only one rule applies. The law of the jungle. Those who can, will rape and pillage, and no individual can stop them.

The solution is to form pacts with your fellow man in order to protect each other from the aggression of others. By doing this, you voluntarily trade liberty for security. And you do this freely, because like any transaction in a free market, you value what you get more than what you give.

These associations of mutual protection, known as government, are the free market's solution to the problem of human nature. Real liberty lies somewhere in the middle of no government and too much.

Depressing

One of the biggest fallacies of economics is that war is good for an economy. The oft cited example is that of World War II and how it lifted this country from the Great Depression. Well, you can't have it both ways as this New York Times reader suggests:

To the Editor:

A big reason for the huge deficit is the $1 trillion we have spent on the Iraq and Afghanistan wars. Stopping the wars now would take a large bite out of our deficit. Our children and grandchildren would be grateful.

Jordan Langner
Delmar, N.Y., Feb. 8, 2010

Either spending reduces the output gap or it doesn't. If World War II lifted this country from a depression, surely the wars in Afghanistan and Iraq ought to be doing wonders for a little old recession? Obviously there's a flaw somewhere, draw your own conclusions.

Making a deal with the devil

Folks, the only way to stop liberalism is to expose it and make it irrelevant. The two go hand in hand. At it's heart, liberalism is about controlling people's lives, it's a bunch of wannabe Napoleons who think they can run your life better than you. Sure, they mask their true ambitions with platitudes about helping the poor and the down trodden. But make no mistake, their ambition is unadulterated power.

My aim is to expose this ambition, to make them come out and say that you are incapable of running your own life. This means taking away their cover; I won't allow them to hide behind claims of wanting to "help" the poor because I'll help the poor in a direct and transparent way. And when they protest, and they will protest, their ambitions will be exposed. It's one thing to protest the free market, it's another to protest giving poor people the help they need (although they are wildly successful in the case of school vouchers).

My fellow libertarians and conservatives, I ask you to open the government's coffers and give poor people money directly with no conditions. Give them enough money so wealth is no longer an issue. And when liberals oppose this, ask them why. They will have no response.

Everyone should live within their means

Outstanding letter in the Wall Street Journal in response to, "The Obama Fisc" Review & Outlook, Jan. 27:

You had me all hooked up with your bleak analysis of the careless spending and deficit buildup of the last year, until I came to the following sentence: "If this borrowing were financing defense investments or tax rate reductions to spur the U.S. economy, we wouldn't be worried." My fiscal discipline enthusiasm immediately melted away. I was reminded of an even bleaker analysis offered by a friend: "The bottom line is both liberals and conservatives are going to spend and spend until the country is ruined. The only difference is what the pet cause they are spending on is."

We are never going to get anywhere on deficit reduction as long as one side's "defense investments" are the other side's "shining war toys," and the other side's "investment in health and education" are the first side's "wealth transfers." Where can I find a politician, party or even a newspaper editorial that will unequivocally state that we have to live within our means, period, full stop, no ifs, ands or buts?

Michail Tsatsanis
San Diego

Your kids or mine?

Fascinating discussion between my liberal friend and me:

Liberal Friend: NCLB is on the clock. Anyone have any thoughts? I used to be in the "scrap it and let it die" bunch, but I have softened recently as I agree with the NYT ed board here that it has focused the nation on student achievement like never before.

Editorial - Making ‘No Child’ Better - NYTimes.com

Adam Freund: My thought is to return educatio back to the local level of course. Let it die and replace any federal funding with block grants to the states based on their populations with no strings attached. Better yet, give vouchers to the parents so they can choose where to send their kids to school.

Liberal Friend: If control is entirely local, does that include control over curriculum?

Adam Freund: yes, but if you are worried that there aren't any standards, I suggest letting each state outline their own standard. And I admit that it is possible that some states will not be as good as others, but that is a fair compromise, in my opinion, for allowing for expermentation. And in the end I believe that outcome will be superior to that of complete centralized control by the federal government.

Liberal Friend: Any reaction to this?
http://www.foxnews.com/story/0,2933,584758,00.html?mep

Adam Freund: I don't think it is a big deal. First, let me explain my experience in the public school system (your miles may vary).

I learned very little of what I would call useful information. History was sparse, economics was non-existent and overall it was what I would consider a poor education. Mind you I was in the "smart" classes too. I can only imagine what drivel the other students were learning.

Second, what I think you are failing to see is that there is only so much time children spend in school and whatever they learn means they can't learn something else. That whole oppoturnity cost thing again. I assume that you think this is a great tragedy, meaning, if you were in charge of prioritizing the curriculum, you would do it differently. That's your perogative. But I don't believe it is your perogative to impose this on others.

The citizens of North Carolina can decide what curriculum they value most and I have confidence that they will develop a good one. And if they don't, there will be less citiziens of North Carolina. That's a tradeoff I am willing to live with for the overall improvement of all our schools.

As an aside, if I were educating my yet to be concieved kid, I would eschew history altogether in favor of math and reading. Those skills are far more important to me. And if the kid is interested in history, go to the library. But you are free to teach your little Liberals whatever you want.

Liberal Friend: I think we have a fundamental difference in how we approach this problem, although we both approach it from an individual rights approach. You think it is up to an individual (or moreover a parent) to determine what her child should be learning. I do not. I think it my right not to die from cancer that should drive education.

I know the odds are good that I will get cancer one day. I have accepted this. That said, I want to make sure every single child in America and beyond our borders gets the education she needs to be the child who has the cure for cancer. I don't give a damn what her parents think or where they are.

I know this sounds incredibly selfish, but this is who I am. I want cancer cured by the time I get it. And if the child who has the cure for cancer happens to be in a Texas town that doesn't believe in biology, I don't care what her parents believe.

Adam Freund: We do have a fundamental difference, but hopefully we are working on bridging that difference. A few points to consider:

First from a purely pragmatically selfishly perspective, you are not taking into account whether or not your desired system of education is more or less likely to produce the child who has a cure for cancer. You have already implicitly assumed that your system is more likely. I submit that is not the case.

Second, you are advocating a principle which when broadly applied can be detrimental to you. You say you have a right not to die from cancer. Where did that right come from? But more importantly, your supposed right places an obligation on the child who is to cure your cancer. Should that child be able to learn what they want, to do what they want. It appears you have already placed a claim on his/her life. their life is not for them to live, but to serve you. To grow up and learn medicine whether they want to or not because you want them to cure your cancer. Forget about the child's parent not wanting this, what if the child doesn't want this? Will you force them to cure your cancer? What if that child were you?...

You are perverting the term, individual rights. Rights do not impose an obligation on another human being. If that were the case, then the other human being doesn't have any rights. And one day it could be your life that is obligated to someone else's "rights".

Liberal Friend:I am simply offering a new paradigm for how we look at education, using myself as an example. We must educate as many people as we can, within our borders and outside, so we can cure cancer, AIDS, figure out how to deal with excess plastic, solve climate change, etc. This should be our focus. And anything that diverts us is not worthwhile. Just as we educated an entire generation to battle the USSR and Sputnik, we must do it again.

And I do trust curriculum experts over parents and locally elected officials because they're experts. That's what they do. I will not allow a misguided local PTA to stop us from edcuating as many children as we can to solve our problems.

All or nothing?

Great letter in today's Wall Street Journal:

Mr. Obama rudely criticized the Supreme Court for broadening First Amendment rights to corporations, which he said would lead to First Amendment rights for foreign corporations. Let me get this straight—it is all right to grant Fourth, Fifth, Sixth and Eighth Amendment rights to foreign terrorists who want to destroy the U.S., but granting First Amendment rights to foreign corporations, many of which have businesses in the U.S. and hire American workers, is wrong.

Roger L. Rice
Leesburg, Fla.

Perfection is the enemy of the good

A friend of mine was telling me about Thomas Sowell's book, "A Conflict of Visions" and we were discussing some of the differences between liberals and conservatives. One stark contrast is that liberals believe in an idealized version of the world while conservatives do not.

I encountered a recent example of this while discussing the Haitian earthquake with another friend (who happens to be liberal). The topic of discussion centered on the U.S. stopping flights from Haiti. Here was my friend's reaction:

Does the fact that there are costs at all to treat critically injured people strike anyone else as morally wrong?

In Cost Dispute, U.S. Halts Airlift of Haiti Quake Victims

The difference between my friend and I is that I accept the fact that there are costs, i.e. limitations on the help people can or are willing to provide. Whether you like it or not, doctors, nurses, hospitals, etc., will only help so much out of the goodness of their heart and when their altruism runs out, other motivation is necessary.

But what my friend really hates (whether he realizes it or not) is that people are not as altruistic as he would like them to be. And while he would claim that he wants to change the world, in actuality he wants to change the people who inhabit it.

...But some things, like care for critically injured people, should not fall under the rubric of financial costs because they should simply be accepted and done irrespectively. Therefore, their financial cost should not be a factor.

What my friend is expressing is a value judgement. What's missing from his assessment is WHO should not consider the financial cost? Should the person being asked to pay for or perform the service have no say in whether they must help Haitians? My friend sees pain and admirably wants to stop it, but his idealized version of the world, where everyone thinks and acts as he would like them to act, does not exist. Only in his mind does this world exist.

This explains why my friend and I have very divergent views over the Haitian situation. I see the massive amounts of aid our country has given in the wake of this tragedy and I am proud of all the good we have accomplished. He sees the same thing and laments that we haven't done enough. To him, there should be no suffering; people should do what needs to be done irrespective of the costs; reality should live up to his ideal.

My friend worries me and I wonder: what would he be willing to do, in order to force his ideal vision onto an unwilling reality?

Ok, now that's retarded

Knowing many mentally retarded people, it's a shame that normal people act like retards far too often. Case and point:

In a statement Tuesday night, the Special Olympics organization said that several of its officials would meet with Mr. Emanuel at the White House on Wednesday afternoon.

The statement said the group would discuss “the suffering and pain of people with intellectual disabilities that is perpetuated by the use of the terms ‘retard’ and ‘retarded’ as well as the damage that can be done by the casual use of the R-word – even if it is not directed toward people with intellectual disabilities.”

The R-word! Are you kidding me? If anything could aptly be described as retarded, that's it.

Here's the problem I have with this, people are taking offense when they aren't even being spoken too. Rahm was speaking in a semi-private setting, and only when it was leaked that he used the dreaded R-word, some R-word got offended. All of us have sensitivities which could be aroused by the casual use of off color remarks. But to take offense because it was reported that someone said something offensive is ludicrous. At some point, it's no one's g-d damned business what someone else says. That's hyper-sensitivity gone too far.

It starts with principles

Very good letter in the Wall Street Journal:

"A Small GOP" (op-ed, Jan. 26) is correct that James Bopp and others are wrong to have a litmus test that includes "10 conservative principles." The problem is that most of the items on his list are not principles. A troop surge is not a principle, and neither is cap and trade, nor most of the others. These are policy differences. The kind of government a political party stands for is a principle.

If you stand for the principle that a large central government is a tool that will solve your problems, such as health care, poverty, racism, etc., and that will result in an egalitarian society, then you are a liberal. If you stand for the principle of a limited central government that will result in lower taxes, individual responsibility and a meritocratic society, then you are a conservative. Policy issues like abortion, gay rights and the environment have nothing to do with these principles.

It seems to me that it is proper to have a litmus test for the Republican Party, but it should be narrowed to the one conservative principle, and by focusing on this one principle, the Republican Party will allow a "big tent" of broad diverse policy differences.

Robert S. Sargent, Jr.
Brevard, N.C.

Everything goes down with the ship

In today's Wall Street Journal, one letter to the editor commenting on Rep. Paul Ryan's (R., Wis.) roadmap for the GOP, mentioned a common fallacy concerning the privatization of Social Security:

...His plan to privatize part of Social Security is old news, having been put forward by President George W. Bush. Thank goodness that road was not traveled, given the current deep recession and the sharp losses in personal retirement funds.

What the reader doesn't realize is that the government too has lost a ton of money. Yes, retirement funds have gone down due to our current economic recession. But what or who does he believe pays for social security? The Tooth Fairy? No, the same recession which has caused stock market declines has also caused declines in government revenue. And guess what that means? If you said, government doesn't have money to fulfill it's Social Security obligations, go to the head of the class. In effect, that "lock box" which supposedly contains your social security just got a whole lot smaller. Just like your 401k.

Recovery begins with certainty

Best analysis I have ever heard of the underlying cause of a recession:

A recession is not so much a stoppage of demand or supply as it is a rescheduling of big-ticket items.

The popular idea that the economy is driven by "stimulus" spending—as if politicians could capture and bring in resources from outside the economic system—is mistaken. Economies grow as the result of capital being put to work. Capital is plentiful. But it retreats in times of turbulence and uncertainty, coming back to work when uncertainty abates.

This is unbelievably spot on. A bubble is created by a misalignment of production with demand. The misalignment is inevitable in any system where production is based on predictions of an uncertain future. In essence, goods are produced today based on what we think people want. When the future doesn't turn out as planned (which it won't), we need to change what we produce. This constant churning of production to meet changing demand is called creative destruction and it is a very healthy thing for our economy.

The problem is that for the necessary readjustment to occur, for the economy to meet the new demand, what is currently produced must be changed to produce something else. This does not happen simultaneously, it takes time. People must be fired and re-hired, plants must be shut down and re-opened, and resources which were used to produce typewriters must now be used to produce laptops. This means that in order to expand, the economy must first contract.

But what really screws things up is not the necessary contraction, but the uncertainty associated with it. Uncertainty multiplies the contraction by idling resources which could be put to use. In effect, uncertainty causes people to wait and see. This situation, when resources which could be employed are idled, is known as the "output gap".

Obliviously we would like to eliminate this "output gap" (i.e. put idle resources to use). The idea behind government interventions such as spending or tax cuts, is that they will somehow "stimulate" these idle resources into production. The problem is that these measures treat the effect rather than the cause. The cause is uncertainty, and arbitrary government policies do nothing to reduce it, they make it worse.